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Boeing's Eastward Migration Suggests How US Manufacturing Can Remain Relevant

Boeing's Eastward Migration Suggests How US Manufacturing Can Remain Relevant

Thanks to the Internet, conducting surveys is now a relatively easy and painless process for researcher, second only to coming to a conclusion about what the survey results mean. That being said, some surveys are obviously going to be more significant than others, based on both who conducted the survey and who responded.

If you were told, for instance, that the United States is no longer number one in manufacturing competitiveness – that in fact, it’s number three, behind China and Germany – you might very well say, “Oh yeah? Says who?” As it turns out, no less an authority than global consulting firm Deloitte, which polled 550 manufacturing executives worldwide, with 46% of them being chairmen, CEOs or presidents, and the rest senior-level executives. So as surveys go, this one is pretty authoritative.

In fact, the U.S. being in third place right now is the good news, according to Tom Captain, principal and vice chairman of Deloitte’s U.S. Aerospace & Defense Sector, and a speaker at the recent Aerospace Manufacturing Conference produced by SpeedNews (which, like IndustryWeek, is a Penton Media brand). Within five years, if current trends continue, the U.S. will slip to 5th place, as both India and Brazil leapfrog their way past us.

Deloitte’s breakdown of how countries rank in various manufacturing competitiveness indicates that China’s dominance comes largely in all the areas you’d expect: low-cost labor, government investments in manufacturing and supplier networks (which includes supply chain management and risk management). I asked Captain how the U.S. could hope to compete in the future given the huge disparity in the cost of labor and materials between the U.S. and China. He pointed out that, according to the survey respondents, the key driver of manufacturing competitiveness today is not labor costs at all, but talent-driven innovation, an area where the U.S. excels (though respondents gave Germany an even higher score in this area than the U.S.).

“The pressure to reduce manufacturing costs is driving labor content down,” Captain explained, “and labor is being replaced by technology.” Automation, he continued, is reducing labor costs by reducing labor content as a component of total production costs, particularly in the aerospace industry. That reduction in labor content, however, “is feeding into a talent shortage in manufacturing jobs,” Captain points out, “where the greatest shortages are associated with skilled production workers, technologists, scientists and design engineers.”

It’s that very skills gap that brought the attendees of the SpeedNews conference to Charleston, S.C., a state that’s offering significant tax breaks and credits to attract manufacturing companies like Boeing, who in turn attract the best and the brightest engineering talent in the area, as well as Tier 1 and Tier 2 suppliers who want to be closer to their major OEM customer. As Jack Jones, vice president and general manager of Boeing South Carolina pointed out at the conference, Boeing’s decision to build its Dreamliner aircraft in Charleston was made easier because “the community wanted us.” Having the support of state and local governments, elected officials, business leaders, and educational and training institutions went a long way in convincing Boeing, which had always been a West Coast company, to come to the East Coast. Boeing clearly must be enjoying its relationship with South Carolina, as the company just announced it plans to spend another $1 billion in the state, adding another 2,000 jobs.

That kind of support needs to be repeated throughout the U.S., over and over and over again, to ensure the U.S. doesn’t slip behind even further in the quest for talent-driven innovation and global manufacturing competitiveness.

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