Reports: Manufacturing Changes Required

If manufacturing is your business, you realize more than most that the game is changing on a seemingly daily basis. While you are on the front lines experiencing new challenges and hopefully taking advantage of opportunities, what is the big picture? The State Science & Technology Institute summarizes two recent studies:

The 2013 Global Manufacturing Competitiveness Index, published by Deloitte and the Council on Competitiveness, draws on a survey of more than 550 CEO and senior international marketing leaders to depict the changing global landscape. China continues to occupy the top spot as most competitive manufacturing economy, despite a recent downtown in economic growth. China’s abundant low-cost labor and material and strong government investment in manufacturing and innovation appear poised to preserve its competitive edge. The U.S. currently ranks third, but is projected to fall to fifth by 2018. Survey respondents found the recent focus on manufacturing in the U.S. encouraging, but cited a sense of uncertainty in the regulatory and taxation systems as a major concern.

Survey respondents cited talent and labor-related issues as the most important factors in judging the competitiveness of nations. The quality and availability of researchers, scientists and engineers led as the most important single factor, followed by the quality and availability of skilled labor. While the U.S. scored well in these areas, it performed less impressively in the second group of factors, which account for a country’s economic trade, financial and tax system. Respondents found the U.S. tax system overly complex and burdensome.

In a separate report, the McKinsey Global Institute argues that preserving the U.S. manufacturing edge will require a significant reassessment of federal policies as manufacturing evolves and splinters into new market segments. Policymakers need to adjust their expectations about job creation within manufacturing companies and view manufacturing firms as drivers of the overall economy, according to the report.

The lines between service-oriented firms and manufacturing-oriented firms has begun to disappear as manufacturing firms employ more workers in customer service, R&D, information technology and other tasks typically associated with the service economy. At the same time, service companies are engaging in small scale production that would have been associated with manufacturing in the past. The blurring of the line suggests that policymakers should focus on the innovative power of manufacturing firms to increase productivity and create ripple effects throughout the economy instead of job creation at individual manufacturing companies.

More on the reports: Deloitte and McKinsey