Tag: Future Trends

Peering Into Business’ Future

If America’s future workforce is going to be “more flexible, more freelance, more collaborative and far less secure,” as Time magazine prophesizes in its May 13, 2009 issue, it indicates that the American business paradigm as we know it is going to go through some major upheavals in the coming decade or two. Time suggests that American business is teetering on the cusp of major change. Powerful social forces have pushed us toward this edge, and the current economic disaster appears ready to tip us over and send us careening in new directions.

What’s driving the coming changes?

  • The Baby Boomer generation has been an unstoppable force since its inception. Sheer numbers have changed the focus of society each time Boomers have entered a new life phase. Now poised to enter retirement, America’s most populous demographic will again shift the country’s emphasis, this time to health care and aging issues. By 2030, one-fifth of American citizens will be over the age of 65, with the greatest growth in the over 85 demographic. As they have from the beginning, Boomers will drive the country’s business, social and political agendas. Expect growth in health care, pharmaceuticals, medical aids and equipment, security and alert services, home care, transportation and mobility, shop-at-home opportunities and travel. But don’t count Boomers down and out yet. The last of the Boomers won’t retire for another 20 years and many plan to and will be able to work into their 80s. With far fewer workers moving up to replace them, American business owners need to prepare for a grayer workforce.
  • The new generation of managers entering the business world seems to have been plugged in since birth. Quick to embrace new technology, they’re more comfortable in front of a computer checking their email and Facebook accounts or texting and twittering than they are communicating face-to-face. Expect business communication and social interaction to change to reflect the fast-paced, multi-tasking, solitary preferences of the tech-savvy earbud generation. This is the generation that will take integrated technology to new levels not yet even imagined. Business has already begun to lose its brick and mortar walls as more people work remotely. Expect the next generation to blow them away. The days of the cubicle are numbered!

More on Monday

Material Handling Industry Must Seek Growth in World Markets

Navigating the U.S. economy has been a bumpy ride of late for industry and consumers alike. There is hope for a smoother future, particularly in material handling, but the road to success may lead outside America’s borders.

World market demand for material handling equipment and systems is expected to increase 5% per year through 2012, according to a new study, World Material Handling Products, by The Freedonia Group, Inc. The Cleveland-based industry research firm expects major market gains to come from growth in fast-developing countries in the Asia/Pacific region, Eastern Europe, Africa/Mideast region and Latin America. Growth in these markets is expected to eventually outstrip sales in the U.S., Western Europe and Japan. However, in the near term, the study predicts “renewed strength” in the Japanese material handling market and “acceleration” in the U.S. market driven primarily by automated products such as robots and automatic guided vehicle systems (AGV). 

The Fredonia Group report analyzed the $93.8 billion world material handling industry in 37 major national markets worldwide, predicting global industry growth to $133.5 billion, including price increases, by 2015. Rapid economic growth, increased manufacturing output, greater fixed investment activity and rising motor vehicle production in China, India, Turkey, Mexico and Russia, particularly, will lead demand and sales gains. China, a major producer and exporter to Asian markets, is predicted to account for 30% of total material handling sales growth.

The material handling products demanded by these developing markets will come primarily from U.S., Europe and Japan which are home to the largest and most advanced material handling equipment and systems producers. High-value products, technical expertise, advanced production systems, capital availability and trained labor will give western material handling firms a pronounced sales edge in developing markets. However, that edge may be short-lived. China, with its vast low-cost labor pool, has become a major producer and supplier to Asian markets. While quality and safety issues haunt Chinese-produced products, the country has shown amazing adaptability in other product markets and could become a major world material handling competitor within the next decade.

Next time: Which material handling products will see the greatest growth?

Forces of Change: What’s Driving New Business Paradigm?

The current economic crisis has created a tipping point for American business. While change is a normal and healthy part of growth, overwhelming economic forces are combining with powerful social forces to force major upheavals in the U.S. business paradigm. Economic necessity has eroded the normal inertia that usually slows change. Economically unviable businesses are failing, the weak are being culled from the competitive pack, and even the strong are struggling, forcing business owners to make hard decisions to ensure their survival. For the first time in decades, labor unions and their members are willing to reconsider compensation and benefit packages to save jobs. Add to this the looming retirement of America’s largest-ever workforce — the Baby Boomer generation — and its replacement with a new generation of tech-savvy workers ready to blow traditional business practices out of the water, and you have a potent climate for change.

Today, we continue our discussion begun last week of the coming forces that will change American business.

