Today is the first national Manufacturing Day, reminding us that the United States still leads the world in production of manufactured goods, and that the manufacturing sector is at the core of our economy.
Manufacturing activity is coming back from the recession, and may also be coming back from overseas. The 2012 U.S. Re-shoring Survey by the MIT Forum for Supply Chain Innovation finds that manufacturers are reconsidering their supply chain strategies due to higher labor costs in developing countries, energy costs and political stability issues, as well as time-to-market concerns. Re-shoring — bringing manufacturing back to the U.S. — is under consideration by a significant number of firms, and some, including auto parts and electrical equipment manufacturers, have moved operations back. The survey finds that federal and state policies, including corporate tax rates, have a major impact on decisions to move or stay.
Here in Massachusetts, “manufacturing is alive and well, and has a healthy future,” according to a recent report, “Staying Power II: A Report Card on Manufacturing in Massachusetts,” by professor Barry Bluestone and his team at Northeastern University.
Some of its key findings about Massachusetts manufacturing today:
Manufacturing employment has stabilized after a sharp decline in the recession
Manufacturing is the state’s six-largest employment sector — and the second-largest (after health care) in terms of payroll
Manufacturing’s share of gross state product has risen for the past two years, to 12.2 percent
The number of manufacturing firms actually increased in 2011, for the first time in decades
Manufacturing is more technologically intense than ever; in 1970 employment in low-tech sectors was twice that in high-tech, in 2006 they were equal, and by 2010 high-tech was 27 percent larger
Most Massachusetts manufacturing companies are small, and most are family-owned
The manufacturing workforce is more diverse than the overall state workforce
Although most jobs in manufacturing are now “white collar,” only about one position in five requires a college degree
While cost issues and global competition are challenges, the study finds, the skills and work ethic of the state’s workforce are powerful reasons to stay in Massachusetts. But employers are already experiencing difficulty in hiring skilled workers, and an upcoming wave of retirements will create up to 100,000 job vacancies over the next 10 years. The 70 percent of manufacturing firms foreseeing expansion of employment in the state over the next five years must face up to this “recruitment challenge” by focusing on workforce development and promoting manufacturing careers.
In this election year, candidates across the country, from President Obama and Governor Romney on down, have jumped onto the manufacturing bandwagon. Beacon Hill has cut the corporate excise tax, passed bills to control medical and energy costs, strengthened the Workforce Training Fund Program and the community colleges, and created the industry-led Massachusetts Advanced Manufacturing Collaborative. Nationally, however, the reality has been not bipartisan consensus but partisan deadlock.
If Congress really cares about manufacturing, there are issues that demand immediate action. Most urgent is heading off about $500 billion in tax increases that will hit the U.S. economy on January 1, along with huge automatic spending cuts. The top tax rate on dividends will almost triple, the top tax rate on capital gains will increase by more than half, and many small and mid-size manufacturers will see their top marginal tax rate rise, because nearly 70 percent of manufacturers file taxes at individual rates. The Research and Development tax credit expired for the 15th time at the end of 2011. And the U.S. corporate tax rate is the highest in the developed world. Action in other areas is equally vital, if less pressing; for example, the future of workforce development programs, largely shaped by federal policy, remains up in the air.
America’s manufacturing sector, historically the backbone of our economy and of upward mobility in our society, is entering a period of renewed opportunity. We need congressional action, now, to ensure that future expansion takes place here rather that abroad.
Richard Lord is president and CEO of Associated Industries of Massachusetts headquartered in Boston.
Made in America, Again: Why Manufacturing Will Return to the USA
in Domestic Sourcing, Made in USA, Manufacturing, Production, Reshoring/by The Made in America Movement TeamFor over a decade, deciding where to build a manufacturing plant to supply the world was simple for many companies. China was the clear choice with its seemingly limitless supply of low-cost labor, an enormous, rapidly developing domestic market, an artificially low currency, and significant government incentives to attract foreign investment. Read more
China Needs Its Own Dream
in Uncategorized/by MAM Team“Success in the ‘American Dream,’ ” notes Peggy Liu, the founder of the Joint U.S.-China Collaboration on Clean Energy, or Juccce, “used to just mean a house, a family of four, and two cars, but now it’s escalated to conspicuous consumption as epitomized by Kim Kardashian. China simply cannot follow that path — or the planet will be stripped bare of natural resources to make all that the Chinese consumers want to consume.”
Liu, an M.I.T. graduate and former McKinsey consultant, argues that Chinese today are yearning to create a new national identity, one that merges traditional Chinese values, like balance, respect and flow, with its modern urban reality. She believes that the creation of a sustainable “Chinese Dream” that breaks the historic link between income growth and rising resource consumption could be a part of that new identity, one that could resonate around the world.
