Member Briefing May 14, 2024
Manufacturers Are Using Data and AI Holistically to Drive Customer Value
To thrive in today’s competitive environment, manufacturers must move beyond mere machine efficiency and focus on directly contributing to customer profitability. The authors’ research, published in “Fusion Strategy: How Real-Time Data and AI Will Power the Industrial Future,” highlights this critical shift. They found that many companies claiming to be service-focused need more real-time data on how their equipment directly impacts customer profitability. While they may possess high-level data enabling broad business assessments, they cannot tailor their offerings to optimize individual customer performance.
This limitation stems from the siloed data systems prevalent in the analog world. To overcome this hurdle, companies must transform the analog machines they sell into fusion products capable of transmitting real-time data to central locations. These fusion products form the foundation for fusion services, the next generation of industrial services. For industrial companies, the opportunity lies in designing and manufacturing fusion products and leveraging the real-time data they generate to deliver compelling services that unlock hidden value for customers. Here are four essential steps for companies to emerge as leaders in the fusion services space:
Why Is Inflation So Stubborn? Ask Your Local Small Business
The cost pressures squeezing small businesses—and their need to pass along those higher charges—help explain why inflation has been so stubborn. The Federal Reserve this month highlighted a “lack of further progress” toward bringing inflation down and said it was holding interest rates at their highest level in two decades. More than half of small-business owners said they plan to raise prices in the next 12 months, according to a survey of more than 450 entrepreneurs conducted in April by Vistage Worldwide. Sixty-four percent of those surveyed said they had increased prices in the 12 months prior, according to the business-coaching and peer-advisory firm.
Higher labor costs are the biggest source of pain, with more than 80% of entrepreneurs reporting that increases in wages and benefits are having a significant impact on their businesses, according to an April survey of more than 1,200 small businesses by Goldman Sachs.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Still Reeling from Oct. 7, Israel Marks its Memorial Day - VOA
- Fighting Flares Across Gaza Amid Push to Revive Israel-Hamas Talks - WSJ
- Cease-Fire Calls Mount as Israel Ramps up Military Operations in Gaza – Politico
- Palestinians Flee as Israeli Forces Go Back Into Jabalia - BBC
- Israeli Forces Push Into Gaza From North and South - Reuters
- Inside Israel, It’s a Very Different War - WSJ
- Humanitarian Operations in Gaza at Risk of Grinding to a Halt for Lack of Fuel - VOA
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- Russia’s Bombardment of Ukraine Is More Lethal Than Ever - WSJ
- Ukraine Evacuates Almost 6,000 People From Kharkiv as Russia Advances – Politico
- Putin Replaces Defense Minister in Rare Cabinet Shake-up - NYT
- Nominee for Russian Defence Minister Underlines Need to Take Better Care of Soldiers – Reuters
- Putin's Reshuffle Betrays 'Serious Concerns' over Rising Cost of War: ISW - Newsweek
- Who's in Putin's Inner Circle and Running the War? - BBC
- U.S. Weighs Sanctions on Chinese Banks Over Russia Military Support – Nikkei Asia
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Other Headlines
- Amazon and Microsoft Invest in France’s Cloud and AI Infrastructure - Yahoo
- Mighty Dollar Pushes Asian Governments to Boost Currency Protection – Nikkei Asia
- Deadly Floods Kill Hundreds Across The Globe: Here’s Where The Devastation Is Happening (Photos) - Forbes
- Kim Jong Un Tests New Multiple Rocket Launcher - Newsweek
- Defense Space Policy Chief Calls Russia’s Space Nuke Threat “a Thing Apart – Space News
- Arvind Kejriwal: India Court Grants Bail to Delhi Leader - BBC
- Kuwait Forms New Government Headed by Ahmad Abdullah Al-Sabah – Reuters
- Japan Economy Expected to Shrink in Q1 Due to Weak Consumption: Reuters Poll – Reuters
- Tunisia Extends the Detention of Two Journalists, Lawyers Begin a Strike – Reuters
- Where the US Spends the Most on Foreign Aid – The Hill
Policy and Politics
Brainard: Inflation Reduction Act Provisions Would be Hard to Dismantle
White House Council of Economic Advisers Chair Lael Brainard dismissed the notion that Republicans would be able to easily reverse the sustainable energy provisions passed in the 2022 Inflation Reduction Act (IRA) even if they win majorities in the general election this fall. By building the energy transition into the tax code and incentivizing businesses and households to change their behaviors rather than compelling them to do so with more top-down spending initiatives, the Inflation Reduction Act is insulated from any quick-and-dirty policy corrections that may be desired by a new Congress or presidential administration, Brainard argued Friday.
