With the manufacturing industry moving robustly, there is the potential for shifts in productivity based on the current circumstances. There are a variety of external factors that can happen in any given month or season which can improve or bring down manufacturing. However, such shifts don't necessarily reflect a larger trend. Keeping an efficient operation with ERP software such as Microsoft Dynamics NAV 2015 can be a great help to maintain control if there are any sudden shifts in the market or demand. That way, costs remain low and companies can focus on doing well. Still, it's important to pay attention to new developments the industry to be prepared.
A sudden surprise
Economists were surprised when data came in for February's manufacturing output. According to the Federal Reserve, production fell 0.2 percent in February. This is the third straight month that output has declined. Reuters reported that many analysts were expecting a rise of about 0.1 percent for the month. This has supposedly caught many off guard. Automotive production in particular declined 3 percent. Many are now expecting the cooldown to continue in March.
A variety of factors has been highlighted as the cause of the decline. As quantitative easing tapers off, the value of the dollar has increased against most currencies in recent weeks. A stronger dollar results in the cost of exported goods becoming more expensive in other countries, resulting in American goods becoming less competitive in the market. More importantly, the winter has been harsh in many parts of the United States, especially in areas like the northeast which suffered from record-breaking snowfalls. In addition, pressure from the fossil fuels industry, which is witnessing consistent lows in the price of oil, has resulted in a slowdown in developing pipes and other related materials for the sector. Finally, a lengthy labor dispute between dockworkers and their employers at the Ports of Long Beach and Los Angeles have resulted in a major backlog in exports, driving up the cost of goods elsewhere.
Strength still exists
However, all is not as dour as it seems. The Institute of Supply Management released its monthly Report on Business around the same time the Fed's numbers were announced. In it, the Purchasing Managers Index, while declining 0.6 points to 52.9, was still indicating growth in the manufacturing sector. It has now been 26 straight months of growth for manufacturers.
In many key factors, there is still evidence that manufacturing is growing, albeit at a slower pace. Of the 18 industries that were being reported, 12 experienced growth. Customer inventories continued growing over the course of the last few months, as did supplier deliveries. However, there were some concerns as backlogs were growing while prices remained flat. Respondents were consistently pointing to the west coast labor dispute as a cause. However, with the dispute concluding in late February and returns to normal operations well under way, it's only a matter of time before the situation rights itself. In the meantime, companies should look to utilize efficient solutions such as physical inventory management software to keep a steady course in the coming months.
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