So Juccce has been working with Chinese mayors and social networks, sustainability experts and Western advertising agencies to catalyze sustainable habits in the emergent consuming class by redefining personal prosperity — which so many more Chinese are gaining access to for the first time — as “more access to better products and services, not necessarily by owning them, but also by sharing — so everyone gets a piece of a better pie.”
That means, among other things, better public transportation, better public spaces and better housing that encourages dense vertical buildings, which are more energy efficient and make shared services easier to deliver, and more e-learning and e-commerce opportunities that reduce commuting. Emphasizing access versus ownership isn’t just more sustainable, it helps ease friction from the differences between rich and poor. Indeed, Juccce translates Chinese Dream as “Harmonious and Happy Dream” in Mandarin. (“Green” doesn’t sell in China.)
Chinese are more open to this than ever. A decade ago, the prevailing attitude was, “Hey, you Americans got to grow dirty for 150 years. Now it is our turn.” A couple of weeks ago, though, I took part in the opening day of Tongji University’s Urban Planning and Design Institute in Shanghai and asked students whether they still felt that way. I got a very different answer. Zhou Lin, a graduate student studying energy systems, stood up and declared, with classmates nodding, “You can politicize this issue as much as you want, but, in the end, it doesn’t do us any good.” It is not about fairness anymore, he said. It is in China’s best interest to find a “cleaner” growth path.
To say China needs its own dream in no way excuses Americans or Europeans from redefining theirs. We all need to be rethinking how we sustain rising middle classes with rising incomes in a warming world, otherwise the convergence of warming, consuming and crowding will mean we grow ourselves to death.
China’s latest five-year plan — 2011-15 — has set impressive sustainability goals for cutting energy and water intensity per unit of G.D.P. All of these goals are critical to the greening of China, but they are not sufficient, argues Liu. With retail sales growing 17 percent a year since 2005 and urban incomes up 150 percent in the last decade, “the government must also have a plan to steer consumer behavior toward a sustainable path,” adds Liu. “But it doesn’t yet.”
So Xi Jinping has two very different challenges from his predecessor. He needs to ensure that the Communist Party continues to rule — despite awakened citizen pressure for reform — and that requires more high growth to keep the population satisfied with party control. But he also needs to manage all the downsides of that growth — from widening income gaps to massive rural-urban migration to choking pollution and environmental destruction. The only way to square all that is with a new Chinese Dream that marries people’s expectations of prosperity with a more sustainable China. Does Xi know that, and, if he does, can he move the system fast enough? So much is riding on the answers to those questions.
Madison Rising – The Star Spangled Banner
in Uncategorized/by MAM TeamCheck them out on Facebook and tell everyone you know about this amazing group!!!
Honda Announces Third Large Recall of Week – 268,000 CR-Vs
in Uncategorized/by MAM TeamOctober 6, 2012
In the CR-V recall, the automaker said rainwater or spilled liquids may enter an open driver’s window and drip onto the master power window switch. Over time, exposure to liquids can cause electrical resistance in the switch, making it overheat, melt and cause a fire. No crashes or injuries have been reported related to the problem but Honda said it knows of four switch fires.
On Thursday, Honda expanded a March headlight recall to include 820,000 model-year 2002-2003 Civic sedans and model-year 2004-2005 Pilot sport-utility vehicles in the United States.
The automaker said a problem with the wiring of the headlight switch could cause the low-beam headlights to not work. The loss of headlights could limit a driver’s ability to see the road and potential hazards and increases the risk of a crash. However, Honda said no crashes or injuries have been reported in connection with the problem.
In March, Honda recalled 550,000 CR-V small SUVs from the 2002 through 2004 model years and Pilots from 2003 because of the same problem.
On Monday, Honda said it would expand a recall of Acura TL sedans to include 572,000 model-year 2003-2007 Accord V6 vehicles in the United States.
But the automaker said the Accord recall, to fix leaking power steering hoses that could cause fires, will be delayed into next year because the automaker doesn’t have enough parts to fix the problem. The updated power steering hoses won’t be available until early 2013.
Honda is sending out a notice to Accord owners telling them of the problem and describing the symptoms. Drivers who think their cars are affected should take them into the dealership for an “interim” repair, the automaker said. The most commonly reported symptom is a smell from the seeping fluid.
Manufacturers Report Saving Millions by Reshoring
in Uncategorized/by MAM TeamLow-cost labor’s connection to the “cheapest price” for an end product is getting less play, according to Acorn. U.S. manufacturing and retail companies are now giving more attention to attaining the “lowest total price” or “net landed costs” to avoid the sting of rising wages for Chinese workers and a strengthening Chinese currency.