  • Today’s hierarchical management structures will all but disappear. Growing entrepreneurship will shift more tasks to contract workers. Changing priorities about work/life balance are already impacting corporate structure with more workers telecommuting and job sharing. The creative experiments implemented to save jobs and money during the recession — unpaid furloughs, reduced hours, lateral advancement — are likely to be retained, allowing for the more flexible career paths sought by the next generation of workers.
  • Women will finally crash through the glass ceiling and come into their own. Time foresees an 8% growth for women in the workforce, compared to 5% for men, and much of that growth will be at the management level. Backlash from the economic crises of the last two years is creating demand for the female management style. Studies indicate that female managers are more cautious about risk-taking than their male counterparts and are collaborative consensus-builders who practice transformational leadership that engages and motivates. 
  • Rising health care and pension costs are already forcing a major change in corporate benefit packages. The current model of employer as provider has become unsustainable. Employees are already being asked to share the burden of health care and retirement costs with their employers, a trend expected to increase. While this naturally concerns Baby Boomers nearing retirement age, benefits are of far less concern to the next generation of workers. In its May 25, 2009 issue, Time magazine reported that among 18- to-34-year-olds, base pay and career advancement were the top-ranked concerns. To decrease health care costs, both businesses and workers will support wellness initiatives and adoption of ergonomic equipment and practices in the workplace.

Part II: Trends Challenge the Material Handling Industry

Today we continue our post on future trends that will challenge the material handling industry. Please see our June 6 post for Part I.

  1. Workplace. The workplace is already changing with a growing number of workers telecommuting and working from home. The traditional brick and mortar office is giving way to mobile and virtual offices. Computers, cell phones, teleconferencing and video conferencing allow people to do business with clients, colleagues and suppliers around the world from any location, including their kitchen table. Nearly 750,000 people already live and work out of their RVs. The blurring of home and work boundaries is already starting to impact how we work and our expectations about work.
  2. Biotechnology. Genetics, biotechnology and nanotechnology are the world’s new industrial frontier. Scientists are creating undreamed of organisms and compounds that are revolutionizing our world, and all in ever more minute packages. Every year brings profound discoveries that will force us to redefine the role of industry, how we produce and use materials, and the role of workers.
  3. Globalization. A global economy is a growing reality. World markets are becoming increasingly interconnected. To be successful, businesses will have to look beyond local and regional resources to take advantage of market opportunities around the globe. As this occurs will the pressure of business and industrial inter-reliance have an affect on political, economic and social issues around the world. It seems certain that opportunities for global influence and change will be created. The challenge will be to see that they are positive ones.

Recession Over but We’re Not Out of Woods Yet

Today’s headline blared: “Recession officially ends, with trepidation.” Ain’t that the truth! In officially declaring the recession over, the U.S. Commerce Department cited a 3.5% growth in the economy. Encouraging, certainly. Something to cheer about? Apparently Wall Street thought so as the Dow Jones Industrial average shot up nearly 200 points. But the guy or gal on the street? Maybe not so much. The effect seems more psychological than actual. Economists caution that much of the 3.5% increase in gross domestic product was fueled by the government’s Cash for Clunkers program and first-time homebuyers tax credit. Whether those programs have created an unnatural spike in economic growth that can’t be maintained or the economy really is finally throwing off the chill of recession, only time will tell. But until unemployment decreases, most analysts agree we’re not out of the woods yet.

Getting people back to work is the real challenge now. People aren’t going to start buying again — the necessary trigger for real economic improvement — until they have jobs and can stop worrying about keeping food on the table and a roof over their heads. And the jobs won’t be there until American businesses feel comfortable financially. A bit of a vicious circle: consumer purchasing fuels businesses which fuel jobs. Traditionally, small businesses provide the greatest potential for U.S. job growth; so it was interesting to read the results of the American Express OPEN Small Business Monitor bi-annual survey in Manufacturing & Technology eJournal.

Here are some of the survey highlights:

  • 51% of manufacturers have a positive outlook, about the same as last year (52%)
  • 61% are experiencing serious cash flow difficulties, compared to 47% a year ago
  • only 22% plan to hire additional employees, down from 30% six months ago 
  • only 36% are planning capital investments, down from 59% in 2008
  • 68% think U.S. economic woes are far from over

DJ Products would like to know what you think and how your business is coping with the recession.

New Trends Will Affect Speed, Strength of Economic Recovery

The heart monitor on the economy has started beeping again, apparently shocked into recovery by the dual application of bailout money and stimulus funds. Of course, there’s still concern that the cure may prolong the patient’s recovery but the big guy does seem to be on the mend. Many economic analysts are now predicting that true recovery from the recession may begin as early as next quarter, that’s six months to a year ahead of previous predictions. Naturally, there’s disagreement about the strength and speed of the economy’s recovery. “The question is whether we are transitioning to a solid growth period or to something flatter,” explained Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International (FMA), in the FMA economic newsletter Fabrinomics.  

