13 September, 2013

made in the U.S.A.

What follows are excerpts from the cover article published on TIME magazine by Rana Foroohar and Bill Saporito, on April 2013. The page offers a detailed interactive map. Hover over or tap a county to see the number of jobs gained or lost between 2010 and 2012. You can select a category of manufacturing using the icons provided below the map.

The U.S. economy continues to struggle, but step back and you’ll see a bright spot. Climbing out of the recession, the U.S. has seen its manufacturing growth outpace that of other advanced nations, with some 500,000 jobs created in the past three years. It marks the first time in more than a decade that the number of factory jobs has gone up instead of down. From ExOne’s 3-D-printing plant near Pittsburgh to Dow Chemical’s expanding ethylene and propylene production in Louisiana and Texas, which could create 35,000 jobs, American workers are busy making things that customers around the world want to buy ;and defying the narrative of the nation’s supposedly inevitable manufacturing decline.

Apple, famous for the city-size factories in China that produce its gadgets, decided to assemble one of its Mac computer lines in the U.S. Walmart, which pioneered global sourcing to find the lowest-priced goods for customers, said it would pump up spending with American suppliers by $50 billion over the next decade–and save money by doing so. Airbus will build JetBlue’s jets in Alabama. Meanwhile, in North Carolina’s furniture industry, which has lost 70,000 jobs to rivals abroad, Ashley Furniture is investing at least $80 million to build a new plant.

This isn’t a blip. It’s the sum of a powerful equation refiguring the global economy. U.S. factories increasingly have access to cheap energy, thanks to oil and gas from the shale boom. For companies outside the U.S., it’s the opposite: high global oil prices translate into costlier fuel for ships and planes, which means some labor savings from low-cost plants in China evaporate when the goods are shipped thousands of miles. And about those low-cost plants: workers from China to India are demanding and getting bigger paychecks, while U.S. companies have won massive concessions from unions over the past decade. Suddenly the math on outsourcing doesn’t look quite as attractive.

Manufacturing in America

Today’s U.S. factories aren’t the noisy places where your grandfather knocked in four bolts a minute for eight hours a day. Dungarees and lunch pails are out; computer skills and specialized training are in, since the new made-in-America economics is centered largely on cutting-edge technologies. The trick for U.S. companies is to develop new manufacturing techniques ahead of global competitors and then use them to produce goods more efficiently on superautomated factory floors. These factories of the future have more machines and fewer workers–and those workers must be able to master the machines. Many new manufacturing jobs require at least a two-year tech degree to complement artisan skills such as welding and milling. The bar will only get higher. Some experts believe it won’t be too long before employers expect a four-year degree ; a job qualification that will eventually be required in many other places around the world too.

If the U.S. can get this right, though, the payoff will be tremendous. Labor statistics actually shortchange the importance of manufacturing because they mainly count jobs inside factories, and related positions in, say, Ford’s marketing department or at small businesses doing industrial design or creating software for big exporters don’t get tallied. Yet those jobs wouldn’t exist but for the big factories. The official figure for U.S. manufacturing employment, 9%, belies the importance of the sector for the overall economy. Manufacturing represents a whopping 67% of private-sector R&D spending as well as 30% of the country’s productivity growth. Every $1 of manufacturing activity returns $1.48 to the economy. “The ability to make things is fundamental to the ability to innovate things over the long term,” says Willy Shih, a Harvard Business School professor and co-author of Producing Prosperity: Why America Needs a Manufacturing Renaissance. “When you give up making products, you lose a lot of the added value.” In other words, what you make makes you.

There are a number of factors that seem to be converging and providing hope that manufacturing in the U.S. can expand sufficiently to provide a significant number of long-term jobs. As businesses become more efficient, time scales become shorter and product builds become more focused. Shorter build cycles, more specialty items, and rapid design changes all favor domestic production. If the price of oil remains at an elevated level, that will also shift the profitability calculus in the favor of domestic production. There is a second phase to globalization. The overseas companies that gutted some of the U.S. industries with imported goods are now beginning to realize the advantages of building the product in the product’s market. For example, many lost automotive jobs are gradually returning, albeit in another form, via factories being built in the U.S. by competitors. [1]

Stronger-than-expected data on U.S. manufacturing and construction spending on Sep.2013 hinted the world's biggest economy was gaining traction, potentially supporting views the Federal Reserve will soon slow its massive bond-buying program. The Institute for Supply Management's (ISM) index of national factory activity rising to 55.7 in August from 55.4 the prior month. New orders also marked their best level in more than two years, with that sub-index jumping to 63.2 from 58.3. Employment, however, slipped to 53.3 from 54.4. [2]

[Infographic : manufacturing in USA] http://www.nist.gov/mep/mfg-america.cfm

Further reading :
Boston Consulting Group, "Made in America, Again", Aug 2011, available to download here.
Go here for some collated figures on USA manufacturing power.
"Rustbelt recovery" an article from The Economist
"What's Next For U.S. Manufacturing?", Forbes magazine, Aug 2013

other Resources :
Deloitte. Manufacturing Competitiveness Hub, Exploring the complexities of today’s global competitive landscape, available here.

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