According to a recent report from The Hackett Group, the most important decision-driver in the sourcing strategy for manufacturing firms is net landed costs, which incorporates components historically overlooked, such as raw material costs, manufacturing costs, transportation and logistics, inventory carrying costs, taxes, duties, etc.
Other factors cited when considering the option to reshore include:
Product quality – For manufacturers, quality is always top of mind. Justin Rose, a principal with the Boston Consulting Group says, “You never know what’s being sourced from local suppliers and if it’s up to quality standards.” Rose also points out that extra-long supply chains add uncertainty to the shipping and distribution process, causing manufacturers to hold more inventory to ensure that retailers can be kept stocked.
Shorter product life expectancy and faster time-to-market:The life expectancy of products is shrinking so it is important for manufacturing firms to provide high-quality products as quickly as possible to stay ahead of the competition. A recent survey by Mitch Free, CEO and founder of MFG.com, indicated that locating production near a company’s engineering/marketing teams provides crucial collaboration for innovation and quicker time-to-market.
Nationalism/political pressure: According to a recent survey by Massachusetts Institute of Technology (MIT) engineering professor, Dr. David Simchi-Levi, 21 percent of manufacturers listed “pressure to increase jobs” as a factor in reshoring. Dr. Simchi-Levi reported that survey respondents “appear to feel both political and market heat to show that they make products in the U.S.”
“We are certainly addressing the topic of reshoring with our current U.S. manufacturing customers,” said Leland Putterman, CEO, Acorn Systems. “A growing number can see that, from a pure financial perspective, reshoring is the best business decision for them.”
President Barack Obama recently announced plans for new tax proposals that would reward companies for creating jobs in the U.S. and possibly eliminate tax advantages for moving them overseas. High-profile manufacturers such as Caterpillar, GE and Ford have already announced plans to reshore some products to the U.S.
Manufacturing May Be Coming Back to the U.S., Long-Term
in Uncategorized/by MAM Team(This article is by Robert McCutcheon, the U.S. industrial products leader of PwC.)
PwC’s recent report A Homecoming for U.S. Manufacturing? evaluates the key factors that may lead to the U.S. becoming a more attractive manufacturing location. Many manufacturers are increasingly reevaluating their U.S. strategies, such as their separation of R&D and production, and their production abroad and importation back to U.S. buyers. Depending on the industry, they may find considerable benefits in establishing regionalized supply chains and R&D facilities in the U.S., including reducing costs, shortening lead times, protecting intellectual property, and avoiding many of the risk factors of developing markets. Localizing production can help reduce supply chain disruptions that cost American industrial manufacturers $2.2 billion last year, according to the PwC report. Bringing manufacturing production back to the U.S. generally holds greater advantage for some industries than others. Taking into account labor, materials, transportation, and energy costs, the chemicals, primary metals, and heavy equipment manufacturing industries stand to benefit most from maintaining or expanding facilities in the U.S. Companies in wood, plastic, and rubber products could also benefit significantly, but their lower net imports might limit their benefits from on-shoring.
The bull market in energy commodities has driven up transportation costs for manufacturers with global supply chains, leading some machinery companies to produce more in the U.S. for sale in North America. If transportation costs remain elevated, perhaps because of growing global demand for energy, production closer to home may grow more attractive. Also, it can cut down on lead times, reduce inventory levels, diminish some currency risks, increase control over intellectual property, and reduce supply chain disruption risks. In addition, progress in extracting natural gas from shale has created new opportunities for manufacturers in several industries, particularly chemicals and metals, thanks to more affordable energy and greater downstream demand.
Also, manufacturers are increasingly concerned about currency fluctuations. The depreciation of the dollar and rise of China’s currency has narrowed the cost gap between producing domestically and importing from China for domestic consumption. Moreover, the long-term decline in the dollar helps make the U.S. a potentially more competitive location for manufacturing for export, and there has been strong growth in the exports of goods since the end of the recession. The appreciation of the yuan relative to the U.S. dollar may continue longer-term as China’s economy grows, which could further help U.S. manufacturers.
U.S. demand remains supreme. Although China and other emerging markets are expected to keep having faster gross domestic product growth than the U.S., our advantage in wealth, in real GDP per capita, is expected to persist, dwarfing China and other emerging markets. This difference in standard of living, as well as the size of the U.S. market, supports investment in the domestic production of goods targeted for U.S. consumption. In addition, the U.S. labor force remains strong.
