Surely, every industrial sector in this country goes through up-and-down business cycles as would occur in any mature economy. However, the role of manufacturing in the U.S. has experienced a broadly based and systemic decline during the last few decades. Even in a weakened state, the U.S. manufacturing sector is a global powerhouse, but the idea is to keep it that way and reverse the trends that its declining fortunes portend.
That is where competitiveness comes in.
A study conducted in 2011 by global management consulting firm Booz & Company in conjunction with the University of Michigan’s Tauber Institute for Global Operations found that U.S. manufacturers provide about 75% of domestically consumed products. That number actually sounds a bit high to me, but the salient point of the report is that this number can be increased or decreased significantly based on the actions taken by leading business and public officials in the near future. The report concludes that actions taken to improve competitiveness could raise this percentage substantially; the converse of what might happen if our manufacturing base remains neglected is also true.
This, in turn, begs the question of how we can improve competitiveness in ways that will make a difference. Georgia Tech and the Council on Competitiveness examined this issue in a conference and subsequent report published earlier this year entitled U.S. Manufacturing Competitiveness Initiative: Dialogue on Next Generation Supply Networks and Logistics. This report states, “From a supply-chain standpoint, the most visible impediment to expanding America’s global manufacturing and export capacity is the growing inadequacy of its infrastructure.”
The U.S. interstate highway system, whose initial development is credited to the Eisenhower administration of the 1950s, is the “backbone” of the U.S. trucking industry, which accounts for 97% of all consumer goods and 70% of all goods by weight. By some estimates, there are 35,000-40,000 bridges in the country that need repair. Some highways are in a similar state, in which poor roads produce wasteful congestion and inefficient delivery schedules. Further, to the extent this infrastructure interconnects harbor activities at major export terminals, our ability to grow export markets is also in play.
Clearly, the business decisions made by executives and the legislative, economic and tax policies that drive them are frequently at odds. To these we can add the human factor of production – an adequate supply of trained and competent labor. Further convoluting an already twisted path, we can toss in the issues of environmentally benign and sustainable manufacturing processes. And, finally, we can toss the need to turn a profit into this manufacturing quagmire. Taking all these factors into consideration, one can see why business people sometimes choose to manufacture offshore or, in extreme cases, not at all.
In future columns we will take a closer look at the changing face of manufacturing and the problems that need to be addressed in order for it to regain its importance.