As part of our annual look into Iowa’s manufacturing sector, Business Record Associate Editor Mike Mendenhall and Group Publisher Chris Conetzkey recently moderated a panel discussion with two Iowa-based manufacturers, an economics professor and patent attorney who are on the ground and closely watch the state’s largest industry.

During the Manufacturing Forecast event, panelists weighed in on skilled workforce recruitment and retention, recent ag manufacturing layoffs, interest rates and their impact on manufacturing productivity and investment, and the expanded role that artificial intelligence and automation is playing in the industry.

The panelists included:
Heather Bruce, president and CEO, Osmundson Manufacturing Co.
Luke Mohrhauser, managing partner and chair of Mechanical and Electrical Practice Group, McKee Voorhees & Sease
Tom Root, associate professor of finance and department chair of accounting, economics, finance and law, Drake University
Lori Schaefer-Weaton, president, Agri-Industrial Plastics Co.

Here is what our reporters took away from the conversation.

Using automation to make jobs accessible to more workers
Schaefer-Weaton said retirement of the older generation will have an effect on productivity as they’re replaced by younger workers with less experience. “Part of automation is allowing us to increase our pipeline of who we can even get in to take these jobs,” she said. The advantage of Gen Z workers is they are open to and adept at working with technology and automation. “Automation, AI, all those different things — doesn’t terrify them like it would boomers and potentially some of the Gen X workforce that you have, so pairing those two together is what we’re trying to see is more of a harmony,” Bruce said. Bruce also noted that she doesn’t think automation technology is currently as productive as a human. Mohrhauser said companies need to keep in mind that all automation is data-driven, so the quality of what is put in affects the outcomes. He said he counsels clients to get input from their experienced workers to tailor automations to their specific structure and processes as much as possible.
— Sarah Diehn

Iowa should turn ‘brain drain’ losses into boomerangs
A recent report from Iowa Workforce Development shows more college students educated in Iowa leave the state after graduation today compared with 20 years ago. Schaefer-Weaton said as a boomerang, that isn’t too concerning to her. “After college, I lived in Chicago for 15 years. I worked for a technology services company for 10 and came back and had a lot to offer a medium-sized manufacturing company in Fairfield, Iowa,” she said. “Had I just moved right back to my hometown, [I] probably would not have had as much to offer, so that concept doesn’t scare me so much.” But she said it does mean that employers and community leaders have to make the case for coming back to Iowa while they’re here. ABI’s Business Horizons program is one that successfully shows students the opportunities in Iowa, she said. Bruce is also a boomerang who came back to be near family. “I’m not worried like everybody is with the brain drain. I think it’s actually healthier for Iowans if we can let them explore, and then have them come back,” Bruce said.
— Sarah Diehn

How recent layoffs in ag manufacturing are affecting productivity and the economy more broadly
Root said those layoffs have a “spillover effect, especially when you think about small towns that have a large plant that gets hit or a provider into a larger system and the ecosystem.” But he said there is growth in other manufacturing sectors outside of agriculture, where those layoffs could present an opportunity. “Those who get laid off have skills. And the question is, can you take advantage of those skills to bring them into a manufacturing facility in a different place?” Root said. “And so it might actually help in some manufacturing areas here that we have some highly skilled people who maybe work very well on the manufacturing floor, and who can then transfer out of ag into something else.” According to Root, the state’s manufacturing industry produces about 14% of the ag implements sold nationwide, making it a big part of Iowa total manufacturing base.

Because Osmundson services component orders for original equipment manufacturers and the aftermarket, the ag manufacturing layoffs have a direct hit on the company, Bruce said. “Everybody was buying heavy during the last four years, and then this major kickoff of John Deere and the uncertainty with Deere, because they hold the dealer network. Let’s be honest, everybody plays with the big green machines,” she said. “It takes a toll on us. … We still feel it. Orders are super slow. We probably have the order books very similar to 2018 where we had almost double our growth from 2019 over the last four years. It is also one of those things that is a double whammy for us, because our town is very heavily in agriculture, one form or another. Tyson’s closure was a huge hit to the industry. And then we have a few others that are also like, ‘Hey, we’re gonna have to do layoffs because there’s not enough volume in the industry itself.’” Osmundson is trying to be “very creative” to keep its workers employed during the slower period because it took time to bring the talent on board.

“We know in the ag economy, we’re the last ones to get hit. So the fact that we’re being hit now, when everybody kind of started seeing it pre-COVID or right around COVID, that means that, yep, we’re going to work towards the end, so to speak. So when ag has that two- or three-year lull, that’s really the lull of the economy, and then we’ll start picking back up again,” Bruce said.
— Mike Mendenhall

Optimism for production orders to start stabilizing in 2025
Schaefer-Weaton is cautiously optimistic about production orders for 2025. “We still have some big customers that are forecasting yet another year over year to be down, and so that will be a big chunk for us,” she said. “Diversification is key.” Schaefer-Weaton said, though, that when those segments have been down, the traditional ma-and-pa shops have been up. “This year, our team was hunkered down, and let’s get through this year,” she said. “I’m looking at 2025 in kind of the same context right now.” Coming out of the COVID-19 pandemic, Schaefer-Weaton said customers took so much product that they couldn’t check it in on their end because they didn’t have a warehouse where they could store it. “We would like to think that it’s going to go back to that pre-COVID era when it comes to the number of units per part. But I would say for several of our big [original equipment manufacturers] this year, it was down from that level. And I would say that next year may be similar, maybe a little better.”
— Kyle Heim

Read more takeaways and other manufacturing-focused coverage in Friday’s special Made in Iowa edition of the Business Record.