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Don’t Let Small Manufacturers Go the Way of the Small Farmer

Let’s give the ‘little guys’ their due, as they have an outsized influence on the U.S. economy.

I guess I’m a little bit like most writers. I get a kick when I see someone else writing an article which parallels and confirms one that I have already written. That was the case last week, when the June 5 edition of the Madison, Wisconsin Capital Times published a column entitled “Plain Talk: Corporate interests have bullied family farmers into devastation.”

 If you compare its content and conclusions, you may notice some overlap between it and my article “Rest in Peace, Piece-Price.”

The premise of the Capital Times article was that family farms have, over the last 50 to 60 years, pretty much disappeared from the agricultural landscape in this country, to be replaced by corporate farms. As a result, the taste and quality of the food we eat has suffered. The parallel I drew from this article was that over the last 25 years, I’ve been seeing the same thing happening with small- and medium-sized manufacturers, whose employment has gone down, as has their contribution to our domestic economy.

The column was written by a retired editor of the paper who started out as a journalist the early 1960s. His first “beat” was farming. Back then, most produce came from family-owned and -run farms, and it was his job to keep people up to date on the issues affecting that part of the overall state economy. Today, I suspect you’ll see very few dedicated agricultural reporters in mainstream media today. In fact, most farm-related news is on agricultural corporations and is reported in business sections.

That got me thinking. A primary focus of IndustryWeek’s Supply Chain Initiative is giving people insight into the contribution to the U.S. economy of small- and mid-size manufacturers and the issues affecting them, most of which are suppliers to larger Original Equipment Manufacturers (OEMs). I’m not aware of any other media outlet that has a targeted focus on this topic. That’s a problem, since “out of sight, out of mind” pretty much applies to most things, even in the case of manufacturing. When I look at the business pages of larger, more general media outlets, it is rare to see a reference to anything other than the large OEMs.

When we lost family farms, we lost a significant influence on the culture of this country, something that made our nation—and us, individually—what we are today. Let’s not let that happen to manufacturing’s “little guys.” If their numbers continue to decline at the current rate, we’ll lose even more of that “gung-ho” attribute that differentiates the U.S. from other counties. Specifically—as in farming—another avenue for individuals to “pull themselves up by their bootstraps” will be eliminated.

Shoring Up Our Opinions

I’ve written about Jeffery Watson in a previous column. His company, Sourcing Systems, provides off-shore sourcing services to OEMs, and at the Industry M&T conference he educated me on how tariffs have historically been used, the justifications for them, and their general impacts.

Readers of this column know that when selecting sources, I emphasize that the first step is to understand the characteristics of the demand in the industry you will be serving. In other words, you need understand which suppliers—factoring in their location—will be able to provide the level of supply chain performance that an OEM needs to efficiently and effectively hit their customer fill rate goals. In general, the business case will lead to manufacturing in the primary markets served. That means that when the U.S. is the primary market, manufacturing and sourcing in this country will deliver the most positive impact on company financials.

Read more Supply Chain Initiative columns by Paul Ericksen

Anyway, we live only a couple hours apart, and I had lunch with him the other day to discuss international trade, particularly focused on sourcing strategies. Given that our positions—on the surface, anyway—seem to represent two opposing ends of the sourcing strategies spectrum, you may wonder whether our luncheon conversation remained civil or not.

It was civil, and we found that despite some sourcing strategy differences, there was much middle ground regarding trade and manufacturing. Although I’ll only share a few details below, Jeffrey gave me a lot to chew on, and I suspect I did likewise with him. Here’s just a couple of the areas we were able to agree on:

  • We are in an environment where the tectonic plates of international trade are about to shift significantly. Some of these shifts will benefit the United States, while others will likely not. For instance, as China transforms into a consumer nation, it may make sense for companies to manufacture and source for that market in China.
  • These shifts imply that going forward, corporations will need to revamp their thinking on sourcing. In other words, the concept of supply-chain-related cost will need to be expanded to include their own corporate overhead—where appropriate—and supporting sales when demand comes in over forecast.
  • In fact, going forward, there will be few general sourcing “givens,” as piece-price being the primary focus in selecting suppliers will no longer—if it ever was—be valid. Rather, a business case needs to be developed for every product that will guide sourcing decisions based on overall business considerations. For instance, Jeff told me Strategic Systems International has advised clients that for some of the parts and components they want to source overseas, domestic sourcing is the better option. Considering how his company makes money, that is quite a bold statement.

I’d like to thank Jeffrey for his insights. I suspect you will hear more about our lunch and his company in future columns, as I further digest our discussion.

Paul Ericksen is IndustryWeek’s supply chain advisor. He has 38 years of experience in industry, primarily in supply management at two large original equipment manufacturers.

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