The IRA contained a bevy of clean energy tax credits and deductions that are being implemented by the IRS. For businesses, credits are available for clean manufacturing investment and production, electric vehicles, biodiesel and alternative fuels, nuclear power production and carbon sequestration, among many other technologies. “This is now the tax code,” Brainard said, speaking at an event in Washington. “These rules are complex, they take a very long time to write, and they take a very long time to amend.”
Labor Groups and Left-Leaning Advocacy Organizations Seek to Bolster Protections Against Wage Theft.
Unions, including the United Auto Workers and the Retail, Wholesale, Department Store Union, rallied in Albany for a measure that would allow labor groups and whistleblowers to file public enforcement actions, including lawsuits, against companies believed to be in violation of wage, worker safety and retaliation protections. The rally dovetails with a letter sent by the coalition backing the proposal to top lawmakers in the state Legislature and Hochul to press for the measure.
“Workers already face enough obstacles and rising costs to make ends meet,” the groups wrote in the letter. “Unscrupulous corporations breaking labor laws should not be one of them.” Business organizations, however, have taken a starkly different view of the proposal and have warned it could “cripple the court and administrative system.” The New York Post’s conservative editorial page has also criticized the legislation and alleged it would hurt small businesses.
Read more at Politico New York Playbook
Suddenly There Aren’t Enough Babies. The Whole World Is Alarmed.
The world is at a startling demographic milestone. Sometime soon, the global fertility rate will drop below the point needed to keep population constant. It may have already happened. Fertility is falling almost everywhere, for women across all levels of income, education and labor-force participation. The falling birthrates come with huge implications for the way people live, how economies grow and the standings of the world’s superpowers. Some demographers think the world’s population could start shrinking within four decades—one of the few times it’s happened in history.
In high-income nations, fertility fell below replacement in the 1970s, and took a leg down during the pandemic. It’s dropping in developing countries, too. India surpassed China as the most populous country last year, yet its fertility is now below replacement. Many government leaders see this as a matter of national urgency. They worry about shrinking workforces, slowing economic growth and underfunded pensions; and the vitality of a society with ever-fewer children. Smaller populations come with diminished global clout, raising questions in the U.S., China and Russia about their long-term standings as superpowers.
Health and Wellness
Novavax And Sanofi Join Forces To Develop Combination Covid-Flu Vaccine
Novavax on Friday said it has signed a multibillion-dollar deal with French drugmaker Sanofi to co-commercialize the company’s Covid vaccine starting next year and develop combination shots targeting the coronavirus and the flu, among other efforts. Shares of Novavax closed nearly 100% higher on Friday from their previous day close of $4.47 apiece. The licensing agreement will allow Novavax to lift its “going concern” warning, which it first issued in February 2023 due to having doubts about its ability to continue operating, Novavax CEO John Jacobs told CNBC in an interview.
It marks a turning point for the struggling vaccine maker and its protein-based Covid shot. Health officials view the vaccine as a valuable alternative for people who don’t want to take messenger RNA jabs from Pfizer and Moderna. The deal also allows Sanofi to develop products that combine its flu shot or other in-house vaccines with Novavax’s Covid jab. Sanofi can also use Novavax’s Matrix-M adjuvant to develop new vaccine products. Notably, Sanofi will be solely responsible for the development and commercialization of any combination shot containing its flu vaccine and Novavax’s Covid shot.
Election 2024
- NYT/Siena Poll: Trump Widens Lead in 5 Key States, as Young and Nonwhite Voters Express Discontent With Biden – Siena College
- How the State Budget Could Protect New York Democrats in November – City & State
- Democrats Running Ahead of Biden in 4 key Senate Races: Poll – The Hill
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
New Design to Replace Baltimore’s Collapsed Francis Scott Key Bridge Unveiled
Italian design firm Carlo Ratti Associati (CRA), have worked together with structural engineer Michel Virlogeux and international construction group Webuild on the reconstruction proposal for the Francis Scott Key Bridge. The design, which follows a cable-stayed approach, improves several functional characteristics of the old bridge to enhance safety and long-term adaptability. By enlarging the bridge’s main span from 1,200 ft to 2,230 ft (700 m), the primary support pillars will be situated in very shallow water (a depth of approximately 23 ft), well away from the navigation channel used by large vessels.
