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

Mixed Message on Manufacturing

Make: an American Manufacturing Movement is a new report from the Council on Competitiveness that indicates policymakers are receiving vastly conflicting reports on the state of U.S. manufacturing. In addition, it prescribes five "solutions" to help keep the U.S. on top.

The State Science & Technology Institute offers the following:

Policymakers, the report’s authors contend, are bombarded with widely available reports and analysis that support one of three conflicting views (it is on steep decline, doing reasonably well or it is poised for growth) on the health and importance of U.S. manufacturing.

"In reality, elements of all three perspectives are likely true," according to the authors. U.S. manufacturing remains the world’s top producer and an important part of the U.S. economy — employing more than 11 million and contributing more than $1.7 trillion to the economy. However, emerging economies are increasingly becoming a threat to U.S. competitiveness. Going forward, the U.S has the potential to capitalize on emerging marketplaces, but to achieve this the U.S. must find solutions to the challenges it faces.

The report provides five "solutions" to maintain the nation’s status as the world’s top producer, resolve its manufacturing challenges and capitalize on growing international demand:

  • Enact fiscal reform, transform tax laws, regulations and other structural costs to spur investment, ramp up production, capitalize growth companies and create skilled jobs

  • Create fair and open global markets for U.S. goods and services to reduce the trade deficit and increase exports as a percentage of gross domestic product

  • Prepare the next generation of innovators, researchers and highly-skilled workers

  • Create national advanced manufacturing networks and partnerships, prioritize R&D investments and deploy new tools, technologies and facilities

  • Develop and deploy smart, sustainable and resilient energy, transportation, production and cyber infrastructures