In the aftermath of the bubble economy, America needs to shift resources from the debt-inflated finance and housing sectors to the productive economy.
As part of this long-term strategy, how do we revitalize manufacturing?
Join the editor and several contributors to a new study, Manufacturing a Better Future for America, published by the Alliance for American Manufacturing, to discuss ways to rebuild the foundation of the American economy by means of innovation, industrial policies and trade reform.
What do you think? How do we as a nation revitalize manufacturing?
I am a Chinese reader. A thought-provoking clip.
some my personal ideas:
Education, I believe it is the key for manufacturing industry and the country to survive.
I like to combine country’s future with manufacturing, as I see all the past civilizations are evaluated first by their technology level to produce goods, which is essentially manufacturing industry. So I believe the future still depends on it.
Why Education?
> Because we are losing the young generations to maintain the industry.
Why “we”?
> Because China is facing similar problem, it just starts later than yours.
What’s the problem with young generation?
> Mao ZeTung once said: “Enemy (evil ideology) will pin the hope on the 2nd and 3rd generations.”
> My peers surrounding me, both Chinese and those from US: “What is manufacturing? Why choose that? Come to code web-games, sell houses, or be a trader at investment company. That’s how to become rich…” and that’s why the investors still only know about websites and real-estate.
> Professors of Manufacturing-related majors in Universities: “Sorry, I don’t have enough funding to support new Graduates…” I know many professors within the circle, they even have to compete with low level suppliers on projects without any innovation, just for the labs to survive. No young people will choose a manufacturing related career when facing an education like that.
> Check the European style: most company and industry build their own schools and breed their own successors. That’s how BOSCH can invest hundreds of million Euros for a single factory while the US auto-suppliers are in a mess with the Big-Three.
How bad is the manufacturing industry doing on education their successors?
> Very. My roommate saw the documentary movie of BMW product line THRICE just to say he want a BMW with a blond. And I know a US college student major in material forming who know nothing about mould but want a job in investment bank.
> Take Information Technology as example, it is important for upgrading manufacturing in the new century. However, for most high school students, IT = Department of Computer Science = a “dot-com” career or a job at the IT department in banks. They have on idea how all the other important disciplines such as manufacturing are evolving with information technology. And that’s why lots of CS graduates are not appreciated by industry executives. [M. Tomizuka, U.C. Berkeley, 2002]
two suggestions:
> pay more attention on young students. When they ask what is manufacturing, don’t shuffle about it can also earn a proper salary, just tell them: “all the things you wakeup to see in the morning are the products of manufacturing!”
> cooperate more with colleges – they need the industry’s money to breed the industry’s successors.
I am going to recite the obvious because maybe it isn’t. These observations pertain pretty much to the content of the video, only, not to the general discourse on the state of manufacturing in the U.S..
It is not clear what the panel means by ‘manufacturing.’ Do they mean a) the process of turning information into products, or b) an industry, or c) an enterprise that interacts with other enterprises, or d) an economic sector or e) a way of provding employment, or f) an instrument for ‘social justice,’ or g) what? I encourage clarification of Context, then the Content and Structure that are Fit for (whatever) Purpose. With this clarity they might garner lots more support rather than just empathy.
The panel seemed more focused on problems than on opportunities. We can build systems for one of two reasons. One is to suppress problems, helping avoid the unwanted. The second is to create something we care about. Which is the NMCS focus? It is difficult to build a system that does both. It can be useful to focus on the impediments to achieving an objective provided that opportunities for overcoming the impediments are also identified. In fact, this is the core of strategy formulation. Then resource allocation and scheduling can be done for real.
Regarding action, Go Public. Preaching to the choir or to politicians (many of whom abhor the notion of corporation) is futile. Show the public why THEY are losing if ‘manufacturing’ loses.
Sort out an Order of Battle. Manufacturing cannot heal all leaks and sores simultaneously. Triage manufacturing and identify the 1/3 that can be made to dominate the global market. Trying to sustain Kueffel and Esser after the advent of the TI calculator was a waste of time.
