Three Trends to Look For in 2018
With 2017 wrapping up and proving to be an overall strong year for manufacturing, it’s now time to take a look at some of the things to watch out for in 2018. This upcoming year could pick up where 2017 left off and manufacturing companies could continue with this momentum throughout the year. Already this year there has been some big news that highlights this momentum continuing. Companies like Fifth Third Bank and AT&T vowing to give out $1,000 bonuses to it employees. Other companies like Toyota and Mazda have agreed to invest in American manufacturing by announcing a $1.6 billion assembly plant in Alabama. All these are good signs for the manufacturing industry. Here are 3 other trends to look for as we begin 2018:
- New Tax Code:
The new tax code was passed at the end of 2017,but can have a big impact on manufacturing in 2018 and beyond. One of the major provisions made in the new tax bill is that there will be lower tax rates for both C Corporations and pass through entities. These new rates will benefit a lot of manufacturers as this will allow them additional capital they could use elsewhere. For example, the capital saved from the tax cuts could be used to purchase new equipment, hire new employees, expand the business, etc. An overlooked part of this bill will also benefit manufacturers. According to Jim Brandenburg, he states “One thing that’s interesting that was put in is when you had the bonus depreciation, it was just for new equipment purchases. Now with this bill, the equipment can be new or used — it doesn’t have to be new anymore, just new to your company.” This all adds up to more opportunities for company leaders to invest and grow their businesses.
- Material Lead Times:
One trend that manufacturers and their customers may start to see as 2018 gets going could be longer material lead times, which will affect deliveries. There are a few reasons for this starting with China slowing its steel production to help with their pollution problems. Additionally, with China and other overseas metal suppliers, the US government is attempting to stop material dumping and limiting steel imports. With increased demand from US customers as the economy and industry continue to grow, but with less supply from overseas sources, US mills are at capacity. This causes increased lead times for material, and also increased prices. Those who buy steel should be considering placing an order earlier than maybe they are used to in order to ensure that on-time delivery.
- Capacity Constraints:
Like mentioned previously, the manufacturing sector has seen a lot of growth over the last year or so. Just last month manufacturers added 25,000 jobs. However, it hasn’t been too long since the business was down and many skilled workers were laid off. Now, as manufacturing is picking back up again and showing no signs of slowing, many companies are looking to hire back skilled workers. The problem is that many shops can’t find enough. An already underserved market of skilled workers is getting even smaller by the day with not nearly enough new candidates coming onboard. Without enough workers, companies are finding themselves at capacity with no room to grow. Furthermore, some shops just simply don’t have the number of machines they need to keep pace, and as a result could also fall behind. If shops don’t have the capacity they need, some companies and customers will start looking elsewhere where capacity is not an issue.
2018 is poised to pick up right where 2017 left off. The new tax bill has many provisions that could benefit the manufacturing sector in 2018 and beyond. On top of this, manufacturing is coming back to US soil, but as a result, longer lead times for material and a larger shortage of skilled workers are impacting the growth potential for some businesses. Be prepared to tackle these issues ahead of time to help position yourself for growth in 2018.