As for the availability of capital, although credit standards aren’t at the levels reached during the financial crisis, banks have resumed tightening their credit requirements. Borrowing in China and has become more difficult, too, though, so manufacturers may shy away from longer supply chains and the risks they carry, including getting inventory stuck in transit, particularly in industries with short product cycles or high spoilage.
The U.S. has the highest statutory corporate tax rate among developed countries. This has spurred talk of tax reform to boost economic growth and employment. Proposals include a lower statutory rate, tax incentives, and extending or making permanent the R&D tax credit. However, the tax and regulatory environments do bring uncertainty to the expansion of domestic manufacturing.
All these considerations, as well as labor costs, are affecting manufacturers’ decisions whether to establish production facilities in the U.S., closer to their domestic customers. Can we expect an increase in re-shoring as a result? Will “Made in USA” become more common? Only time will tell, but a wide range of signals now suggest a potential renaissance of the U.S. manufacturing sector.
Call Me Maybe – 2012 CT Manufacturers
in Uncategorized/by MAM TeamAmerica's Manufacturing Crisis: Finally Harvard Gets It
in Uncategorized/by MAM TeamThe only previous serious academic treatment I can remember was Manufacturing Matters by the Berkeley economist Stephen S. Cohen and his political scientist colleague John Zysman. Written as far back as 1987, this was an inspired book but precisely because it was so early, it was forgotten long before the future problems the authors so presciently identified became universally obvious.
Why is manufacturing so important? In my book In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity in 1999, I made three points:
1. Jobs. Manufacturing creates a much better mix of jobs than advanced services — jobs for everyone from ordinary blue collar workers to capable engineers, brilliant scientists, and resourceful and far-sighted top managers.
2. Wages. Those who in the 1970s began dismissing America’s manufacturing base as the “Rust Belt” displayed deep ignorance of modern First World manufacturing. Such manufacturing has long been highly capital-intensive, which means that each worker’s productivity is greatly leveraged by sophisticated production machinery. This creates plenty of room for employers to pay high wages. Advanced manufacturers moreover require great accumulations of secret production knowhow – typically knowhow acquired over generations of “learning by doing” – and this powerfully shields them from low-wage foreign competition.
3. Exports. I have calculated that, per unit of output, manufacturing businesses are nearly ten times stronger exporters on average than services. Thus America’s investment in postindustrial activities (such as computer software, internet development, finance, and legal services) cannot hope to bridge the trade gap opened up by the decline of manufacturing. One reason for manufacturing’s superior export prowess is that manufactured products generally require little adaptation to sell around the world. By contrast services have either to be performed in a customer’s home country or at least – in the case of computer software, for instance – have to be expensively adapted to meet different cultural needs in different foreign markets. Thus the net receipts transmitted back to the United States are often minimal.
What explains the American establishment’s complacency in the face of the near collapse of the national manufacturing base? The answer is mainly a misplaced faith in laissez-faire. American opinion leaders have trusted to the theory that if a factory closes, this is dictated by the “wisdom of the market.” In reality free markets have next to nothing to do with it. American manufacturers are competing in a globalized marketplace that is comprehensively rigged to hollow them out. If other advanced nations protect their domestic markets (Japan and Germany come to mind in the case of car industry, for instance) , their home producers enjoy greatly enhanced retained profits to plough back into improving their production technologies. After five decades of such unequal trade, this begins to add up. It is hardly surprising that Japan and Germany are now the leaders not only in cars but all sorts of advanced producers’ goods that once defined American leadership of the world economy.
As for the Pisano/Shih book, detailed comment must await its official publication later this month. In the meantime Pisano is making an appearance at a reception in Washington tomorrow hosted by, among others, the Kearny Alliance and Asia Policy Point at the offices of the King & Spalding law firm.
The key question is what America should do. Judging by the Amazon.com page for the book, the Pisano/Shih answer is a bromidical call to government and business to work more closely together on basic and applied research. This is little more than hot air and will do nothing to address the real issue, which is an unfair world trade system. The fact is that almost as soon as American corporations invent new, more efficient production technologies, they come under pressure from foreign governments to transfer these out of the United States. If they don’t do so, they face non-tariff barriers in the foreign markets concerned. By definition, given their single-minded focus on profits (and their acknowledged lack of concern for the American job base and wider national interest), they cave. They suffer no penalty for doing so. Quite the reverse: they improve their access to key foreign markets while they can continue, of course, to sell unhindered into the American market. This sort of economic blackmail has been taken to a high art by China in particular, with results that are now redefining the world’s future. Virtually every major American corporation has been persuaded — often under duress — to transfer key production technologies to China. Just some of the more notable names include General Electric, Ford, General Motors, and Motorola. Ultimately the fault does not lie with these companies. Rather they are creatures of an economic environment that was wished upon them by others — not least generations of Ivy League economists who thought that free trade and the resulting move to postindustrial services would bolster American competitiveness.
