1. What’s Happening in Manufacturing: Digging
Below the Surface
Kenneth P Voytek
Chief Economist
NIST MEP
September 2016

2. MEP Overview
Manufacturing Activity is Slowing
2

3. MEP Overview
Productivity and Employment are Leveling Off

4. MEP Overview
A Negative Trade Balance Among the Most Advanced Technology
Products
-$120,000.0
-$100,000.0
-$80,000.0
-$60,000.0
-$40,000.0
-$20,000.0
$0.0
$20,000.0
$40,000.0
$60,000.0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Balance of Trade/Adv Tech ProductsSource: U.S. Census Bureau
4

5. MEP Overview
Declining Business Dynamism in Manufacturing
Number of Manufacturing Establishments
Expanding vs. Contracting
20
40
60
80
100
120
140
Qtr3
1992
Qtr1
1994
Qtr3
1995
Qtr1
1997
Qtr3
1998
Qtr1
2000
Qtr3
2001
Qtr1
2003
Qtr3
2004
Qtr1
2006
Qtr3
2007
Qtr1
2009
Qtr3
2010
Qtr1
2012
Qtr3
2013
Qtr1
2015
# of Manufacturing
Establishments Expanding
# of Manufacturing
Establishments Contracting
Linear (# of Manufacturing
Establishments Expanding)
Linear (# of Manufacturing
Establishments Contracting)
Number of Manufacturing Establishments
Opening vs. Closing
0
2
4
6
8
10
12
14
16
Qtr3
1992
Qtr1
1994
Qtr3
1995
Qtr1
1997
Qtr3
1998
Qtr1
2000
Qtr3
2001
Qtr1
2003
Qtr3
2004
Qtr1
2006
Qtr3
2007
Qtr1
2009
Qtr3
2010
Qtr1
2012
Qtr3
2013
Qtr1
2015
# of Manufacturing Establishments
Opening
# of Manufacturing Establishment
Closing
Linear (# of Manufacturing
Establishments Opening)
Linear (# of Manufacturing
Establishment Closing)

6. MEP Overview
A Majority of Manufacturing Costs Are in the Supply Chain
52%
53%
52%
57%
59%
48%
50%
52%
54%
56%
58%
60%
1992 1997 2002 2007 2012
Share of Manufacturing Costs in Purchasing Materials
Share of Manufacturing Costs in Purchasing Materials
Up 7 Percentage Points
6
Source: Executive Office of the President and the Dept of Commerce (March 2015)
Supply Chain Innovation: Strengthening America’s Small Manufacturers.

7. MEP Overview
Smaller Establishments: An Increasing Share of the
Manufacturing Landscape
62.4% 63.9% 64.3% 67.1%
17.4% 17.1% 16.8%
15.8%
8.6% 8.5% 8.4% 7.7%
6.9% 6.6% 6.7% 6.1%2.7% 2.4% 2.4% 2.1%
1.9%
1.6% 1.5% 1.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1979 1989 1999 2014
1-19 emp 20-49 emp 50-99 emp 100-249 emp 250-499 emp >= 500 emp
7
Source: U.S. Census Bureau

8. MEP Overview
The Changing Face of Manufacturing: Getting Smaller; Need
to Get Smarter
$30,000
$80,000
$130,000
$180,000
$230,000
$280,000
$330,000
1972 1977 1982 1987 1992 1997 2002 2007 2012
Small Manufacturers (less than 500
employees)
Large Manufacturers (500 or more
employees)
 Facts about small manufacturers in 2012:
• Represent 99 percent of all manufacturing establishments
• Employ about 8.2 million people – 73 percent of all manufacturing
employment, and
• Account for about 62 percent of the total value-added by all U.S.
manufacturers
 The Challenges for Small Manufacturers:
• In 2012, productivity per employee in large establishments was 63
percent higher than productivity in small establishments. In 1967,
productivity per employee was “only” 26 percent higher.
• Over the last 10 years, productivity across smaller firms grew at a slightly
faster rate than large firms (39% vs. 34%)
• Market Failures exist in several dimensions: firm, inter-firm,
consulting/services, public failure.
Sources: U.S. Census of Manufacturing & the Bureau of Economic Analysis
Constant2012$
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9. MEP Overview
Small Manufacturers Report a Host of Challenges
71.9
59.2
45.3
19.1
25.5
10.4
13.1
18.0
8.0
72.9
60.2
46.3
20.1
26.5
11.4
14.1
19.0
9.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Cost Reduction Growth Product
Development
Employee
Recruitment
Sustainability Technology Needs Supply Chain
Management
Financing Exporting
FY 2009 FY 2015
Source: NIST MEP Client Survey
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10. MEP Overview
Challenges in the Metal Cluster vs. All Other Manufacturers
72.2%
56.9%
50.0%
40.6%
19.0%
14.4% 13.2%
8.5%
6.1%
68.7%
50.5%
41.8%
49.9%
20.7%
14.3% 14.6%
11.3%
7.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Continuous
Improvement
Growth Opportunities Employee
Recruitment
Product
Development
Sustainability Technology Needs Supply Chain
Management
Financing Exporting
Metal Cluster All Other Mfgs
FY 2015 NIST MEP Client Survey N= 5,930 completed surveys. Metal Cluster N = 2,125 completed surveys
10

11. MEP Overview
Where is the Metal Cluster in the United States?
11
Source: http://www.clustermapping.us/

12. MEP Overview
Job Openings are Outpacing Hiring in Manufacturing
0
0.5
1
1.5
2
2.5
DEC
2000
APR
2001
AUG
2001
DEC
2001
APR
2002
AUG
2002
DEC
2002
APR
2003
AUG
2003
DEC
2003
APR
2004
AUG
2004
DEC
2004
APR
2005
AUG
2005
DEC
2005
APR
2006
AUG
2006
DEC
2006
APR
2007
AUG
2007
DEC
2007
APR
2008
AUG
2008
DEC
2008
APR
2009
AUG
2009
DEC
2009
APR
2010
AUG
2010
DEC
2010
APR
2011
AUG
2011
DEC
2011
APR
2012
AUG
2012
DEC
2012
APR
2013
AUG
2013
DEC
2013
APR
2014
AUG
2014
DEC
2014
APR
2015
AUG
2015
DEC
2015
APR
2016
Hires to Job Openings Ratio
12
Source: U.S. Bureau of Labor Statistics

13. MEP Overview
The Changing Face of Manufacturing Employees
79%
71%
70%
64%
66%
68%
70%
72%
74%
76%
78%
80%
1959 1989 2016
Share of Employment in Production Jobs
Share of Employment in Production Jobs
11.9%
15.6%
21.7%
24.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1994 2004 2014 2024
Share of Workers > 55 Years Old
Share of Workers > 55 Years Old
13

14. MEP Overview
Profit Margin Predictors for SMEs
1.607
1.512
1.238 1.221
1.133
0.678
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Operational Excellence Growth Customer Diversification Strategy Recurring Revenue Size
Odds
Ratio
14

15. MEP Overview
Thank You
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