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All businesses retain value one of two ways: capturing revenue at the right moment or avoiding costly risk before it hits company coffers. What opportunities and dangers on the horizon should U.S. glass manufacturers strive toward or veer away from?
1. Mind energy efficiency innovations and their industrial applications
Far and away, glass manufacturing is one of the most energy-intensive industries in the industrial sector. According to research from the Energy Information Administration, U.S. glassmakers consume about 200 trillion British thermal units of energy annually, primarily derived from 143 billion cubic feet of natural gas. A quarter of total consumption, however, comes from electricity.
The EIA estimates energy reductions to melting, refining, and possibly forming processes, depending on the product under manufacture, could yield a sizeable return of 20 to 25 percent. Companies interested in energy-efficient operations should watch out for progress in science surrounding direct current field technology, which, among other things, lowers the melting point of glass for more cost-effective production.
Is energy efficiency on the horizon for glass manufacturing?
2. Envision a world with stricter glassmaking regulations
Last year, glass producers across the country were the subjects of federal scrutiny after the Environmental Protection Agency caught several companies using highly toxic materials to tint their products. More to the point, these facilities also lacked the appropriate filtering and ventilation technology to protect workers, the surrounding neighborhoods and the environment from the toxic, even carcinogenic, byproducts of consumed cadmium and other heavy metals.
Time will tell what will happen in the aftermath of this discovery. Current political ambiguity has pushed the matter off the EPA’s plate for now. However, glassmakers everywhere should take heed while there’s still time. What regulators find when the investigation reopens could spur new oversight and mandates throughout the industry. Are your operations agile enough to accommodate possible changes? Does your business possess enough capital to invest in additional safety measures should they be required of you? Will your processes withstand audits from the EPA?
3. Enter new markets with confidence
There’s market share and wallet share, but have you ever heard of “building share”?
No? Well, it’s only a matter of time before this concept takes off. As the U.S. toys with entrance into a new era of infrastructure spending and widespread construction projects, glass manufacturers must follow the innovative trends set forth by sister industries like concrete and steel to grow more valuable in the eyes of developers and contractors. The next architectural generation will define itself through greener, more energy-conscious building materials.
For glassmakers, this means not only consuming energy more efficiently, but also diversifying product portfolios and creating valuable partnerships to capitalize on offerings like photovoltaic glass, which, when installed, converts solar energy into usable electricity. In 2015, customers around the world bought 580 million square meters of PV glass, according to RnR Market Research.
In addition, many glass manufacturers have also begun formulating smart glass, which becomes more transparent or opaque on command. By restricting or exploiting direct sunlight and its heat, buildings enjoy energy cost savings from both lighting and HVAC systems.
With that said, to build long-lasting partnerships with new suppliers, glass manufacturers must demonstrate their operations are up to snuff. Just as important, these same businesses must ensure the vendors they work with won’t hold them back either. Consider both sides when entering into negotiations with suppliers, and never sacrifice a legacy of success for an uncertain future.
4. Train staff for 21st-century duties
In the past 30 years, U.S. manufacturing has lost about one-third of its jobs for myriad reasons, according to the Brookings Institution. Many rightly fear the effect automated glass manufacturing processes will have on employment. The entire industrial sector is currently undergoing a perfect storm of issues, automation among them, that are having a corrosive effect on hiring. This challenge also includes a sizeable swath of retiring baby boomers and difficulty finding eager and highly skilled applicants to fill open positions.
An investment in professional development and training can and should be a viable solution for any glassmaker. All it takes is leveraging human capital in such a way that long-time line workers become next-gen technology leaders. If done right, businesses prevent operational disruption and develop knowledgeable teams with ideal job experience. After all, these workers will already know everything about not only glass production, but what’s unique about glass production at the business that trained them.
However, training is and will forever be an ongoing process. As automated technology advances, so too must the businesses utilizing it. Through cross-functional collaboration and professional consulting, glassmakers should optimize and lean down as best they can to transform wasted costs into investment opportunities in the future of their workforces.
It’s easy to forget that, connected though they may be, building materials and construction are two distinct industries.
That said, they almost always experience similar economic challenges or act as augurs to one another’s success or failure. While one might think building materials would inform construction more often than the other way around – changes to a product, after all, could greatly alter how a user uses it – in many ways the reverse is just as true.
What current construction trends will impact how building materials manufacturing performs this year?
U.S. economy stabilizes and takes off in 2017
Simply put, if people are building, the building materials industry can expect good sales numbers.
According to the American Institute of Architects, construction will soon overcome the stagnancy it struggled against at the tail end of 2015 and throughout 2016. This year, spending on construction is projected to grow by 6 percent, with a majority of investment coming from the public sector (government and residential). In theory, this comports with current events in Washington, D.C. The Hill reported the Trump administration plans to wheel out a “massive rebuilding package” in the president-elect’s first 100 days in office.
The AIA stipulates, however, these increases depend entirely on good performances from volatile variables such as moderate job growth, continued housing market recovery, and both national and international confidence in American manufacturing. Estimates from Metrostudy show about three new construction jobs were created for every house built in 2016, so the success of building materials as fed by construction may be somewhat self-sustaining as far as the job market is concerned. After all, with larger construction workforces, contracting teams can take on more projects and require more supplies to do so.
