What is in this article?:
American manufacturing has done pretty well in terms of cost reduction, productivity and internal efficiencies in the last 30 years. In the eighties when the Japanese began penetrating our markets with superior quality products American responded with Deming Statistics, TQM, and ISO-9000 and eventually America could compete with anybody in terms of quality.
About the same time computer software evolved into MRP, MRPII, and eventually ERP to control workflow and inventories. Then the Toyota Production System was revealed and programs like JIT, Six Sigma, and Lean Manufacturing became very popular. All of these initiatives have kept the United States in the global game of manufacturing.
In fact, American manufacturing ranked first in manufacturing value added in 2008 as most other countries showed drops in their output because of the recession. In 2011 the Department of Labor said that America and China are both close to the number one position in terms of total manufacturing value added.
The U.S. Labor Department shows that output per hour of American Manufacturing from 1987 to 2011 was 3.4 in 24 years. This is very high compared to most other countries except for Finland, Singapore and Taiwan. So if these figures are all true, why is there still doom and gloom by many manufacturers?
The problem is that American manufacturing is not growing in terms of percentage of GDP, number of employees, number of plants, or in many cases sales revenue.
The chart below shows the macro economic figures from the last decade to support this claim.
# Employees # establishments’ % of GDP
2000 16,473,994 354,498 14.2%
2001 15,950,424 352,619 13.1%
2002 14,664,850 344,341 12.7%
2003 13,878,170 339,083 12.3%
2004 13,404,202 338,080 12.5%
2005 13,168,822 333,460 12.4%
2006 12,954,696 331,355 12.3%
2007 13,416,569 330,350 12.1%
2008 12,781,169 326,216 11.4%
2009 10,914,035 308,934 11.0%
2010 10,567,355 11.7%
We have lost 5,906,639 employees, closed 45,564 factories, and manufacturing’s percentage of total GDP has slipped 2 percentage points since year 2000.
In a recent Deloitte consulting survey of North American CFOs, they found that “60% of the firms say their top company challenge is revenue growth from existing markets." I think that it is safe to say that since America has felt the pressure of globalization, American manufacturing is no longer growing especially in terms of sales.
One alternative is to wait and see. We can hope the government will make progress in forcing China to stop manipulating its currency which is under valued by as much as 35%. This makes China very attractive for American manufacturers seeking ways to lower costs, and it makes Chinese imports superficially cheap.
Or perhaps the large multinational companies will become more patriotic and quit out-sourcing jobs and production to low wage countries. This would create an immediate demand for American manufactured products and opportunities for growth.
Or maybe the Obama administration will give into to the multinational companies and reduce their corporate tax rate by 10% or even give them a tax holiday so they can bring in the profits they are holding out side of the country.
Or perhaps someone will come up with a successful way to reduce the cost of health care. But hope is not a plan and waiting for outside events to change or the government to step in to help us may never happen.
As old industries dwindle, new industries emerge, and large customers evolve to adapt to globalization, your company will be part of this change. And change can be good news as many new industries, hundreds of new market niches, and thousands of new applications will emerge. (I am fond of saying there are always opportunities in chaos.)
Certainly there are going to be many industries that continue to decline and perhaps some, like circuit boards, textiles, and shipbuilding, will never come back. But there are other industries that are emerging and evolving that will provide new opportunities for manufacturers in the future.