Optimism About Manufacturing Could Be Productive

Jul 1, 2008 12:00 PM
David Morrison, Editor in Chief

For years we've been hearing that the United States is losing its manufacturing capabilities as more and more companies move their manufacturing operations overseas in pursuit of cheaper labor and greater access to global markets. But is that message entirely true?

A survey released recently by the National Association of Manufacturers (NAM), The Manufacturing Institute, the Canadian Manufacturers and Exporters (CME) and Deloitte suggests that there may be some reasons for optimism.

The survey found that North American manufacturers consider the United States to be the most desirable country for expansion over the next three years. Moreover, 44% of North American companies indicated plans to expand their production in the United States over the next three years.

And while they intend to expand production here, they're still participating in global markets. According to the survey, 57% of U.S. manufacturers expect to be competitive globally in the next five years.

But naturally, there are big challenges ahead, too.

“The survey clearly shows concerns that manufacturing companies want government to address,” says Emily DeRocco, NAM senior vice president and president of The Manufacturing Institute (the research, education and workforce affiliate of NAM). “Manufacturers cited controlling labor costs, enacting favorable tax policies and assisting with the severe shortage of skilled manufacturing workers, including engineers, scientists and technicians, as the top three areas that policy makers should address to help improve their global competitiveness.”

This survey of 321 senior executives of manufacturing companies was broader than just the electronics industry. However, it encompassed many of the important segments within the electronics industry. Broken down by industry, 28% of those surveyed manufactured automotive and transportation equipment; 10%, consumer electronics; 9%, aerospace and defense equipment; and 4%, high-tech and telecom equipment. In addition, another 37% of the respondents were involved with diversified manufacturing and industrial products.

On various occasions, I've had the opportunity to visit local manufacturers of electronic components. These local companies make products like high-performance power supplies, high-voltage dc-dc converters, transformers and machined interconnects. Although they're located in a part of the country where labor and utility costs are high, these companies have found a way to build some or all of their products here.

These companies are cultivating lucrative and growing niches by delivering high-quality, high-reliability products, many of which are custom or modified standards. They also provide high levels of engineering support to their customers, fast delivery and other forms of service.

They're not so likely to compete on price as their overseas competition (if it exists), but some of their customers are those who have tried the low-cost competitors and been disappointed by problems with quality or delivery. Most of these local manufacturers would probably be described as “low volume, high mix,” reflecting the diversity of product variations they build.

It's difficult to take my observations of the local electronics manufacturing scene and correlate them directly with the findings of the NAM survey. However, I suspect that the successes of these local manufacturers are being repeated in many parts of the United States. Perhaps the strategies adopted by these local firms are also being adopted by some of the optimistic companies addressed in the survey.

Although design engineering jobs are not necessarily dependent on where products are being manufactured, it's clear that for many U.S. manufacturers, the design and manufacturing functions are closely linked. Perhaps it's time we remind ourselves — and our neighbors — that all manufacturing does not need to be exported. And maybe with a more sophisticated view of what manufacturers can accomplish in the United States, our leaders will make more decisions that help to grow manufacturing and engineering opportunities here at home.