Article by Ken Naughton, President, Management Controls
The heavy asset industry has proven resilient to economic, social, and environmental challenges it has faced over centuries of operation. In today’s environment of heightened technical advancement and greater-than-ever focus on employee wellbeing and productivity, Management Controls President Ken Naughton has identified several industry-leading trends that will impact decision-making through 2023 and into 2024.
IRA Incentives Will Drive New Projects and Expansions
For starters, the Inflation Reduction Act (IRA) provides $500 billion in new spending and tax breaks to boost clean energy, increase tax revenues, and reduce healthcare costs. Because of the incentives this brings to the clean energy arena, we can expect to see steady investment in and growth of these projects.
And while the IRA’s incentives for clean electricity infrastructure investments and electric vehicles are getting the lion’s share of the headlines, the legislation also delivers workforce-related benefits that should be top of mind for business leaders.
The IRA incentivizes businesses that meet prevailing wage and apprenticeship requirements with an investment tax credit of up to 30% of qualified investment projects. However, the continued challenge of finding skilled labor adds a layer of complexity to this incentive. Business leaders should be keen to consider solutions that can help solve or ease this problem.
Unemployment rates are down, but the hunt for skilled labor is still pressing.
Earlier this year, the mining, quarrying and oil and gas industry reported only a 0.3% unemployment rate as compared to 8.4% in 2022, which indicates an industry rebound since the onset of the pandemic.
- Financial assistance to offset barriers to entry
- Enhanced strategy to increase involvement from underrepresented groups
- Increased safety standards
- Higher pay
But even as these industries are working to boost the labor force, leadership is still having to learn how to do more with less. And many are turning to other options like outsourcing and managed services to keep production efficient.
The adoption of tech solutions to support ongoing challenges caused by a lack of skilled labor will likely continue throughout 2023 and into 2024. Managed services, IoT-based devices, and other tech of this nature has proven itself as an effective resource as the heavy asset industry strives to do more with less. Tech solutions can help businesses optimize and augment their existing heavy asset industry staff.
Access to automation proves effective in the heavy asset industry.
Rapid growth of automation, AI-powered software, and access to real-time data continues to be a growth driver in the heavy asset industry. For example, the mining automation industry was valued at $3.24B in 2022 and is expected to register a CAGR of 5.9%. Plus, McKinsey predicts the increased use of automation is creating “a ‘software-defined’ paradigm for industrial automation.”
The drivers behind greater tech stack adoption stems from the need to address slim teams, but also to keep existing teams safe and working as efficiently as possible. Critical safety data like fatigue management, accurate badging in-and-out, and knowing which machines are in use at all times can help management more effectively oversee resource allocation. By making more informed decisions, they can easily see who may be overworked or underqualified on various project sites and could be a risk to overall safety.
By leveraging automation and real-time data, along with increased demand, heavy asset industry players have seen great growth in safety, efficiency, and business over the last year despite economic challenges.
Heavy industry growth has been steady and is expected to continue this year.
Despite the past year’s record-breaking inflation and impending recession, not to forget ongoing supply chain and raw material sourcing challenges, the heavy asset industry – particularly oil and gas – has performed ahead of expectations.
While oil supply has fluctuated across various parts of the globe, the overall global oil supply has expanded by 1.2 mb/d this year, led by the United States and Brazil.
In the manufacturing industry, modest growth is expected to continue this year.
And while the industry and project sizes are expected to continue growing, so does the importance of consistent cost management oversight and reporting across sites. Having immediate access to clean, usable data that can easily be cross-referenced in the same format from site to site will streamline project management operations and keep heavy asset industry businesses running smoothly.
Expect a shift in approach to capital expenditure analysis.
As the industry continues to grow, capital expenditure will likely find itself under the microscope. Considering the impacts of ongoing economic challenges, business leaders overseeing large capital projects are finding great value in taking a closer look at capex. They need to understand where and how resources are being spent and where cost savings can be derived.
As these industries realize the value of automation and real-time data, they can use these tools to make capex analysis much simpler so they can review and find areas where spending can be cut or reduced.
For example, having accurate data into the cost of labor and time spent by contractor teams onsite as compared with overall productivity and cost of resources can be a game-changer. Leadership gets a clearer understanding of where money is being spent and can make informed decisions when planning future projects.
Growth requires resources.
Identifying and addressing these challenges and opportunities is key for heavy asset industry leaders to continue down the path of predicted growth. Having ample resources – particularly in the areas of labor and capital – will unlock growth opportunities. But having the right tech tools and management tactics in place to balance both human and financial capital will make all the difference in long-term industry success.