The design also increases clearance from 185 ft to 230 ft (70 m), in accordance with the shipping industry’s latest standards and enables the Port of Baltimore to remain a major international harbour in the years to come. The concept also proposes a larger roadway, with a new lane added in each direction, to accommodate increased vehicle capacity, addressing the high traffic levels across the bridge. The project is designed in collaboration with renowned French consulting engineer and designer Michel Virlogeux, who designed several of the world’s most significant cable-stayed bridges, including Lisbon’s Ponto Vasco da Gama and the tallest bridge on Earth, the Millau Viaduct in the Occitania region of France.
Big Pharma Layoffs Continue, as Bristol-Myers Squibb Cuts 2,200 Jobs, $1.5B in Costs
At a time when drugmakers Eli Lilly & Co. and Novo Nordisk are scrambling to meet demand for their popular weight-loss medications, other manufacturers are struggling. Bristol-Myers Squibb has announced that it plans to cut $1.5 billion in expenses by the end of 2025, including laying off more than 2,200 employees. The restructuring is designed to prioritize products that the company sees as having the highest potential, and it plans to reinvest the targeted $1.5 billion in savings in these opportunities.
Patents are set to expire for the company's two top-selling drugs – the blood thinner Eliquis, which it sells with Pfizer, and the cancer immunotherapy Opdivo. Eliquis also is one of the first 10 drugs the government has targeted for price negotiations under the Inflation Reduction Act. Its third highest-grossing product, the multiple myeloma treatment Revlimid, already faces limited generic competition. Two-thirds of the $1.5 billion savings is expected to come out of spending on research and development. The company has discontinued 12 programs, including a successor version of its immunotherapy Yervoy, and will continue to review its pipeline through the rest of the year, Chief Medical Officer Samit Hirawat said.
Global Chips Battle Intensifies With $81 Billion Subsidy Surge
Superpowers led by the US and European Union have funneled nearly $81 billion toward cranking out the next generation of semiconductors, escalating a global showdown with China for chip supremacy. It’s the first wave of close to $380 billion earmarked by governments worldwide for companies like Intel Corp. and Taiwan Semiconductor Manufacturing Co. to boost production of more powerful microprocessors. The surge has pushed the Washington-led rivalry with Beijing over cutting-edge technology to a critical turning point that will shape the future of the global economy.
What began as concern over China’s rapid advances in key electronics blossomed into a full-scale panic during the pandemic, as chip shortages highlighted the importance of these tiny devices to economic security. Those investments by the US seek to do more than just counter China, which still trails the rest of the world by several generations in advanced semiconductor technology. They also aim to close the gap on decades of state-directed incentives from Taiwan and South Korea that have made those places centers of the chip industry. The spending spree likewise is fueling rivalries among the US and its allies in Europe and Asia, all chasing a piece of the growing demand for devices powering advances in AI and quantum computing.
What Do Young People Want? Getting - and Keeping - Gen Z in Manufacturing
A surge of new technologies, collectively promising a Fourth Industrial Revolution, is taking hold in manufacturing —and promising to reignite productivity growth. And, conveniently, a generation of workers who have spent their whole lives immersed in technology is coming on the scene: Generation Z. In contrast to older generations, more of Gen Z say they’re open to the idea of working in manufacturing. But ask a plant manager in Ohio or Nevada looking for entry-level workers to staff a technologically advanced assembly line and you’ll likely hear frustration. What seems to them like a great opportunity for starting a career isn’t attracting very many Gen Z applicants. And those who get hired often don’t stay for long, prompting a fundamental question: What do these workers want?
Research from McKinsey confirms what these managers are experiencing firsthand: not nearly enough Gen Z workers are entering the field to fill factory vacancies. Once there, Gen Z engagement levels tend to be low, and they’re more likely to leave than older workers. According to the research, Gen Z workers’ motivations for taking, keeping, or leaving a job are similar to those of older cohorts, although compensation is somewhat less of a draw compared with factors such as career development and advancement, flexibility, meaningful work, and caring leadership. Another big difference, of course, is that Gen Z knows it has options, given sustained low employment.
Stellantis, UAW at Odds Over Layoffs, CEO Pay After New Contract
UAW president Shawn Fain has hit out at Stellantis over recent employment cuts, which occurred less than a year after the union secured a new long-term contract with the car manufacturer. Stellantis said it would invest an additional $19 billion into the U.S., increase wages by 25%, and provide more than 3,000 temporary workers with full-time employment as part of its new contract with the UAW. Despite this, Stellantis recently fired 199 full-time workers at the Ram 1500 plant, axed 400 engineering, technology, and software jobs in March, and will also reduce its Italian workforce by 8%.
