Bill Polk: Brains and brawn: Manufacturing has a future in the U.S.
by Bill Polk -- Manufacturing Business Technology, 2/1/2009 7:00:00 AM
The death knell for manufacturing in the U.S. has been sounded by many people, but the reality is that we can be competitive on the global stage. The question is, what do manufacturers need to do to legitimize this argument?
I contend the argument has already been made for us by a combination of risk factors and our manufacturing heritage.
The flight from American shores by companies in pursuit of cheap labor was, to a degree, understandable. I say understandable only to a degree because a number of those decisions were nearsighted. I’ll even admit to being a part of the problem. My background includes roles as the Director of Operations at electromechanical component factories located in the U.S., Mexico, and France. Like all heads of operations I was constantly challenged to pursue cost savings. Those nearsighted companies (and occasionally I) would look primarily at lower labor costs without regard for other risks and make decisions that were at times pennywise and pound foolish.
When moving operations overseas to mitigate rising labor costs, many companies fail to think about the risks this can introduce within their global supply chains. In a recent AMR Research study, 130 companies were asked about the risks in their global supply chains. China was ranked as the highest risk geography for nine out of 15 supply chain risks, including IP infringement, supplier and internal product quality failure, and security breaches.
Problems serious enough to warrant recalls can be devastating to brand image. Nestlé’s recent recall of Lean Cuisine frozen meals highlights just how easily an uncontrolled offshore production operation can destroy a well-molded brand.
Fuel volatility and currency fluctuations are two more reasons U.S. manufacturers are—or should be—coming home. When these two cold realities are coupled with the latency of overseas shipments, companies can lose control of manufacturing input costs and end up holding products that cost more to make than they can sell them for.
Additionally, supply chains historically are built on moderately inexpensive fuel. Although the cost of fuel has plummeted in recent months from its heretofore unseen heights, it will probably go up again. When oil spiked last year, it effectively imposed a 10-percent tariff on products shipped from China. This tariff prompted a majority of companies to rethink offshore manufacturing. The AMR Research survey found four times as many companies intend to increase, rather than decrease, nearshoring. Evidently you can come home again.
Finally, U.S. manufacturers have a heritage of craftsmanship. This long and storied history is not well served by outsourcing to low-cost and at times lower-quality manufacturing regions. A Harley Davidson motorcycle with the stamp “Made in China” just doesn’t sound right.
The future of manufacturing in the U.S. must have a basis in craftsmanship. Although U.S. labor productivity is the highest in the world, we are challenged to produce the lowest-priced products. To compete for market share we must have products that are innovative in design and function, and of unquestioned quality.
Does this all point to a rosy picture for the future of U.S. manufacturing? Absolutely not. The global recession underlying these historic economic times is posing manufacturing challenges to every nation, industry, and factory. However, U.S. manufacturing was built on brains and brawn, and it does have a future.
