Manufacturing continues to be a key component of the Puerto Rico, but global trends in the 21st century mean that the industry is already changing with a focus on technology, increasingly capital intensive and generating fewer jobs.
This was the assessment of a report by Estudios Técnicos in its monthly publication, “Perspectivas.” As explained by José J. Villamil, the firm’s founder and principal executive officer, traditional manufacturing will not cease, but the industry will continue to undergo “profound transformations in technology.”
Among the global trends that he outlined include:
• Production will increasingly be of intangibles, blurring the line between manufacturing and advanced services.
• New manufacturing companies are emerging around technologies, as is the case of Tesla and many others, and this trend will not change. This is important to recognize because these new companies do not respond to market demand but create such demand.
• Companies will be characterized by high mobility and can be located practically anywhere, which has allowed a greater dispersion of industrial production and has generated a movement in the U.S. for North American multinational companies to return their production processes to the country.
• The organization of production is fragmented and requires integration of processes carried out in companies located in different jurisdictions. Horizontal integration (“outsourcing” or subcontracting) replaces the vertical integration characteristic of traditional manufacturing.
• The very short useful life of products and technologies requires companies to have the flexibility to act with agility in the face of changes in technology, in the economic and geopolitical context and in consumer preferences.
“One priority must be to ensure that global manufacturing supply chains on the island are located in Puerto Rico to the extent possible and that they are predominantly made up of local companies. From promoting factories, we must move to promoting the creation of integrated production systems, the so-called ‘clusters,’ a concept that’s been with us since 2000…
“It is much more difficult to move an integrated production system than to move a production line, an important condition in a context in which capital moves with great ease. By encouraging internal linkages, the economic impact of global manufacturing would be much greater than it is today,” Villamil said.
A Success Story
Highlighting the importance of technology, local company Inteldot has reached a milestone: 10 years of collaborating with a number of global life-sciences company. Inteldot, a local system integration and outsourcing firm, has helped with the island’s digital transformation to increase efficiency, reduce costs and improve lead times that are key to attract new investments. Among the companies that Inteldot works with are Amgen, Johnson and Johnson, Takeda, BMS and Novartis.
Inteldot, founded in 2011, counts on a local staff that has experience in design, development, testing and validation solutions. They have been completing implementations for more than a decade for plant utilities, building management systems, bulk manufacturing facilities and vial & syringe filling processes for local and global companies.
“In Puerto Rico, for the past decades, the elimination of tax incentives has forced the life sciences sector to invest in technology to maintain its competitive edge over other jurisdictions, where energy and labor costs are lower. Therefore, we are aimed at strengthening the local ecosystem to allow the implementation, operation and maintenance of these technologies so that our clients can focus on shipping quality products out of their warehouses,” said Reggy Agosto, founder and CEO of Inteldot.
By implementing Manufacturing Execution Systems (MES) and other enterprise systems, Inteldot has met the business needs of global leading companies, having a direct influence in the manufacturing process and quality assurance for three of the top-20 selling medications in the world, he indicated.
Some of the main challenges that companies have during technology implementation are data integrity, limited business resources as well as getting and keeping quality groups and management’s attention and commitment. “Our focus with the services and solutions that we create is not only to address those challenges, moreover they have to be agile, scalable and flexible enough to transform and meet the ever-changing business needs,” Agosto said.
As per the company, Inteldot is the first service provider from Puerto Rico to provide MES solutions for commercial CAR T-cell therapy manufacturing processes and supports client operations in California, New Jersey, Germany, Switzerland and Japan. With more than 40 staff members, they are the local service provider with the largest number of employees assigned to MES implementations.
To accelerate the digital transformation of the life science industry, Inteldot will be sponsoring an educative forum in November. “The implementation of technology has to be accompanied by the development of professionals who can maximize the benefit of investment in the industry. Undoubtedly, the creation of forums that allow the discussion and knowledge development paves the way for our island to be the preferred center at international level for talent search,” he said.
Good News, Bad News
There has been some mixed news regarding the manufacturing sector in the past month. Manufacturing in Puerto Rico has been hovering around the mark of 50, as measured by the Purchasing Managers’ Index (PMI), which represents the expansion in the activities generated by this economic sector compared to the previous month. A reading above the threshold level suggests an expansion in the manufacturing sector with respect to the previous month.
This positive trend occurred, despite the economic and operational complications that the COVID-19 pandemic has generated, manufacturing is one of the sectors that has managed to keep its activity afloat on the island and is one of those that has had the least impact.
For example, in July, the PMI was at 55.8, with most of the sub-indexes registering increases, as reported by the Puerto Rico Statistics Institute. In the case of New Orders and Employment, both rose to 53.8 and 55.8, respectively, after having been below the threshold in the previous month. Delivery to Suppliers reached 71.2, while company Inventories remained at 50.
However, the PMI decreased to 53.8 in August. The Employment and Own Inventories sub-indexes decreased with respect to the previous month. On a positive note, the Production, New Orders and Suppliers Deliveries sub-indexes were above the threshold level of 50.
According to the report by the Statistics Institute, factors affected by the pandemic in the manufacturing sector were: a reduction in suppliers’ deliveries (21.2 percent), a reduction in demand (9.4 percent), a reduction in staff (18.8 percent), a reduction in inventory (0 percent), and others (18.8 percent). Meanwhile, 50 percent of the respondents were not affected by the government measures due to the pandemic.
The PMI had remained above the threshold of 50 since Dec. 2020, with the months of February and March as the ones with the highest growth, exceeding the threshold of 60.
Another bit of good news came from an expansion announcement by Prime Air Corp. With an investment of $1.4 million, the Puerto Rican global transportation and logistics services company began the construction of its second controlled temperature warehouse in the cargo area of the Luis Muñoz Marín International Airport to supply the growing demand for pharmaceutical companies and medical devices on the island.
Prime Air Corp. offers air, sea or land transportation services for cargo, storage and delivery of machinery, equipment or products to any destination in the world. Specialized in the handling of air and maritime services for the manufacturing, pharmaceutical and device industries, Prime Air also transports heavy and large equipment, sensitive and refrigerated cargo, hazardous materials, as well as chartered aircraft, among others.
On the downside, Microsoft Operations Puerto Rico LLC announced that it will maintain a remote workforce in Puerto Rico and the other employees will be relocated in the different offices they have globally. This reorganization will be done gradually and will culminate in 2024.
“Microsoft plans to reduce its activities and decommission its facility in Humacao, Puerto Rico. This process will take place over a period of several years and even after its completion, Microsoft will maintain sales and support personnel in Puerto Rico to support its customers. There is no immediate change in the roles of the employees at the Humacao facilities,” the company said, adding that its offices in Guaynabo will remain unchanged.