The UAW appears particularly upset at Stellantis for firing many temporary workers. The company said it would provide 3,200 temporary workers full-time employment within a year. Stellantis usually uses these supplemental employees to fill absences or calls on them when a plant needs more workers. Stellantis axed 539 supplemental employees across the United States in January and 341 in March.
Credit Card Debt Slowed Sharply in March
Consumer credit increased at a slower pace in March, growing at an annual rate of 1.5%, a decrease from the 3.6% rate in the previous month. Total consumer credit outstanding rose $6.3 billion, which was significantly less than the anticipated $15 billion increase. Revolving credit saw a modest increase of $200 million for the month on a seasonally adjusted basis, translating into a 0.1% annual rate following a 9.7% rise in February and a 7.3% increase in January. Nonrevolving credit grew $6.1 billion, or at a 2% annual rate.
During the first quarter, consumer credit grew at a seasonally adjusted annual rate of 3.2%, faster than the 2.4% increase recorded in the final quarter of the previous year. Revolving credit, which includes credit card spending, expanded at an annual rate of 5.7%. Nonrevolving credit, which covers loans for items like vehicles and education, increased at an annual rate of 2.2%. Higher interest rates are likely a factor. The average interest rate for a credit card reached 21.59% in February, its highest since the Fed began keeping track of rates in 1994.
Online Buying Grows, but Consumers Face Delivery Problems
A survey from Descartes Systems Group found that 39% of respondents made more online purchases in the period surveyed this year compared to last year, and that 57% made purchases in at least one new product category this year. While the study revealed that consumers in every demographic are increasing the volume and frequency of their online purchases, 67% of those surveyed encountered delivery problems.
Additionally, delivery issues were also cited in the study as a potential barrier to future online buying. When consumers were asked what would put them off making more online purchases in the future, 21% indicated they have had negative delivery experiences, 20% said deliveries are not reliable and 17% have been dissatisfied with the delivery process. And 63% of those who experienced delivery problems took some form of action that had negative consequences for the retailer or delivery company.
Read more at Material Handling & Logistics
Panama Canal in Talks With US LNG Producers to Increase Transit as Drought Eases
he Panama Canal is in talks with U.S. liquefied natural gas (LNG) producers on how to meet increased demand for crossings as water levels recover after a prolonged drought, the canal's administrator Ricaurte Vasquez told Reuters in an interview. The canal is typically used by U.S. Gulf Coast exporters to send LNG cargoes to Asia via the Pacific Ocean, but from last year low water levels forced cuts to daily crossings, driving many producers to seek more costly or longer alternative routes.
In April, LNG transits through the canal's Neopanamax locks only amounted to 4.9% of crossings while container ships snared some 61.6% of the transits. Following increased rainfall that has replenished water levels, tensions have begun to ease and the canal is examining future opportunities, Vasquez said on Wednesday. The Panama Canal has proposed building water reservoirs as a solution to mitigate climate change related shortages, though it is still waiting for the government to grant it access to the areas where they could be built. President-elect Jose Raul Mulino told Reuters on Wednesday he would move to speed those permits. Mulino will take office on July 1. Scarcity has raised water's value, with Vasquez saying the canal will move to present an updated price scheme that match the new realities and customers' needs next year.
Workers Don’t Want Bosses Knowing They Use AI—Even As They ‘BYOAI’ To Work
Just over half of employees who use AI at work—52%—say they’re reluctant to divulge they’re applying it to their most important tasks, and roughly the same number worry that using it on critical tasks in their job makes them look replaceable, according to the latest Work Trend Index from Microsoft and LinkedIn. Still, workers are clearly using the new tech: Some 75% of full-time office workers surveyed said they’re now using AI at work—up from 46% six months ago—and more than three-quarters are turning to their own tools rather than company-provided ones, a phenomenon Microsoft calls “BYOAI.”
The annual report, released Wednesday, draws from a survey of 31,000 full-time workers, as well as LinkedIn labor and hiring data and usage data Microsoft captures from customers using its software. “The first thing we really see in this report is that employees want AI at work and they're not waiting for companies to catch up,” says Colette Stallbaumer, who leads the company’s future of work and Microsoft 365 teams. “A lot of that’s unsanctioned use.” This year marks the first time Microsoft has worked on the report with LinkedIn, which it acquired in 2016, and found a growing role for AI in both job titles and in what jobseekers and managers expect.