New England Council Report: Advanced Manufacturing & Changing Perceptions
By Jack Healy, Director, MassMEP
Perceptions are often formed by what we are conditioned to expect. Continued media coverage of the difficulties in the automotive industry has most Americans expecting that all of manufacturing is tottering into decline and needs a federal ‘bailout.’ Unfortunately, this negative perception joins with all of the others that have been codified by the various no-think economists in the public mind. The end result is a public perception that manufacturing is not something that the United States still does or does well.
Fortunately, a significant new study, to be released in September 2009 by the New England Council, presents a detailed view of the wealth building contribution and potential generated by manufacturing throughout New England. This study is a collaboration of the New England Council and Deloitte LLP. It was previewed to a select audience in a report. "Reexamining Advanced Manufacturing in a Networked World."
This report redefines New England’s manufacturing image to reflect the reality of an advanced, productive, and networked manufacturing community that employs 9.3 % of the New England labor force and accounts for 13.3 % of the region’s GDP. The report validates that "Advanced Manufacturing" (86% of which is in MA, CT, and NH) has been responsible for the continued growth of manufacturing in New England, ensuring that manufacturing, overall, is still the dominant industry sector in four out of the six New England states.
Deloitte Summary: Advanced Manufacturing in New England
State
Mfg Sector
Rank
% of State
GDP
% of State Private Jobs
Connecticut
2
7.5 %
9.0 %
Maine
1
5.3 %
2.8 %
Massachusetts
1
9.6 %
6.1 %
New Hampshire
1
8.9 %
8.3 %
Rhode Island
3
4.5 %
6.9 %
Vermont
1
11.0 %
4.8 %
Advanced manufacturing, as noted in the report, is distinctive from traditional manufacturing in three ways : (1) volume and scale of economics, (2) labor and skill content, and (3) the depth and diversity surrounding the industry. Large volume product manufacturers (both process and fabrication industries) that compete traditionally by leveraging scale and low cost structures, and often include very advanced manufacturing technologies, are not defined in this study as advanced manufacturing.
The study characterizes the major aspects of advanced manufacturing:
Firms that innovate, co-create solutions, and create significant value by transforming raw materials into specific, highly specialized product solutions. Volumes are normally low but highly complex.
Firms that compete with high standards of operational excellence in design, production, delivery, and management of the product life cycle.
Firms that require a highly skilled, highly compensated workforce that is essential for creating these complex product solutions (i.e., in the trade off between skills and labor rate, skills prevail)
Savvy, Skilled Workforce
The report indicates that the $53.79 billion dollar New England advanced manufacturing sector is "not dark, dirty, dangerous, or declining." The report states, "The reality of the industry is quite the opposite — computer savvy employees, a highly skilled and compensated workforce, and innovative products are the norm. Unlike its traditional counterparts, advanced manufacturing does not rely on low cost labor and scale/volume, but rather on skills and creativity to produce highly specified and complex products. Additionally, the industry does not exist as a set of isolated firms, but resides in a talent–rich network of engineers, business developers, entrepreneurs, scientists, financiers, machinists, and other experienced professionals that collaborate and wrap their creative powers around innovative customer solutions."
The report goes on to make the point, "Few regions can match this talent cluster in depth or diversity. It is truly the New England advantage." How is that for clearing up some misperceptions?
As stated in the report, "Traditional linear terms, like R&D pipeline and supply chain, are no longer accurate descriptions of how things are done. A cluster of advanced capabilities moves faster, solves problems more accurately, and leverages resources and insights more quickly among its members."
That New England’s manufacturing competitiveness has been recognized by others should not come as a surprise. The report points out that four of the six New England states were ranked in the top ten in the Milken Institute’s science and technology Index of 2008.
Massachusetts was ranked number one in this index as best positioned for economic growth due to its dominance in science and technology assets.
Direct foreign investment has been reaffirming New England’s competitiveness for a number of years by greatly exceeding the US average investment levels, providing 22% of all manufacturing jobs in New Hampshire and 14% in Connecticut.
Strategic Challenges
On the opposite side, Deloitte points out various operational and strategic challenges facing New England manufacturing, that will have to be addressed if this community is to remain competitive. These primarily consisted of:
A lack of educational alignment with business training needs and an inadequate talent pipeline.
Outdated economic policies that don’t meet the needs of current manufacturers and focus solely on promoting job growth.
Lack of a positive brand to counteract the reputation that manufacturing is a dying industry with limited career potential.
The need for management to simultaneously achieve operational excellence and develop new markets and customers with limited resources of time, talent, and money.
The Role of the Manufacturing Extension Partnerships
On this last point, the report is the first of such manufacturing studies that has pointed out the contribution of the Manufacturing Extension Partnerships in "enhanced growth, improved productivity, and expanded capacity." It was noted that these MEP partnership organizations, sponsored by the National Institute of Standards and Technology and supported by the states, "have enabled countless small and medium-size firms in the region to streamline processes, reduce operational costs, and build the capacity for innovation. These partnerships not only build opportunities for networking across sectors and service areas, but also spread the benefits of the policies among many members."
Advanced Manufacturing
This initial report concludes that, "Advanced manufacturing has reversed the decline associated with traditional manufacturing in spite of significant challenges. In New England there is a concentration of capabilities in several industry sub-sectors that double the national average. Productivity improvements have not been incremental but have been transformational. The value of shipments has exceeded or met the national average in all but one state. Most importantly, the cluster of talent and capabilities surrounding advanced manufacturing has the depth, breath, and degree of connectivity that few regions could replicate".
Linking existing advanced manufacturing networks throughout New England to premiere shared service providers, such as workforce development organizations, economic leaders, and consultancy groups that the various state Manufacturing Extension Partnerships (MEP’s), will provide a unique ability for manufacturers to strengthen the region’s economy in this hyper competitive world.
The New England Council has a long history of promoting unified activities for the entire region and is ideally suited to facilitate linking these networks which will be a real asset to the region. As the report notes, "The complexity of the product solutions, skills, and the depth and diversity of the talent network makes advanced manufacturing more sustainable in New England and less prone to offshore outsourcing to low cost countries to where the network is less advanced."
So we look forward to September and the release of this important study which will show the way forward. The continued offshoring of the US economy is not sustainable and has undermined the dollar’s role as the reserve currency .and has compounded our deficit problem, requiring more dollars for oil and other imported commodities. This has placed us firmly on a path that will end in a substantial reduction in US living standards unless we find a better ways to generate wealth. The New England Advanced Manufacturing community has demonstrated that an opportunity to reverse this imbalance is to be had, with what the report has described to be an "Industry of Opportunities."
Anyone interested in learning how they may participate with the New England Council and it’s networking initiative, can do so by contacting Larry Zabar.
