Manufacturing Under Stress in Flight to Quality

The new signs of stress in the manufacturing world are indications of the scale of the consumer trend toward higher quality in manufactured goods.

The signs of stress are easy to see in stock markets and global politics this month. There is a slump across the mining sector, as the demand for materials remains soft. There are a few exceptions, and there is no sign of a loss of interest in the trending metals such as rare earth metals, lithium, or silica. There may never be a decline in demand for uranium as two generations of nuclear power plants struggle to remain in operation. Otherwise, though, the demand for basic materials is less than anyone expected.

A slump in global shipping is another sign of the same trend. Ocean shipping fleets rushed to expand in 2022, only to now find that there are no customers for the newly added capacity. Sailings are being canceled in numbers never before seen while the giant cargo ships sit empty offshore for weeks at a time.

Official statements from China, the largest manufacturing country, call for policy changes in the largest consuming country, the United States. China blames the slump in its manufacturing sector on more restrictive policies in the United States.

This story does not stand up to scrutiny, though. Manufacturing demand has also declined in product categories and countries that have not had policy changes, including China itself. Nor are there indications that factories in other countries are expanding in the areas where China is contracting. Manufacturing outside of China is also struggling to hold its own. The whole world has become more skeptical of the ultimate value of manufactured goods, and factories everywhere are affected.

This trend dates back at least to the ecological awareness movement of 1970, but it picked up most of its momentum in 2020 and 2021, perhaps simply because so many people were spending more time than usual at home during those years. Forced to look at their material possessions, consumers became more keenly aware of every area of imbalance in their purchases.

One of the biggest trends to emerge from that period has been a consumer flight to quality. A consumer willing to pay more for higher quality goods might seem like a plus for manufacturing, but in the long run, it is the opposite. Quality often means durability, and when consumers favor designs and brands and designs that last longer, it means a longer wait before factories are called on to make a replacement item. This is already a noticeable effect when consumers choose a premium battery brand that has a 10 percent longer life, but some products, like the better headphones, hedge trimmers, computers, and kitchen blenders may last 10 times as long as the brands previously preferred.

Another example that might not seem to add up to much is the trend toward reusable shopping bags, especially at some grocery stores. A reusable grocery bag may cost 5 times as much to manufacture because of the greater use of materials, but may last for 1,000 uses, meaning it replaces 1,000 disposable bags. In the long run, the net loss in manufacturing from this switch is more than 99 percent.

The new generation of LED light bulbs is another small part of the same trend. These bulbs share the 30–50 year nominal expected life of previous bulbs, but defect rates are lower, so these bulbs are more likely to last for their full design life span.

This trend toward fewer product purchases with a shift to higher quality shows every indication of expanding slowly to cover more product categories. As a result, the global slump in manufacturing could last for many years to come.

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