"It has always been in our best interests to introduce the rest of the world to freedom and free enterprise. Our situation now is just another chance to prove again to them that we still know how to take advantage of all that freedom. Competition is good for the world!"
American manufacturing is "fleeing," "dying" or "collapsing," depending on which pundit you ponder these days. They sa y our factories and the jobs in them are moving to Mexico, to China, to other countries where labor is cheaper, and the regulatory burden is, if not entirely absent, strikingly less. They say we're done as a manufacturing power, let alone the leading producer country—as the United States has been for generations. Is this true?
Only those asleep don't know that there's a terrific amount of manufacturing going on in China. Check the labels on your Christmas gifts. There's similar industrial development going on in numerous other countries. Much of this is a matter of them seeing what we've known since our country's founding. That free enterprise and free markets lead an economy and its people to success.
Yes, their workers work for far less. And yes, their laws about pollution and safety are almost non-existent compared to our hugely powerful EPA and OSHA and the rest of the alphabet soup we have to live with. But, there's also a huge amount of outsourcing going on in those other countries as well.
Some of that comes over here to the United States. Numerous Japanese, Korean and, soon, Chinese plants dot our own landscape. Nearly all of the new (under 20 years old) machine tool plants, auto plants and many supplier plants in our country are foreign-owned. European business investment has been a fact of life with us from our nation's beginning. With that investment comes jobs and top quality products.
This is all part of the increasingly global business world, but it is not new. It's merely accelerating. If we keep our wits about us, as Americans usually do, we will thrive in this climate. In fact, judging from the latest numbers on the economy the thriving is building up momentum and we're in for a pretty good few years.
Pundits, however, despise good news. So on they crow: "We're losing our manufacturing jobs! We're losing out in industry to these countries with their cheap labor! Do something!" Yes indeed, do something. Here are two things American industry is doing to stay successful in this tough, highly competitive business arena with its many new participants. One has to do with automation and related technologies. The other is DAT.
Industries, all industries, are pressing ahead with all manner of automation and advanced material handling technologies. Ever-higher levels of technological integration lead to higher quality and phenomenal productivity growth as has been noted repeatedly in the pages of MHM and many others. Twenty years ago, industry was still in a pretty mean fight over automation. Labor unions saw it as management's banner leading them in their quest to eliminate workers. I call automation the wave front of the industrial revolution, a way to keep companies competitive and workers ever more productive. Enlightened managers then and labor leaders—and many workers today—agree.
Today, even the most anti-management labor leader will concede that a manufacturing company that does not invest in its technological future is guilty of betraying his employees. Such a change in attitude would shock people a few decades ago, but the threat of outside competitors has a funny way of moving everyone into a more cooperative arrangement.
So, we need to automate, modernize and meet the competition with stunning productivity and time-to-market flexibility. Leading manufacturers are doing just that and, in many cases, without layoffs. But, here's something else they're doing. It's called DAT—Design, Assemble, and Test.
Many companies are "outsourcing some of their manufacturing to other companies and focusing on their core competencies," says Russ Strobach, vice president, sales and marketing, Parker Hannifin's Automation Group, in Cleveland.
In other words, the larger companies are moving a lot of their manufacturing needs back into their supply chains (in many cases overseas) and concentrating on the usually more customer-focused functions of design, testing and final assembly. They are keeping the creative engineering work of design, and testing as well as final assembly, which they will increasingly automate. In effect, they are focusing on those operations that require the most intellectual content and the automation of the final assembly of the products that flow from that creativity.
Now the automakers have been moving in this direction for years but their first and second tier suppliers are now following suit. This strategic move on the part of the car companies has had the business profs and management book authors arguing the pros and cons of such " functional devolution" with passion and great erudition. Suffice it to say that while they discuss DAT, it seems to be gaining in popularity among manufacturers.
The entire manufacturing world, big companies, not-so-big and small companies are constantly seeking productivity and profits. That goes for us, the Chinese and the rest of Asia and the Mexicans, the Europeans and the rest of the world. The move to modernize and to focus on what you do best is the two-edged sword of today's industrial manager—here or abroad.
It has always been in our best interests to introduce the rest of the world to freedom and free enterprise. Our situation now is just another chance to prove again to them that we still know how to take advantage of all that freedom. Competition is good for the world, us and them. That's another core commitment. Let's prove we mean it!
It behooves all of us, workers and union leaders, managers, stockholders and politicians, teachers and, yes, those panicky pundits, to recognize the basic manufacturing issues of our economy and the world. Without competitive manufacturing a country becomes or stays Third World. Trying to keep people out of the free enterprise club is not only wrong, it is doomed to failure.
Here again, as I've noted many times, we need a Secretary of Manufacturing. Such a CABINET LEVEL position gives industry (and everybody in it) the high-visibility soapbox it needs. For the good of industry and labor, for the good of the country, the President should upgrade his recently established post in the Commerce Department to the Cabinet where he or she could bring such topics as this to the attention of the American people. We have a Secretary of Agriculture. Why not a Secretary of Manufacturing?
Meanwhile, industry here is not lost. In fact, it's enjoying one of the most ideal business climates in decades. Inflation remains low. Interest rates are still as record low levels and unemployment, while higher than some would wish at 5%, means 95% of the people who want to work are working.
Too optimistic? What better conditions could exist for the manufacturing companies of our country? What do you think? And, maybe you can find a moment to pen a note to your Congressional Representatives about our campaign for that new Cabinet position, Secretary of Manufacturing. He or she should be leading this debate about our manufacturing future. Happy New Year!