Manufacturing materializes models. Without excellent models manufacturing is at a disadvantage. Engineering produces the models. The models may ordain a consumable product, e.g., a can of peas, an automobile, etc. or a transitive product, e.g. a CAD system or an autonomous manufacturing machine. Both CAD makers and U.S. schools are stuck on the product paradigm, not focused on model generators. Accordingly, NMCS should campaign for modernizing engineering.
The NCMS could understand economics as "exchange of value" then sort out the various kinds of value it could exchange and how to monetize the various kinds.
Regardless of the specifics above, an agenda for the better way for ‘manufacturing’ can be created by engaging a few knowledgeable, open minded people in an Interactive Management process aided by skillful facilitation and the Interpretive Structural Modeling software. See http://www.jnwarfield.com.
OBTW, throughout the video the Panel did not acknowledge any question or comment as adding value — only seized on each one to make a plaintive speech. As Einstein cautioned, they are going to have to come at this with a higher level of consciousness than they had when the caused it.
Onward,
Jack
I watched the first 50 minutes of this interesting dialogue. I especially liked the talks of Richard McCormack’s and Howard Prestowitz.
The one thing they didn’t do was draw the conclusion that I came to in my 2004 presentation for NCMS: that labor rates are crucial to manufacturing competitiveness and that currency exchange rates are a major determinant of labor rates.
Whether I’m right about that or not, we are now certainly reaping the whirlwind of 40 years of neglect and trivialization of manufacturing. I wish I could see an easy path back, but I do not.
The problem is certainly more systemic. For years I have been complaining that too many well educated individuals, even up to the PhD level in math or physics, instead of going into industry to make product, i.e. manufacture something, have been hired by Wall Street to design "financial products" (there’s a misuse of the word product) to enable the street to hide risk, make it look like something it is not, or move it somewhere else. Derivatives, hedge funds, etc. The normal banker’s ratios of cash on hand versus what is loaned out, formally at a 10 to 1 ratio, rose to crazy 50 to 1 ratios.
Is it any wonder that this foolishness caused us to crash last year? These banks, so called, were and still are populated by financial manipulators, rather than real bankers. Electronic trading
at the speed of light has enabled these folks to operate globally and get rich at the speed of light. Maybe I’m old fashioned, but we have outfoxed ourselves. We need to go back to our roots, namely, make stuff.
If we can not, or will not, make stuff that other countries want to buy, we will no longer be a world military and economic power. Military power comes from economic power. Economic power means having a genuine manufacturing base, not just a services base. The latter can not support the high employment, high standard of living "middle class" which we have had and has been the envy of the world for so long. We are approaching 10% unemployment. Services will never be the solution for that ailment. Not everyone, for a variety of reasons, are well suited to writing code, selling advice or whatever.
Our government continues to borrow money from foreign sources, or just as bad, print it. As the value of our dollar declines, which is inevitable on our present course, our foreign lenders will demand higher and higher returns, or refuse to lend, ultimately leading to our loss of the advantage of having the world’s "reserve currency." Imagine the cost of commodities like oil when we can no longer pay for them with dollars? And having a political class that will not allow us to tap into known and recoverable "lower 48" reserves. It is all well and good to develop solar, wind and other energy sources, but what do we do in the meanwhile? It was Jimmy Carter, I believe, who created the Dept. of Energy, or some such, to decrease our dependence on foreign sources of energy. We are still waiting!
There is nothing but debt, and more debt, on the horizon. We need to start manufacturing again soon, or it will be too late. This is a horrible legacy to leave to our children and their children.
You can read "Manufacturing a Better Future for America in PDF form here:
http://www.americanmanufacturing.org/manufacturing-a-better-future-for-america/
We need to find a new perspective — recast the problem. We can’t go back to the future; go back to 1950 and replay what we should have done. What’s done is done. We have a 21st century mess, but also 21st century tools to work with, so we need to pull the plug on a lot of old ideology and re-think what to do from the ground up.
One crucial matter is losing old skills, while not gaining enough new ones. The few manufacturers that I know that are seeking people can’t fill the skills at a pay rate they consider acceptable, and there’s a lot of old mythology about this. It’s not true that "anybody" can assemble a car with today’s technology to today’s quality requirements. But the "public" thinks they can, so they "look down" on the job. This do-it-cheaper mentality has us in trouble. And the UAW’s $70 per hour pay rate was largely bloated by health care and retirement loads that companies could no longer shoulder no matter how well anybody performed. We need to drop a lot of illusions about what really needs doing.