Kuehl pegs the strength of the economy’s recovery to three emerging trends that manufacturers and businessmen will need to factor into their plans as they position themselves to compete in the post-recession market:

  • Cautious consumers. High unemployment and the continuing threat of job loss has made consumers wary of spending and further depleting any financial reserves they have left. Most economists expect consumer spending to lag other signs of recovery, further slowing the recovery process. Until unemployment rates return to post-crisis norms and consumers regain confidence in the economy, demand for goods and services is expected to remain low.
  • Consolidation. Financial chaos has forced mergers and acquisitions in the U.S. and around the world, and not just in the automotive industry, Kuehl points out. Manufacturing bases have gone global, shifting from the U.S. and Europe to Asia, particularly China, and Latin America. Digging a toehold into these markets will be essential — and extremely challenging — if manufacturers, especially smaller players, are to survive. The complexities of global business may encourage even more consolidation as small manufacturers partner with larger ones or form cooperatives to gain global access.
  • Unsettled financial markets. While banks and financial entities took the brunt of the first blow, they haven’t carried the burden of the economic crisis. Even so, they are still recovering which will continue to make them wary of lending money. The yet-to-be-known impact of new government oversight and regulation will also be a factor. Kuehl sees a return of the “old-school banker” with tougher credit standards, demands for greater cash flow, and less money available for growth and expansion.

New Marketing Strategies Needed to Survive Lean Years Ahead

With the economic prognosis dim for 2009, U.S. manufacturers and businessmen need to rethink basic marketing strategies. Gone are the comfortable days of order backlog that manufacturers have enjoyed since the post-WWII. Everyone is scrambling to find new customers and new markets for their products. As Doug Gregory of Diamond Group Marketing pointed out in a February 9, 2009 article on Manufacturing & Technology eJournal, “you can’t cut and save your way to survival and profitability.”

To survive the next few lean years, you’re going to have to take excellent care of your current customers and work hard to find new ones. Gregory recommends a number of marketing strategies proven during previous downturns to help companies survive and even thrive. We’ve added some comments based on the benefit of our own experience here at DJ Products in building a successful material handling company with a national reputation for innovation, quality products and superior customer service.

  • Aggressive marketing. Many companies cut back on marketing efforts during a downturn. Survivors will buck the tide and increase marketing across the board. During tough economic times, potential customers do more shopping around looking for the best bargains. Getting your company name out there where they’re looking gives you a better chance to snag the sale.
  • Customer service. Without your customers you won’t have a business. Keeping customers happy must always be a top priority. During economic downturns competition heats up and you have to work even harder to keep your customers from jumping ship and going with the competition. Keep in regular contact with your customers so you’re right there to meet their needs as they arise. In a downturn, companies typically decrease inventories to cut expenses. You’ll benefit if you can provide customers with fast order turnaround and guaranteed delivery dates.
  • Strategic diversification. A tight economy forces you to expand and diversify your customer list, but make sure you don’t lose your core focus. You don’t want to dilute the expertise that sets you apart from your competitors and draws customers to you in the first place. Look for new customers with needs similar to those you now serve. Take a look at your current customers’ competition. With the same needs as your present customers, they present a ready market for your products.

Next time: Where to look for new marketing opportunities.

Where to Find New Marketing Opportunities

Competition is even tougher than it was before. Most sectors of the economy are expected to post losses through 2009 with little improvement expected until sometime in 2010. The bottom line is that for the next year or two everyone is going to be scrambling for a bite of a much smaller pie. In our last post we shared survival tips from DJ Products’ own experience and from Doug Gregory of Diamond Group Marketing (see his February 9, 2009 article on Manufacturing & Technology eJournal). Aggressive marketing, superior customer service and strategic diversification can help your business survive a bear economy, but to thrive you’re going to have to start searching for new customers.

Gregory and others agree that there are bright spots glimmering amidst the general economic gloom. Certain industries are expected to thrive and grow in the coming few years despite the downturn. Savvy firms will target marketing and sales campaigns to take advantage of expected growth in the following economic sectors:

  • Food industry. As Rally’s, a local burger joint, advertises, “You gotta eat!” The entire food supply chain from farm to table provides multiple opportunities for growing your customer base. Agricultural equipment, fertilizer, transportation, processing, packaging and retailing are just the tip of the food industry pyramid.
  • Pharmaceutical/health care industries. Baby Boomers, the world’s largest population segment, are aging. Demand for pharmaceuticals, health care products and health care services is expected to increase and remain steady over the next three decades.
  • Energy industry. Companies that produce, process or deliver energy products are excellent growth targets. With support from President Obama, increasing federal funds will fuel the development of alternative energy options. However, viable nationwide replacement of current energy sources is years, even decades, in the future. Current oil, gas and coal operations are expected remain strong with increases coming in their development of new, cleaner, more cost efficient applications for their products.
  • Transportation industry. Traditional transportation will still flounder for a while until production volumes and consumer spending improve. But there will be opportunity in infrastructure improvement and rebuilding fueled by federal stimulus spending and job creation. And watch for opportunities in new public transportation options still on the drawing board. Last year public transportation ridership posted a 52-year record high. As America struggles with energy issues and global warming, expect increases in innovative mass transit projects.
  • Look south. Southeast and Gulf Coast states are experiencing a manufacturing boom benefiting in part from post-Katrina spending. Census figures indicate that Americans are moving south, seeking jobs and better weather. Environmentalists are leery about the Southwest, however; which is already experiencing water shortages and some fear believe is on the cusp of long-term, possibly terminal draught.