MFGpartners 'Buy American Movement' Meets Washington Precision Machine Shops
in Uncategorized/by MAM TeamOctober 3, 2012
Gagne, a 25 year veteran in made-to-order metal and plastic parts and publisher of numerous technical articles related to product design, lean manufacturing, CNC machining and other processes said AMSN is actively reaching out to companies in Seattle, Spokane, Bellevue, Vancouver, Tacoma, Everett, Yakima, Bellingham, Kent, Everett, Federal Way and across the Evergreen State to join in its job creation ‘Buy American’ campaign founded to help increase the global competitiveness of U.S. Manufacturers.
“Whether it be precision metal machining, CNC grinding, lapping, honing, tool making, OD/ID grinding, sheet metal work, custom fabrication, mold-making, CAD/CAM design, prototyping, tool repair, machine rebuild, or any other manufacturing need, companies nationwide and beyond continue to return to MFGpartners.net to explore and compare US-based vendors capable of providing such solutions,” said Gagne. He continued, “AMSN is pleased to gain the trust and support of businesses throughout the state of Washington, and will remain committed to the movement pioneered by its founder (Don LaBelle) to buy America back and once again be proud to say Made-In-USA.”
About MFGpartners / AMSN
MFGpartners.net is owned and operated by American Machine Shops Network (AMSN). The company specializes in promoting US-based manufacturers of machined parts, fabricated components, precision products and molds. AMSN is the largest network of custom manufacturers in the USA designed to help companies, engineers and others find the most suitable vendors specializing in CNC machining, fabrication, molding, prototyping and other contract manufacturing services.
Manufacturing Matters – 1st National Manufacturing Day
in News/by MAM TeamOctober 4, 2012
Here in Massachusetts, “manufacturing is alive and well, and has a healthy future,” according to a recent report, “Staying Power II: A Report Card on Manufacturing in Massachusetts,” by professor Barry Bluestone and his team at Northeastern University.
Some of its key findings about Massachusetts manufacturing today:
Manufacturing employment has stabilized after a sharp decline in the recession
Manufacturing is the state’s six-largest employment sector — and the second-largest (after health care) in terms of payroll
Manufacturing’s share of gross state product has risen for the past two years, to 12.2 percent
The number of manufacturing firms actually increased in 2011, for the first time in decades
Manufacturing is more technologically intense than ever; in 1970 employment in low-tech sectors was twice that in high-tech, in 2006 they were equal, and by 2010 high-tech was 27 percent larger
Most Massachusetts manufacturing companies are small, and most are family-owned
The manufacturing workforce is more diverse than the overall state workforce
Although most jobs in manufacturing are now “white collar,” only about one position in five requires a college degree
While cost issues and global competition are challenges, the study finds, the skills and work ethic of the state’s workforce are powerful reasons to stay in Massachusetts. But employers are already experiencing difficulty in hiring skilled workers, and an upcoming wave of retirements will create up to 100,000 job vacancies over the next 10 years. The 70 percent of manufacturing firms foreseeing expansion of employment in the state over the next five years must face up to this “recruitment challenge” by focusing on workforce development and promoting manufacturing careers.
In this election year, candidates across the country, from President Obama and Governor Romney on down, have jumped onto the manufacturing bandwagon. Beacon Hill has cut the corporate excise tax, passed bills to control medical and energy costs, strengthened the Workforce Training Fund Program and the community colleges, and created the industry-led Massachusetts Advanced Manufacturing Collaborative. Nationally, however, the reality has been not bipartisan consensus but partisan deadlock.
If Congress really cares about manufacturing, there are issues that demand immediate action. Most urgent is heading off about $500 billion in tax increases that will hit the U.S. economy on January 1, along with huge automatic spending cuts. The top tax rate on dividends will almost triple, the top tax rate on capital gains will increase by more than half, and many small and mid-size manufacturers will see their top marginal tax rate rise, because nearly 70 percent of manufacturers file taxes at individual rates. The Research and Development tax credit expired for the 15th time at the end of 2011. And the U.S. corporate tax rate is the highest in the developed world. Action in other areas is equally vital, if less pressing; for example, the future of workforce development programs, largely shaped by federal policy, remains up in the air.
America’s manufacturing sector, historically the backbone of our economy and of upward mobility in our society, is entering a period of renewed opportunity. We need congressional action, now, to ensure that future expansion takes place here rather that abroad.
Richard Lord is president and CEO of Associated Industries of Massachusetts headquartered in Boston.