A Decline in Investments is a Decline in US Manufacturing Capabilities
By Jack Healy, Director, Manufacturing Advancement Center, [email protected]
A lack of investment in companies by their management is one of the
biggest concerns for the future of the manufacturing industry. Whether
it’s a lack of investment in capital equipment or employees, manufacturing
companies need to invest in the future of their organizations.
Suppliers are moving their businesses offshore because they believe
they can make the parts cheaper in other countries, such as India or
China, rather than investing in their plants and employees in the United
States. This trend is having a wide effect on the U.S. economy, causing
losses not only in employment, but resulting in an overall decline in
manufacturing salary growth, which in turn has caused a slower recovery
from the most recent recession. Lack of overall investment has also
caused a loss in many industries that previously operated "state
of the art" manufacturing plants; many now operate at a competitive
disadvantage to foreign companies.
The United States-China trade deficit reached almost $124 billion in
2003 as imports from China hit a record high. This trade gap is by far
the largest, as reported by the Telegram and Gazette on February 14,
2004.
Yet it doesn’t have to be this way. Kodak recently closed its
instant camera plant in Rochester, New York, and moved the facility
to China. The result was a loss of 500 jobs. Contrast that with the
Fuji film plant in South Carolina, producing the same type of product.
They’ve been flourishing since their opening in 1995.
Why the difference? In South Carolina, the state government goes to
extraordinary lengths to attract and maintain manufacturing companies
– even, in the case of Fuji, spending about $1 million in taxpayer
money to train hundreds of workers from South Carolina at the Fuji plant
in Japan. Fuji and South Carolina have made an investment in the plant
and its employees. Including the recent announcement of a $100 million
expansion project, Fuji has made $1.4 billion in investments in its
South Carolina plant (about $130 million of that was for Fuji’s
single-use camera operation.)
As a result, the residents of South Carolina are able to maintain their
manufacturing jobs and investment in the economy. That means new buildings,
new plants and equipment, and the continued generation of wealth. Conversely,
our overall manufacturing economy has not fared well.
"For the past decade, only one out of 10 companies achieved revenue
and profit growth of more than 5 percent and earned back their cost
of capital," stated Bain’s head of strategy practice, Chris
Zook. This lack of continued profitability has translated to a continued
lack of overall capital investment.
In addition, some manufacturing companies that once contributed a large
percentage of their products to the overall manufacturing economy are
no longer considered manufacturing companies. For instance, IBM is no
longer considered a manufacturer; they consider themselves a service
provider. Their investment has been in providing a service to its customers
and outsourcing the manufacturing of products. The deterioration of
our manufacturing community has been so widespread that the federal
administration has floated the idea of calling fast food establishments
"manufacturing" as they also assemble a product.
So, what does this mean for you? What can you do to invest in your
company with minimal funds?
Invest in Lean Manufacturing. Lean manufacturing processes eliminate
capital and ensure that the manufacturing process is more evenly distributed.
Lean Manufacturing also provides small manufacturers the opportunity
to make modest investments in manufacturing cells and equipment that
will allow for competitive production.
Companies need to investment in their organizations. Deferring investment
development will not allow you to produce effectively. If you are not
producing effectively, you cannot compete effectively.
Making an investment in the process is making a smart investment. Contact
Mike Prior at the Mass Manufacturing Extension Partnership to learn
how your company can become more "Lean" and make the investment
in your future. E-mail [email protected]
or call 508-679-0847.