Manufacturing Rebound Glimmers on the Horizon

With the dawn of a new political era in Washington, U.S. industry experts are cautiously predicting that manufacturing’s darkest days are over and that a rebound can be expected within the next six months. Analysts seem to agree that the Institute for Supply Management Index (ISM) finally bottomed out and will now begin to grow.

“Much depends on some proposed government actions and the reaction of the financial community,” Chris Kuehl, an economic analyst for the Fabricators and Manufacturers Association, told writer Joe Cogliano in the January 6, 2009 edition of Manufacturing & Technology eJournal, “but assuming that the credit crisis continues to diminish there will be some recovery in certain sectors.”

In anticipation of President Obama’s promised economic initiatives to create jobs, rebuild infrastructure and move to alternative fuels, Kuehl expects businesses that supply construction material and machinery and those in energy development to lead the recovery. He said that media saturation about the dire straights of the automotive and construction industries has obscured any good news about the state of U.S. manufacturing. He noted that medical manufacturing has actually grown during the recession and that the aerospace industry has held firm. 

A double digit production decline in the 4th quarter of 2008 is expected to be manufacturing’s low point. The National Association of Manufacturers (NAM) predicts a continued but gradually decreasing decline across most industry sectors for the first three quarters of 2009 before the advent of slowly rising numbers. NAM expects the final months of 2009 to bring a 1.4% increase in manufacturing rates.

Experts agree that while economic downturns take a toll on industry, they also serve to cull out weak, mismanaged and antiquated companies. Those that survive are stronger, more efficient, more resource conscious and more productive. On a larger scale, benefits of the economic crisis include a new era of better risk and credit management by both lenders and borrowers, new avenues of industrial growth, and deeper understanding and a necessary re-evaluation of global trading relationships and their impact on U.S. economy.

“The challenge for all of us is to determine if this is a ‘disaster’ or an ‘opportunity,'” Norbert Ore, Chair of the Institute for Supply Management’s Manufacturing Business Survey Committee told Manufacturing & Technology eJournal. “If we choose disaster, we will be paralyzed during a period of great change, and we will assume that there is little hope of prosperity for ourselves and our organizations. If we choose opportunity, we can view this as the time to face challenges head on and find more productive ways to create value for ourselves and society.”

Is There Light at the End of the Tunnel?

The Dow is plunging, financial institutions are failing, credit is drying up and long-time Wall Street icons are plummeting into bankruptcy. The U.S. economy seems to be falling like a poorly stacked house of cards. The news is full of doom and gloom and more gloom. Is there light at the end of the tunnel?

In a word, yes. But it may be a long tunnel, say manufacturing experts. There are things you can do to calm worried employees and weather the storm, says Joe Cogliano in Manufacturing & Technology eJournal.

  • Keep your staff in the communications loop, says Jay Kuhn, president of Definity Partners, a business improvement company. When the economy tightens up, employees worry about job security, providing for their family, even putting gas in their car to get to work. All that worrying takes a toll on worker productivity. Being honest about what’s happening in your company will bolster employee morale. “Workers are going home and they are hearing bad news everyday,” says Kuhn. “It’s important they know what’s going on because everything the company does is really going to be taken as a negative sign, whether it’s meant to be taken that way or not.” Employers should be prepared to answer questions and explain even minor changes like switching an insurance carrier to reign in employee nervousness. Keeping employees in the loop can alleviate their fears and keep office gossip in hand.
  • Keep things positive. Worry and stress take a physical toll on workers which can result in increased absence rates. Keeping things positive helps make workers want to come to work.
  • Embrace patriotism. Historically, Americans respond positively to hardship and sacrifice when they know they are helping their country. “Small and medium-sized businesses need to realize they’re the backbone of our economic growth and job creation,” says David Velie, managing partner of Amend Consulting/Techsolve, a manufacturing improvement consulting firm. “Remind teams that they’re the strength of the economy, not the Fortune 500s and the housing sector.”
  • Maintain your cash flow. Take a close look at factors that affect your cash flow. You may need to reign in credit terms and be more aggressive about collections to improve your cash flow. Watch for potential cash-draining trouble spots. Kuhn says business owners should base every decision on a “cash is king” model.

Things may be rough for all of us for a year or two, but as Kuhn points out, “The economy does come back; it always comes back.”