Oct 2, 2011

Bringing Manufacturing Home

There's been a great deal of discussion about the manufacturing in Asia, especially when it comes to the toy industry.  These articles, HBR Blog - Is Manufacturing Making A Comeback? and S&B - Manufacturing's Wake-Up Call are great support for bringing this expertise back to the US.

Takeaways: 
Manufacturing matters, for creating economies of scale, impacts on innovation, and the multiplier effect on the economy.
- Manufacturing accounts for 11% of GDP, and as much as 25% when considering secondary markets.
- In 2008, 67% of all innovation was conducted by manufacturing companies.
- From 2006-2008, 22% of manufacturers reported a significantly improved product, process or service, compared to only 8% of non-manufacturing companies.
For this reason, our legislators need to consider manufacturing a key component of growth and future security. 

When considering only labor and currency rates, the West can not compete with emerging economies.  These two factors are increasingly becoming less important (labor is increasing at 15-20% per year, and the uncertainty in the currency), while four other considerations are starting to take precedence.  With a strategy to encourage manufacturing and promote these four consideration, we can all promote and grow our manufacturing capacity domestically:
1. Skilled labor, especially for facilities dealing with high tech - Promote specific skill sets at universities and develop a marketing strategy to encourage young and ambitious men and women to pursue these jobs.2. High impact clusters - Promotes productivity and efficiency, promotes jobs through investment in infrastructure, promotes innovation
3. Access to nearby countries with emerging consumer markets and lower-cost labor (i.e. Mexico) - issues with narcotics and cartels aside, Mexico makes the most feasibly option for replacing Mexico as a source of manufacturing and, more important, a massive market for our products.
4. Competitive regulatory and tax environment (i.e. simplifying and streamlining the current tax and regulatory structure) - current corporate tax rates that are the highest in all countries working in the Organization for Cooperation and Development, and more and more regulations domestically, creates immense obstacles for local manufacturing to be competitive with counties overseas.
Several large firms have seen the writing on the wall.
- Hasbro recently opened a massive US manufacturing plant.
- Boeing is completing its facility in our backyard of North Charleston, SC.
- Volkswagen recently opened a new $1-billion factory in Chattanooga, Tennessee
- Embraer, the Brazilian manufacturer of mid-size commuter jets, recently opened an assembly plant in Melbourne, Florida
- Mitsubishi Nuclear Energy Systems, which builds nuclear power plants and components, is locating a new engineering center in Charlotte, North Carolina.

The signs are clear and numerous options exist.  Who is going to have the courage, vision and leadership to steer the ship a different direction?