Recently Andy Grove wrote a great article about the danger of marginalizing the domestic manufacturing sector- How to Make an American Job Before It’s Too Late: Andy Grove. Grove, who co-founded Intel in 1968, has first hand experience on how difficult it is for companies to grow and create jobs.
The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of start-ups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called “Start-Ups, Not Bailouts.” His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back start-ups.
Andy is right and Thomas Friedman is wrong. Do the math! Only about 2 in 10 start-ups succeed and most fail to employ more than five people in the first five years. A 20% business success rate only creates hundreds of jobs at best. We would need tens of thousands of successful start-ups to make a substantial impact on our economy.
My point isn’t that Intel was brilliant. The company was founded at a time when it was easier to scale domestically. For one thing, China wasn’t yet open for business. More importantly, the U.S. hadn’t yet forgotten that scaling was crucial to its economic future. How could the U.S. have forgotten? I believe the answer has to do with a general undervaluing of manufacturing — the idea that as long as “knowledge work” stays in the U.S., it doesn’t matter what happens to factory jobs.
Depending just on retaining “knowledge work” in the United States as a way of ensuring our economic future is both impossible and, frankly, foolish. If we lose the ability to scale manufacturing, we will soon lose the ability to design, and then innovate. You have to make things. Manufacturing is the foundation of an industrialized nation’s economy, and we are currently reaping what we have sown by sending it overseas.
Talent, Investment and Infrastructure are the key elements in Innovation and also are required to scale for manufacturing. Andy Grove understands this:
Each company, ruggedly individualistic, does its best to expand efficiently and improve its own profitability. However, our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs — we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.
Many complain about the lack of highly educated workers in the U.S. – and we do need to be sure that pipeline is full, but highly skilled trades have a lot of innovation to contribute if they have a job. This is valuable stuff! Grove continues:
The story comes to mind of an engineer who was to be executed by guillotine. The guillotine was stuck, and custom required that if the blade didn’t drop, the condemned man was set free. Before this could happen, the engineer pointed with excitement to a rusty pulley, and told the executioner to apply some oil there. Off went his head.
More than manufacturing is on the guillotine. The basis of our economy is what’s about to lose its head. We need to make sure that the blade doesn’t fall on the American capacity for Innovation.
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Rick Jarman is the President & CEO of the National Center for Manufacturing Sciences (NCMS) located in Ann Arbor, Michigan. NCMS is the largest cross-industry collaborative manufacturing research consortium in the United States devoted exclusively to manufacturing technologies, process and practices. Formed in 1986, the NCMS mission is focused on the development of strategic initiatives and programs aimed at sustaining and enhancing the global competitiveness of North American manufacturing. |
Idea-generation/start-ups/ingenuity and production/manufacturing/taking action are both critical to our ongoing success here in the US. This shouldn’t be an "either/or" dialogue.
Andy is correct. My feeling is that If We, as a nation, do not support innovation with our dollars, innovation will become undesirable because it is not profitable, and we (The USA) will revert from an industrialized society to an agrarian society.
The decay has already begun with the outsourcing of many jobs, just to make the corporations more money. When less people have jobs, less things get purchased.
Outsourcing is SO obviously the cause of the current economic downturn. I am simply amazed that we are refusing to acknowledge the "Elephant in the Room" !!!
Worker "A"’s job gets outsourced. He cannot buy goods. He cannot make his House Payment.
Bank forecloses on House.
Multiply this by thousands, then millions.
Banks in danger of going belly-up. They get bailed out by Government DESPITE MANY calls to congressmen to NOT bail them out.
Banks give million-dollar bonuses to the very people that gave mortgages to the workers whose jobs got outsourced. And on it goes.
The house of cards is crumbling, because big business is always chasing SHORT-TERM profit and ignoring LONG-TERM consequences.
I agree entirely with Andy and Rick and have a direct and reasonably fast solution: the Re-Shoring Initiative. The most efficient and immediate way to bring manufacturing back is by re-shoring: making in the U.S. more of what we now import. The NTMA (National Tooling and Machining Association), PMA (Precision Metalforming Association) and AMT (Association for Manufacturing Technology), just held a re-shoring Purchasing Fair in Irvine, CA. The next Fair will be in Mashantucket, CT on Oct 29. See http://www.purchasing fair.com. Large companies bring out work that is now off-shored. Hundreds of attending U.S. shops then bid on the work. Sixty four percent of the large companies at the Irvine Fair brought work that was currently offshored. AME, SME and other organizations have provided support.
A major reason for offshoring is faulty accounting of the comparative costs. To help the companies make better sourcing decisions we also made available the first draft of a TCO (Total Cost of Ownership) Estimator that helps the large companies perform the complex calculation of the real offshoring impact on their P&L.
It is much faster and efficient to re-shore than to increase exports. All of the costs that the importers face here, our companies face offshore.
If your company now off-shores machining or tooling production, suggest to your Supply Chain Manager or Purchasing Dept. that they attend the Fair and request the TCO Estimator.
You can reach me at harry.moser@comcast.net
Harry Moser, Chairman Emeritus, Agie Charmilles LLC