Huff and Puff and Blow that Economy Down…
What is not to like about more US manufacturing? It is important to our economy, to national security and to the individuals needing jobs and purpose. A nation should be able to build the things that it needs. A hollowed out economy that is only exporting services is not a long term play.
But a revolution is not the solution. Shaming companies to come back is also not a simple anecdote. It took us over 20 years to dismantle our manufacturing prowess. We can’t bring it back overnight. Without some planning we will build a house of straw. We will alienate our trading partners. We will bring back jobs that we can’t fill because we don’t have trained workers. We will try to use the same processes and facilities we have always used and the result will be poor quality and expensive product. We will impact our economy because our goods will be more expensive. Finally, retaliation by other countries will slow down the exporting that we do today. The right way to bring back manufacturing is to consider all of the aspects of a strong foundation and to build a house out of brick. What will that entail?
- Focus – What kind of manufacturing is right for this country? Given our higher standard of living we will not find enough workers for low skill tasks. The best products for re-shoring can be manufactured using automation, are high value or are heavy or bulky. Those kinds of products don’t rely on low wage workers and they cost a lot to move around. If the market is here you can eliminate shipping costs by building here. We also should consider where we can bring a competitive advantage. If we have access to materials and other natural resources, design expertise or automation capability we can do a better job than the competition and build product for the US market and also successfully export. Examples of good products for US manufacturing are appliances, vehicles, expensive electronic devices, machinery, robots and construction materials. It also makes sense to build close to home when a product is difficult to build and contains a lot of intellectual property. The interaction between manufacturing and design engineering is critical during a fast ramp and doing that close to home has time to market advantage. Time is money and fast to market protects IP.
- Infrastructure – We need better roads and power and better access to human resource. State government officials in some locations are working on this. Kentucky, South Carolina, Tennessee and Alabama are attracting more than their fair share of new manufacturing jobs because they have favorable policies, strengthening infrastructure and active government programs aimed at attracting companies. Each state needs to craft policies to attract the kind of industry that will be beneficial to the population.
- Prepare the Workforce – In a 60 Minutes interview Tim Cook, the Apple CEO, said that one of the reasons that Apple needs to build phones in China is that the US doesn’t have a trained manufacturing labor force. The obstacle is not so great. If we package training with job opportunity at a living wage, the workforce will be available. Apple can not afford much labor content with this model but automation is a way around that roadblock. Increased automation will generate the need for other skills that we currently lack in the US. We need more manufacturing savvy engineers. We have the best higher education system in the world and there are many excellent programs that can meet this need. Those programs train engineers for the whole world. We can harness that momentum for our own workforce through part-time, online or even full time degree or certificate programs that are sponsored by companies in need of talent. This is an investment worth making and where some profit should be directed.
- Government Support – Of course tax reduction is what comes to mind here and perhaps President Trump’s intention to increase the tax burden on companies importing goods will help fund education or infrastructure. But there are other ways our government can have a direct impact on a continuing manufacturing renaissance.
- Training program sponsorship or tax credits
- Increased community college support for practical apprenticeship type programs
- Higher education support in the form of manufacturing and technology research grants
- State or Federally sponsored manufacturing initiatives used to focus funds and research
- Increased vigilance for fair trade
- Logical and sustainable regulations that solve for both competitiveness and the environment.
- Leadership and Vision – When I worked with Canon, I was told that Canon just did not understand our actions. HP was making decisions for our stockholders. We were trying to minimize the tax burden and they felt that taxes were a patriotic duty. Losing jobs to China was a defeat and there was much debate prior to any movement of manufacturing. They believed that they could build the product with higher quality and with more process technology and therefore it would ultimately be less expensive. Perhaps we can’t turn public international companies into patriotic entities but with more visionary leadership and more action that drives innovation and competitiveness right here in the US, companies can find a win for US manufacturing and for stockholders. The win is there. It will take leadership to invest in factories, commit to a plan that isn’t easy to pull off in the short term and then execute with determination.
There is a path to solid manufacturing growth in the US. It isn’t a move back to the 1970’s. We won’t go back to what manufacturing looked like then but neither will the rest of the world. The new era of manufacturing will be lean and automated. It will require an educated workforce and a supportive government. We will need the willpower and the leadership at high levels in government and industry to take a stand and to chart a path to a successful win-win future where the consumer gets a good “Made in the USA” product at a competitive price.