Many of us read the biweekly Manufacturing and Technology News for an inside scoop on American manufacturers and the political and regulatory struggles they face. Richard McCormack does a great job of finding a wealth of stories every couple weeks, and in my opinion it is well worth the subscription price.
But lately I’ve started to almost fear the day it arrives in my inbox… because it almost invariably creates a feeling of doom and gloom. All of the recent articles have been about manufacturers in trouble… those that somehow can’t compete with China, can’t deal with regulatory and tax burdens, and are closing down. Regular readers know there’s another side of the story, and that’s what I pointed out to Richard in an email the other day, part of which I’ll reprint here:
As Pat [Cleary, NAM Blog] and I have discussed several times, I completely agree that "competitiveness burdens" are very real, and I believe that attention needs to focused on those burdens as NAM and others do.
But what I take issue with is the continuous stream of drivel from companies that claim they "simply can’t make it." Quite bluntly I think that’s a cop-out for pathetic leadership in those companies. Your previous issue described a couple furniture companies that have given up and blamed foreign competition.
Guess what… there are many furniture companies that are thriving and competing globally from U.S.-based factories. The difference is that they’re looking internally instead of complaining externally, have reduced waste and cycle times, and found that they can deliver value, faster, to their growing customer bases. They look beyond simple hourly labor cost and look at processes and methods. A couple of those companies, along with a well-known motorcycle company and others, will be on a panel discussion I’m moderating at a manufacturing conference at Kellogg next month. The topic: creating competitive advantage through onshoring.
There’s a t-shirt company in Los Angeles (American Apparel) that employs 4,000 workers (in LA) at significantly above minimum wage, with full benefits. Basic t-shirts and underwear. Nothing special. They are growing rapidly and command margins greater than those of companies that import from Asian sweatshops. If they can do it with a product line in a typically miniscule margin industry, anyone can.
I support NAM’s efforts to improve the political and regulatory landscape for manufacturers. But at the same time we need to be promoting the leadership, methods, and actual capability of American companies of all types to compete globally from the U.S. today.
It’s time to stop complaining and start competing.
You’ll note that I said some kind words about NAM. That organization has had some issues, and we’ve at times taken issue with them, but they are fulfilling their mission of pointing out the political and regulatory burdens facing U.S. manufacturers and working to minimize them. While we don’t believe those burdens create unscalable barriers, we don’t disagree that they are real and often greater than similar burdens other countries place on our foreign competitors.
NAM has also told some good stories of successful American manufacturers, including this recent post on Cummins just a couple days ago. I ran into a contingent of Cummins folks at last year’s Lean Accounting Summit, so it is no surprise that they understand real manufacturing cost and the benefit and value domestic manufacturing can create instead of chasing low labor cost around the globe. As the NAM blog post put it,
[CEO] Mr. Loughrey discusses the innovative steps the company is taking in its home state of Indiana to build a skilled, robust workforce. Cummins has so much confidence in these workforce initiatives that it has announced the location of a new light-duty diesel engine plant in Indiana when it could have been located elsewhere. He also announced that Cummins will be investing $22 million in its Rocky Mount [NC] plant this year, with about half of it dedicated to increasing the assembly line operations to increase engine production. And who says nothing is made in America any more?
It won’t be easy, and Mr. Loughrey is very concerned about finding workers with the right skills. That is a recognition of the value of people: factory workers aren’t simply a set of hands that cost a set number of dollars per hour, they are an asset with knowledge, creativity, and experience.
As a final note getting back to Manufacturing News, the "quote of note" in the latest issue was intriguing:
"Our current tax system discriminates in favor of lower value-added jobs such as flipping burgers rather than making semiconductors. The multiple taxation on income through the supply chain makes this even worse. The higher the job skill, the higher the tax."
— Brian O’Shaughnessy, President and CEO of Revere Copper
That’s an interesting one to try to get your arms around. The higher the value of the person, the higher their pay and therefore the higher their tax rate. Is that bad or unexpected? Is the opposite the taxing of the unskilled? The taxing of value as it progresses through the supply chain is real, and has a compounding effect. In effect it adds to the cost of intermediates. Guess what one solution is: become more vertically integrated with captured facilities instead of outsourcing, especially offshore. The subject of the impact of the U.S. tax system, especially when compared to most other countries actually reducing taxes, is the subject of a post in a day or two.
But the bottom line remains that it is possible to compete globally from U.S. factories. If you don’t think you can, then you simply aren’t looking inward hard enough to find waste. You can learn and get help… go to an AME event or workshop, call your local MEP office. The methods are proven and there are innumerable examples of success ranging from low-tech American Apparel to high tech Cummins.
Stop complaining and start competing.