There is much conjecture about the future sustainability of the manufacturing industry, especially in industry news out of the US. Previously, some economists predicted the need for a more
service-based economy as, they argue, manufacturing is now the primary domain of the lower-cost BRIC nations. Contrarily, stories are now emerging where large manufacturers are 'reshoring' or
coming back to the west - up to a third of manufacturers are looking at reshoring according to a recent
Boston Consulting Group Survey.
There's no doubt the industry is at a watershed in its global relevance. To date, the focus has been on an emerging China and the low-cost production and vast consumer market it offers. The balance is due to shift, as outlined in a
previous post on MIMOC. Manufacturing In Markets Of Consumption is where production is determined by proximity to markets and is expected to be felt in large consumer markets such as Europe, US and China. Some will say it is jobs coming back to their rightful place and well... let them say that.
In consuming various facts and opinion, I've reached a number of conclusions that both resonated with and challenged my previous beliefs:
The business case for manufacturing
The business case for manufacturing must be compelling enough to convince economic rationalists and those in positions of power as to its worth. These stakeholders will be supportive of the industry if they recognise its long-term value - at present, most do not.
It is likely industry will change it spots - perhaps a
third Industrial Revolution is on its way, led by a digital manufacturing movement? Adjusting to such change will be difficult at worst, but not impossible. Its resilience has been proven in the face of natural disasters, economic volatility and competitive pressures in times gone by, and there's no doubt our approach needs to change. I recently became engrossed in a presentation by
Professor Goran Roos who noted that Australian manufacturing, mainly because of its parity with the US dollar, has moved from a low-cost competitive environment into a high-cost one and has to shift its approach accordingly. He makes salient points in his 2011 report "
Manufacturing into the Future" such as - advanced economies need manufacturing because:
- nations that emerged best from the GFC were based around high-value add export oriented manufacturing
- it is the biggest spender on applied research and driver for productivity
- it is the largest generator of employment
- manufacturing is at the forefront of applied technology and innovation
- the resources boom may be shorter than expected
It is people like Professor Roos that will help build a sound business case for manufacturing that will resonate with economists and influencers, minus the sentimentality.
Blatant promotion: Professor Roos is a keynote speaker at our upcoming
Manufacturing Skills Conference on 18 May.
Let's address the career path
Many governments and industry associations have orchestrated campaigns to make manufacturing "sexy" or "cool" to kids. I read an article on the manufacturing skills shortage that examined the deep psychological roots the industry has for Gen Y and thereby influencing their choice of manufacturing as a career path.
AJ Sweatt says its not that people are smarter, that they don't want to make things or even that they don't think manufacturing is "cool". He says:
"The problem is that for a generation, US manufacturers outsourced the jobs of fathers, mothers, uncles, aunts, brothers and sisters in search of cheap labor...the factory/mill/shop/plant was shutting down, and the manufacturing job that had given them a decent life, pride, and dignity was no more. There were probably tears. Moods changed, relationships suffered, some families shattered. These kids watched their parents and communities face a dust-bowl reality that said they were expendable....How do you tell someone to ‘un-live’ that?"
Is this the same for Gen-Y and Gen-Z in Australian manufacturing? Perhaps. In my encounters with Gen-Y, it seems that remuneration, status (career progression) and lifestyle are the determining factors in a career choice. Much is being done to re-educate Gen-Ys about the changing nature of (new) manufacturing careers, but this is a long-term challenge requiring a long-term commitment. If we do not continue this campaign, we will
reduce the future capability of (new) manufacturing. We will only know if it has been successful once all of Gen-Y are in the workforce and by then, we should be wising up Gen-Z that manufacturing is "mental"(?)..watch that phrase catch on in a couple of years.
The "S" word
Now here's a dirty word... "subsidies" a.k.a. "protectionism". I know it is US-centric, but I refer you to a great article on how "
Balancing Trade is not Protectionism". The author Mike Collins argues that the US trade balance is not based on a level playing field as China manipulates its currency to force a trade deficit. He says the only beneficiaries are US multinationals (who produce in these low-cost countries) and those nations that manipulate their currency, likening the relationship as trying to sustain a heroine addiction. His argument that the US should be using the "S" word to protect its future from the ultimate collapse that will happen from an ever-expanding trade deficit.
I tend to agree that why wouldn't we, as part of a manufacturing policy, identify key manufacturing sectors of strategic importance and support them in preparation as future economic cornerstones? As those sectors mature, ultimately other low-cost providers will emerge which is when the free market should take over and we should look at the next wave of strategically important sectors.
Well, that's my brain drained. What do you think?
