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Thursday, April 26, 2012

The return of 'Made in America'

Image: A worker uses an oxy-acetylene torch at a steel plant in Chicago © Mister Joe Lekas, Flickr, Getty ImagesThe return of 'Made in America' For all our problems, the stage is set for a renaissance of US manufacturing. That's largely because our dollars are worth less and our pay is shrinking.

Clearly, something's still wrong with the economy. By the metrics that matter to most people, the Great Recession has not ended. Employment, retail sales, industrial production, home prices, most of the stock market and real incomes are all below their 2007 peaks. Food stamp usage is at a record high and rising.


But something's going right, too. And I want to focus on that this week.


American competitiveness is back, albeit largely because of the pain we've endured. Our dollars are worth less, and real wages are lower. Corporations are responding, with new factories springing up and manufacturing jobs blooming like flowers welcoming the spring. Overall, the U.S. has added nearly 500,000 manufacturing jobs since the beginning of 2010 -- the first period of significant growth since the late 1990s.


Meanwhile, the costs of producing goods overseas, and getting them here, are rising. Workers in places like China are demanding more, and oil prices make shipping costlier.


Products still made in America

Experts say these trends are likely to continue.


Bank of America Merrill Lynch researcher John Inch wrote in a recent note to clients that the "U.S. economy is in the early stages of a long-term manufacturing renaissance." Analysts at the Boston Consulting Group add that rising wages and other forces have steadily eroded China's "once-overwhelming cost advantage as an export platform for North America."


Anthony Mirhaydari


Thanks to higher U.S. worker productivity, as well as supply chain, cheap energy (natural gas) and logistical advantages, the BCG team says that by around 2015 "it may start to be more economical to manufacture many goods in the U.S."


In short, we could be on the cusp of revival of "Made in America," with workers paid good wages for building things again. And for the millions in the army of the unemployed, it can't come soon enough.


Silver lining to storm clouds?


Don't get me wrong. Our problems still run deep, and I'm not saying happy days are here again; I'm merely pointing out one of the few silver linings to be found.




Playing the manufacturing comeback

 
We've long been too reliant on credit to supplement stagnant wages -- and that's left the West with an $8 trillion debt hole, according to Credit Suisse calculations. This fueled two bubbles and a financial crisis, and it resulted in the pitiful "recovery" we're in now.


And so far, if the economy is reviving, most workers aren't sharing in it. Real, inflation-adjusted wages have fallen in three of the past four months. This has never happened outside recession before. So it's very possible we're following Europe into the depths of a new downturn.


Last September, I argued that "the real recession never ended" and that, in reality, it started a decade or more ago as labor participation peaked in the late 1990s. We've been sliding lower ever since, trying to compensate for a lack of high-quality jobs and stagnant pay, with voodoo stimulus efforts out of Washington and an extreme, inflation-igniting easy-money policy from the Federal Reserve.

The core problem has been a hollowing-out of America's manufacturing base because of increased globalization, the manipulative trade policies of China and others, and rapid technological change.


Washington, of course, hasn't done anything about trade or jobs (except talk, of course). But the U.S. economy may find a way out of the hole anyway.


The depth of the problem

Before moving on, it's worth remembering that something similar has happened before.


In many respects, the current situation resembles the Gilded Age of the late 1800s and the Long Depression, a global downturn that lasted from the 1870s through the 1890s. Replace the robber barons with hedge-fund managers and multinational CEOs, and the agitation over the Free Silver Movement with the Tea Party and the debate over the Federal Reserve's stimulus efforts, and the similarities are striking.


The downturn was preceded by a period of global economic integration as steam power, the telegraph and railroads made the world smaller. Workers lost jobs to technology and foreign competition. The banking system was rocked by the panics of 1873, 1884 and 1893, driven by real-estate bubbles and stock speculation.


Our current role was played by the United Kingdom, an aging sovereign struggling to maintain its role as the world's superpower. The role of the upstart United States is now played by vigorous up-and-comers like China and India. Check out this excerpt from A.E. Musson's "The Great Depression in Britain, 1873-1896: A Reappraisal":

"Britain was losing her technological lead; she was failing to modernize her plant, to develop new processes, or to modify her industrial structure with the same rapidity as Germany and the United States -- owing to conservatism, the heavy cost of replacing old plant, and deficiencies in technical education."

In other words, the British got lazy, making them vulnerable. We have the same problem now, and I outlined in "Are American workers getting lazy?"


Source: http://money.msn.com/investing/the-return-of-made-in-america-mirhaydari.aspx?goback=%2Egde_56423_member_107279081

Check out this great MSN video: Playing the manufacturing comeback

Check out this great MSN video: Playing the manufacturing comeback

Wednesday, April 11, 2012

Enterprise Mobility: Changing the Business of Manufacturing

The Transformative Power of Enterprise Mobility: Now On-Demand

Executives, line-of-business managers, employees, and, yes, customers, too, are becoming increasingly empowered by mobile devices and applications. The ability to connect, access information, get feedback, and make decisions faster is altering the way manufacturers work. But what are the implications and opportunities with increased mobility? Will it change how manufacturers produce products, manage supply chains, relate to customers? What's required for effective management of a mobile enterprise and workforce? How do manufacturers maximize ROI from this game-changing trend?


Join Manufacturing Executive for an important and informative Webinar on Enterprise Mobility. The findings from a new, exclusive survey of manufacturers will be presented and discussed by a panel of experts.


Core topics will include:

Strategies manufacturers are adopting to take advantage of mobile concepts and technologies.

Policies and procedures they are implementing to manage mobile workers.

Technologies they are acquiring to empower their people with the tools necessary to maximize return from the mobile opportunity.

Mark your calendars now so you don't miss this Manufacturing Executive Webinar on Enterprise Mobility.