Software? Lots of good stuff. Some of it actually does what the programmers say it will do, and it’s so pervasive that a giant internet crash would bring the economy to its knees. Or what would happen if electrical power was shut down about half the time — as in places like Iraq? Do we have a highly vulnerable system that has evolved past the point of being able to regress to an earlier state and go a different direction? (Called a progress trap.)
New manufacturing jobs for millions of unskilled people is unlikely; that transition happened long ago, and it’s over. Manufacturing is the victim of its own success. For decades, there has been much more work to do moving stuff around or transacting it than in making it. By early 2009, almost 8 million people worked in occupations classified as financial services as worked in manufacturing (12.8 million in February) — and financial services presumably contributed 7.8% of GNP; manufacturing only 6.9%. But manufacturing is where the big labor productivity improvement have come. Now we have a consumption economy. As many people work in food service as in manufacturing; many services that we used to do at home we now pay people to do for us away from home (like prepare meals). Have no idea how many work flea markets trading "stuff" somebody no longer wants, but it’s not insignificant. And could Wal-Mart be classifed as just a high-grade flea market for stuff reprocessed through China? Somebody, someplace makes all this stuff, but it doesn’t take very many of them even in China. As a whole what does this economy look like, and why does it seem like a house of cards?
Statistics are flakey. Of the total number of people that are classified as working in companies with an industrial SIC code, how many actually make anything? (Peak "official" manufacturing employment in the U.S. was in 1979 — about 23 million by BLS stats.) Not only do companies compete with the "China price," in factory after factory, we import a lot of the workforce. English as a second language remains very common. And by the way, discounting the temp workers (many undocumented), less than a million people now actually work on farms (much less than live on farms). But what’s a farm any more? Food remains pretty important; agricultural labor productivity has risen about 20X in 50 years, and agriculture is been amply subsidized, but still more farmers keep dropping out. So what is it about our concept of success that really isn’t so successful?
Creating jobs has political appeal. Every pol in every country wants to blow about new jobs, but manufacturing jobs have declined in other old economies as much as in the United States, and in many cases more. (Japan has lost 25-30% in 20 years or so; France is down about 40%). Officially, manufacturing employment even in China has not risen very much, but numbers there are even flakier than here. See BLS 2004 report on this at:
http://www.bls.gov/opub/mlr/2005/07/art2full.pdf
China’s manufacturing employment (85-90 million) exceeds that of all OECD countries combined.
Biotech is the great new hope. Biotech and health care are the major growth areas in American manufacturing. Look at the new factories — lots of medical instruments and pharmaceuticals. Both government policy and customer demand has favored this — so far. Health care is one of the few areas where, despite attempts to hold down costs, expenditures keep going up. Give doctors new toys and they will use them, and their patients expect them to use them. A physician’s order is the trigger point for much of this expenditure, which is why many companies want to influence them, and they do as much as they can. Moral of the story: High tech and reduced costs do not necessarily go hand in hand. Need to re-think another old myth.
Otherwise, we have a mentality of "my brother in law can get it for you cheaper," and lots of executives must have married Chinese. But now even Mongolian garment workers are bitching about losing their jobs to the Vietnamese, and a standing joke is to put garment factories on barges and tow them to the cheapest port.
The federal government may not have a manufacturing policy (outright subsidization), but states and localities do. They compete with goodies and tax abatement to keep companies and jobs. That has been a big shift in the past 50 years or so. And still the factories blow away. We’ve been trying to prop up an increasingly wobbly system. [Maybe we got ourselves in an economic progress trap and have to fumble our way out of this rat maze.]
So what do we really have to do to turn all these negatives into a positive? It’s not like we don’t have plenty of talented people seeking challenges, and plenty of things to challenge them. We don’t have our heads screwed onto the nature of 21st century challenges yet. Can’t wrap our heads around what we really need to do and why.
http://www.ncms.org/index.php/2009/09/ncms-radio-richard-mccormack-manufacturing-a-better-future-for-america/
We just posted a podcast with Richard McCormack at the above link.