We have identified the most relevant external factors manufacturing executives should keep on their radar. The ISM Manufacturing Index fell 2.4 points to 54.2, the lowest since November 2016 the Institute for Supply Management said in its February report. Still, above 50 percent, the index is signaling expansion, just at a slower pace, which is in line with Prevedere’s expectations for the manufacturing sector for 2019.
The ISM Manufacturing Index is just one of many leading indicators often used to monitor the manufacturing industry. This index monitors employment, production, inventories, new orders and supplier deliveries from a survey of purchasing managers. It often greatly influences investor and business confidence. Using in concert with other unique leading indicators, it can be used to identify headwinds to help mitigate any large-scale risk to the business.
Top 10 External Factors Manufacturing Executives Should Watch:
Below is a list of leading external indicators manufacturing executives should watch to pinpoint market opportunities and prepare for unforeseen changes in demand. This list provided will vary depending on the industry.
- Vehicle Miles Traveled: This is the total annual miles of vehicle travel divided by the total population in a state or an urbanized area. It’s delivered by the Federal Highway Administration.
- Trade Weighted U.S. Dollar Index – The Broad Index: This index notes current trade patterns in the U.S.
- Crude Oil Prices – West Texas Intermediate: One of three global oil benchmarks indicating crude oil that is produced, refined and consumed in North America.
- Value of Manufacturers’ New Orders: This is a leading indicator of consumer confidence, as buyers are more likely to order high-value goods when they are confident in the economy.
- American Trucking Association’s Truck Tonnage Index: This notes shipping activity and consumption in the U.S.
- Total U.S. Employment Level: This report notes the number of filled jobs in the U.S., with the exception of farm work.
- Chemical Activity Barometer: The barometer notes a two to fourteen-month lead into the peaks and troughs in the overall U.S. economy and illuminates potential trends in market sectors outside of chemistry.
- Job Openings in Manufacturing: This report recognizes the availability of unfilled jobs to indicate manufacturing growth or contraction.
However, a number is just a number without uncovering how it impacts business. How does a leading indicator correlate to product demand six to nine months out? What does a 1% decline in a metric mean for future sales? How can a combination of these external factors strengthen a company’s economic baseline forecast to drive ROI? Using external data is imperative in answering questions such as these and allows executives to navigate strategically with data-driven insights.
Manufacturing Executives Can Leverage AI and External Data to Plan for the Future
Executives can better prepare for what is to come by empowering data teams to include external indicators in their planning and forecasting process. Utilizing a solution like Prevedere’s ERIN predictive analytics cloud, companies can analyze data faster and with more accuracy.
Using the power of AI, ERIN rapidly analyzes millions of global data series updated daily from hundreds of sources. Companies can easily discover the specific external leading indicators such as crude oil prices, total U.S. employment level, or job openings in manufacturing, that will impact their sales, costs, or profitability. Using Prevedere, manufacturing companies have used ERIN to validate expansion plans to avoid costly mistakes, discover the hidden drivers of demand, and maximize return on capital expenditures.
Every manufacturer has a unique set of external factors that influence performance. Integrating this “domino effect” in business analytics can accurately predict shopper behavior. Prevedere’s Demand Planning for Manufacturing solution combines human intelligence with Machine Learning from Microsoft Azure to provide future-focused insights delivered at the speed of business. Download the Tip-Sheet here.
Learn More About Prevedere’s Manufacturing Solution.