Monday, April 9, 2012

3 Reasons America is having a Major Manufacturing Renaissance

America is making stuff again.
The Wall Street Journal's Jack Hough wrote an article about the hot new idea economists are buzzing about: the American manufacturing boom.

Hough spoke to Bank of America Merrill Lynch economist Neil Dutta who identified three trends that lay the foundation to a coming American manufacturing renaissance.

First, the cost advantages of outsourcing factory work are narrowing. Emerging market wages, while still much lower than U.S. wages, are rising, and high oil prices have made shipping more expensive. That is expanding the range of goods U.S. factories can produce at competitive prices (think sophisticated machines, not toys).

Second, a weakening dollar makes U.S. goods more attractive to foreign buyers. The dollar has fallen by nearly one-third over the past decade against a basket of currencies including the euro, British pound and yen.

Third, energy production is booming in the U.S., and domestic natural-gas prices have recently plunged. That gives an edge to U.S. producers of fabricated steel, transportation equipment, machinery and chemicals, which use natural gas extensively, according to a recent report from Citigroup.

Meanwhile, economist Tyler Cowen is out with a similarly-themed essay on America's great export boom. He also cites three big bullish factors: Domestic energy, huge demand from growing emerging markets, and artificial intelligence that are helping to solve big manufacturing problems.

Bottom line: This is definitely a hot line of thinking across financial and academic circles.
Read more: http://www.businessinsider.com/bofa-economist-3-trends-american-manufacturing-renaissance-2012-4

Monday, April 2, 2012

Reshoring: Seven Industries to Reach Tipping Point in Five Years

In the next five years, seven major manufacturing industries will reach the tipping point where it becomes more economical for them to shift the production of products consumed in the US to the US from China, according to a report released last week by the Boston Consulting Group.


Those industries account for $200 billion in annual exports from China to the US, two-thirds of China's total annual exports to the US. The report, a follow-up to a BCG study last fall of rising costs in China, predicts that, as a result of reshoring, between 2 million and 3 million jobs will be created over the next decade, between 600,000 and 1 million of them direct manufactuirng jobs. The reshoring will add between $20 billion and $55 billion per year to the US economy, the report projects.


The report also predicts that US exports, particularly to Western Europe, will grow by $65 billion annually in five years, driven by improving productivity in the US as well as the depreciating dollar.


Driving the predicted reshoring, the BCG study states, are rising costs associated with production in China as well as increasing productivity in the US. Labor costs in China, which have been growing, are predicted to rise by 18% per year through 2015. At the same time, manufacturers producing in China face higher transportation costs and higher costs related to the slow rise in value of the Chinese currency.


The seven industries that will reach the reshoring tipping point in five years, according to the study, are:

--Transportation goods ($582 billion consumed in the US, $6 billion imported from China)
--Computers and electronics ($467 billion/$122 billion)
--Fabricated metals ($262 billion/$10 billion)
--Machinery ($251 billion/$16 billion)
--Plastics and rubber ($170 billion/$9 billion)
--Appliances and electrical equipment ($134 billion/$25 billion)
--Furniture ($75 billion/$13 billion)

The report cautions that manufacturers should take a holistic, global, long-term approach when evaluating what products to reshore and what to continue to make in China. Assessments should include worker productivity in different countries, labor as a share of total costs, the relative importance of logistics, and other hidden supply chain costs and risks associated with global production.

But, the report says, the time for that reassessment is now. "The message emerging from this analysis is that companies that have not done so already must start reassessing their global manufacturing footprint," the report says. "Those companies that continue to see China as the default option for manufacturing could find themselves at a competitive disadvantage."

Has your company begun to reassess its global sourcing and production profile, particularly production in China? Have you begun to reshore some production? Do you agree that this is likely to gain momentum over the next few years?

Source: http://www.manufacturing-executive.com/message/3155#3155
Prime Advantage, the leading buying consortium for midsized manufacturers, announced the findings of its fourth annual Group CFO Survey, revealing financial projections and top concerns of its Member companies’ CFOs in 2012.

CFOs continue to see solid signs of the economic recovery in U.S. manufacturing. While Member companies are planning more hiring, wage increases, and capital expenditures, the availability of skilled workers is a growing challenge.

Summary of Findings
Nearly 95% of CFOs plan to invest in manufacturing equipment and 63% in computer hardware this year 69% of executives are more optimistic about their companies’ financial prospects in 2012 (compared to 67% in 2011).

While more CFOs are optimistic about their own financial prospects, fewer respondents are more optimistic about the U.S. economy than in 2011, with 67% feeling better about 2012 than the prior year (compared to 74% in 2011) 59% of manufacturers expect moderate to high growth from their key customers in 2012.


Top priorities in 2012 include cutting operational costs, developing new products and services, and long-term strategic planning (which rose 13 points from 2011).


The Prime Advantage Group CFO Survey was conducted in January and February using an online survey platform. Prime Advantage surveyed a cross section of finance executives from its Member companies consisting of industrial manufacturing firms from various sectors with annual revenues ranging between $10 million and $10 billion, of which the majority ranges between $20 million and $500 million.

Methodology: In February 2012, Prime Advantage surveyed financial executives from its Member companies whom represent US-based manufacturers in more than 25 different industries, including commercial foodservice, packaging, truck and trailer, material handling, food processing and construction. These small and mid-market companies range in annual revenues between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million. The survey received a 21% response rate from 200 surveyed.

Founded in 1997, Prime Advantage is a buying consortium for manufacturers with more than 750 Members and more than 125 Endorsed Suppliers. For more information on Prime Advantage, visit the website at www.primeadvantage.com.


To order a free copy of the full Group CFO Survey, click here.


Source: Equipment Finance Industry News

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