Viewpoint: Taking Steps for the Revitalization of Manufacturing

April 26, 2012
More than any other sector in the economy, manufacturing creates the most wealth.

Manufacturing is very critical to economic growth, prosperity and a higher standard of living. Part of the reason for that is its multiplier effect. More than any other sector in the economy, manufacturing creates the most wealth. Manufacturing pays higher wages and provides greater benefits, on average, than other industries. It performs almost two-thirds of private sector research and development, creates the highest number of jobs to support the industry while serving the surrounding communities, and contributes to more than 50% of the country's total exports.

The top three priorities for revitalizing manufacturing proposed by National Council For Advanced Manufacturing and its alliance partners are:

  • Build a better educated and trained workforce
  • Promote product and process innovation, as well as research and development
  • Improve global competitiveness for companies

Each priority contains elements that must be considered in developing public policies that support the revitalization of the manufacturing sector, and policy-makers must consider these elements in shaping future public policy and legislation. Their goal should be to help public school systems and companies transform themselves to compete in more knowledge-intensive and information-fueled innovative processes, leading to more competitiveness by putting people back to work building things at home.

President Obama praised companies that are bringing manufacturing jobs back to the United States from abroad at a White House conference where he met with leaders of firms investing in South Carolina and other states. "I don't want the next generation of manufacturing jobs taking root in countries like China or Germany," President Obama said. "I want them taking root in places like Michigan and Ohio and Virginia and North Carolina."

The Association for Manufacturing Excellence (AME) has been leading the "Revitalization of Manufacturing" initiative, where AME, along with other organizations, has been reaching out to policy-makers nationwide, and encouraging them to join or develop efforts focusing on local and state job creation.

It is imperative that policy-makers recognize the importance of an industry that has been the backbone of the North American economy. To date, AME has received more than 400 signatures of support from state and federal policy-makers, industry trade associations and operations executives representing manufacturers across North America.

Virginia was the first state to pledge its support for AME's initiative. The Commonwealth and its businesses have been actively engaged in promoting manufacturing excellence. Over the years, Newport News Shipbuilding (NNS)has benefited from its relationship with AME by sharing and adopting industry best practices, which accelerate its journey to achieve operational excellence. Even as the Navy, one of NNS' biggest customers, contemplates possible cuts to ship orders, NNS continues to move full-speed ahead with plans to hire thousands of workers in the next five years. By maintaining a highly skilled workforce and utilizing best practices, NNS can grow its business.

As Virginia created the Commonwealth Center for Advanced Manufacturing, consortiums can help to breathe new life into manufacturing. Harvard Business School professor Michael Porter suggests that these industry "clusters" affect competition in three broad ways: "First, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation, which underpins future productivity growth; and third, by stimulating the formation of new businesses, which expand and strengthen the cluster itself."

Consortium members participate in resolving problems such as the lack of a trained workforce, regulations and infrastructure for growing or having access to needed resources. Local companies, academic institutions, government agencies, and labor and learning organizations can band together to become more competitive and reap the benefits of learning about new technology and innovative ideas.

In the future, consortium members will need to become vigorous learning enterprises and embrace a new organizational model. They will need to learn how to deal with economic and ecological survivability, and there will be a need for a new way of thinking called "compression"learning how to continue improving human quality of life while greatly reducing our consumption of energy and virgin raw material, and releasing no toxic chemicals into either air or water.

A major issue in revitalizing U.S. manufacturing is bringing companies back to the U.S. After years of rapid globalization, companies are beginning to see the disadvantages of offshore production, including shipping costs, supply chain issues and inferior quality. A growing trend, known as onshoring, reshoring or insourcing, is gaining acceptance as a weak dollar and surging wage rates in low-labor-cost countries make it more costly to import products from overseas.

President Obama recently highlighted the "insourcing" of jobs back to America. Companies are choosing to invest in the one country with the most productive workers, best universities, and most creative and innovative entrepreneurs in the world. "I don't want America to be a nation known for financial speculation and racking up debt buying stuff from other nations," Obama said. "I want us to be known for making and selling products all over the world stamped with three proud words: 'Made in America."

Harry Moser is the founder of the Reshoring Initiative. He is collaborating with AME to promote reshoring as part of the "Revitalization of Manufacturing" initiative. AME recommends companies use a Total Cost of Ownership (TCO) analysis tool to effectively compare total cost of local and offshore sources, enabling them to make informed business decisions. "We are committed to changing the sourcing paradigm from 'off-shored is cheaper' to 'local reduces the total cost of ownership,'" said Moser.

As companies analyzed the results of the TCO assessment, they identified gaps in performance limiting their capabilities to compete globally. With its alliance partners, AME will provide assistance in closing those gaps through training, kaizen events, plant tours and additional assessments to pinpoint and apply counter-measurements dealing with people, processes and performance.

A Call for Action

Policy-makers, industry professionals and academic leaders play critical roles in revitalizing the economy through the rebirth of manufacturing jobs. They need to ensure the supply of high-quality inputs such as educated citizens, physical infrastructure and a favorable tax and regulatory framework to foster increased collaboration between public and private sector partners.

Glenn Marshall is a director-at large for the Association for Manufacturing Excellence.

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