Housing too should see a good year in 2017, with many economists predicting more than 6 million existing home sales, according to Gord Collins, as well as the creation of 160,000 new homes. The latter figure should carry on annually to 2024. That’s huge for construction and building materials – as Value Line noted, residential housing represents about 60 percent of all domestic construction spending.
Can construction take its services online? And can building materials manufacturing keep up?
Tech disruption may push construction out of pace with manufacturing
Widespread, cross-industry innovation and tech adoption throughout the private sector have only highlighted how little and how infrequently building materials and construction upgrade. Perhaps the resistance to change has something to do with the timelessness of these trades.
Nevertheless, the numbers don’t lie: In its 2016 industry digitization index, McKinsey rated construction the penultimate least digitized industry, one step ahead of “agriculture and hunting.” As the U.S. government plans to repair its crumbling infrastructure to boost the GDP, construction will have to rise to the challenge and implement new, tech-savvy methods for managing large-scale projects.
In turn, the building materials industry should ready itself for a big change. It is, after all, generally easier to upgrade the service sector than it is to upgrade means of production. Distribution too will factor heavily into the interplay between construction and building materials. As more contractors use the internet and apps to price shop, manufacturers must be ready to balance traditional brick-and-mortar channels with omnichannel logistics, all while keeping consumers happy and their brand value high.
Competition in the food and beverage industry has always been high. When one-sixth of every dollar produced by all U.S. industrial businesses comes from F&B, not much else demonstrates the same level of value to investors. Increased market concentration, however, has pushed companies back on their heels and challenged them to rethink their operations.
It’s first come, first served in the world of food and beverage manufacturing. Where should your business focus its attention if it wants a seat at the table?
Agility in the face of anything and everything
Food and beverage, by nature, craves a streamlined, consistent production process. How else could manufacturers expect to produce against such high and persistent demand for their goods?
Yet despite that understandable urge to standardize wherever possible, F&B firms cannot deny the myriad of variables they contend with daily: world economies affecting all the places from which they source their ingredients, regulations on how to produce and ship goods, consumer opinions and interests regarding packaging and merchandising, etc.
Building fixed production processes without any capacity for adaptation is like expecting your car’s cruise control to steer for you. Similarly, food and beverage companies must imbue their processes with enhanced responsiveness to fluctuations, particularly when it comes to their supply chains. U.S. bread producers, for example, no doubt remember how the wholesale price of eggs skyrocketed in 2015 because of an outbreak of avian flu. Since then, businesses have undoubtedly built disaster recovery plans around potential shortages of key supplies, perhaps even created whole new products with the market strength to carry them through tough times.
But why wait for a crisis to plan for one? Businesses in industries like F&B that mass produce ought to take a page from the custom manufacturing playbook: There is a lot competitive value in learning how to lean into a curve, and not only to avoid risk, either.
Big data should mean speedier R&D
Leveraging consumer data has never been a strength for food and beverage producers, but it is fast becoming an incredible indicator of value as millennials take over supermarket sales across the country. Between 2010 and 2015, the top 25 U.S. Food and beverage companies lost a combined $18 billion to outliers, according to Fortune senior writer Beth Kowitt. Who diverted those funds to smaller industry players? Primarily millennials.
How did those businesses convince millennials to do it? They anticipated the desires of the modern consumer and had products to match those desires available. Nothing new there, but these companies performed these actions at record-breaking paces.
Consumer trend cycles are only accelerating. Any business that fails to innovate with customer data rapidly and accurately will continue to lose market share to small businesses that can. In recent years, organizations such as Diamond Foods and Nestle have invested significant capital in research and development facilities that experiment with recipes and packaging. Nestle even has test kitchens where its staff studies how consumers interact with products in a real-world setting. Monitoring in house has the added benefits of confidentiality, direct analysis, and immediate application, too.
When thinking of all the best ways to leverage end-user data, businesses should not limit themselves to information technology but rather utilization in action. How fast can you move when the next great idea presents itself?
Focus on freshness at the retail level
What’s the most widely known unwritten rule of healthy shopping? If you want to eat better, shop around the perimeter of the grocery store where you find fresh produce, whole milk products, and unprocessed proteins.
When customers buy for freshness, should you go to them or make them come to you?
Whether or not that homespun shopping philosophy is actually true, F&B companies have responded as though it is by acquiring brands with a presence in this territory, as well as developing goods that can break into these areas. More than one-fifth of shoppers spent more money on “fresh perishable items” in 2016 than 2015, and more than one-third base their decisions on where to shop on the “quality and variety of fresh foods,” according to research from the Food Marketing Institute. It’s gotten to the point where retailers are using freshness to define their entire retail operations.
To compete, manufacturers must think less about merchandising and more about how to align their product messaging around freshness with that of how their retailers relate freshness to customers. That includes, but is not limited to, marketing how minimally processed goods are or reducing the sheer number of ingredients in certain product recipes. Not only are these changes promotional, but they can also lead to material and production savings if manufacturers play their cards right. Once customers associate a certain product with freshness, they will happily travel to whatever section of the supermarket that product is housed in. The trick is planting the seed.
For more information on fleshing out a competitive Food and Beverage strategy, contact a USC Consulting Group representative today.