Renovating the Foundation of the U.S. Economy Will Take a Revamped Manufacturing Sector

For the American economy to rally and re-establish strong growth trends, we must examine at its foundation: manufacturing. The foundation is eroding at an alarming rate, and rather than reinforcing it we must focus on renovation through innovation.

In his book Saving American Manufacturing: Growth Planning for Small and Midsize Manufactures, manufacturing expert Michael Collins offers ideas to shifting the downward trend, and again we provide an overview so that you have a sense of the kind and degree of change needed and to give you some direction in how your company can be among those that remain strong and competitive in the changing marketplace. The concepts Collins discusses are ones that Insight helps clients explore, and we can help you set your organization on a new innovation track, too.

The Crisis in American Manufacturing

The crisis isn’t the surface symptom of lost jobs, it’s the residual effects on the trade deficit, job creation, and strategic industries (xi). Historically, a large portion of the middle class income came from the manufacturing sector; as that sector shrinks, so does the middle class and its ability to help sustain the economy.

A 1987 report issued by the Office of Technology Assessment as an early prediction that is nearing fulfillment:

During the next two decades, new technologies, rapid increases in foreign trade, and the tastes and values of a new generation of Americans are likely to reshape virtually every product, every service, and every job in the U.S. These forces will shake the foundations of the most secure American businesses. (qtd. in Collins xii)

Why should we care?

Manufacturing touches nearly every aspect of American life in one way or another. Collins notes that, among other things, manufacturing:

  • Creates secondary jobs (xx)
  • Generates exports (xxi)
  • Supports state economies (xxii)
  • Affects our infrastructure (xxiii)

More specifically, the report makes four predictions:

  1. “Change can lead to wrenching dislocation and pain for workers with obsolete skills, for management unable to recognize opportunity, and for communities where traditional businesses have failed” (qtd. in Collins xiv).The data bears this out. From 2000-2006 the United States lost more than 2.3 million jobs in the manufacturing sector alone.
  2. “Change can create an America in graceless decline - its living standards falling below those of other world powers” (qtd. in Collins xv).While the upper class and those with top-tier jobs continue to experience high standards of living, that of most Americans is on the decline.
  3. “Change can result in a gap between those fortunate enough to have the talents, education, and connections needed to seize the emerging opportunities and those forced into narrowly defined, heavily monitored, temporary positions” (qtd. in Collins xvi).In short, the gap between those who have and those who don’t is widening.
  4. “Will people be able to find a variety of attractive opportunities for work, or will only the credentialed elite enjoy such opportunities?” (qtd. in Collins xvi) More jobs are being lost than college degrees are being issued, which indicates that a college degree does not guarantee a well paying job. Collins notes that reasons for this include the advent of the Internet, which has eliminated many tasks that service industry professionals once performed (xix).

What can we do?

Collins is upfront: it is impossible to save all manufacturers (xi).

Success Through Transformation

  1. We Must Grow: stopping the decline isn’t enough.
  2. Process Solutions: solutions like lean manufacturing help, but they alone are not enough.
  3. All Customers Are Not Good Customers: demands prices so low that profit margin is non-existent are demands by customers you can afford to lose.
  4. Finding New Customers and Markets: you must find new, good customers to replace bad ones.
  5. A New Organization: focus on exploring new markets and developing new products
  6. Mindset Change: be market-driven rather than operations-driven.

Insight can help you transform your organization into one that innovates and seeks to explore new markets and opportunities. Contact us to learn about our methodology, approach, and experience.

Collins, Mike. Saving American Manufacturing: Growth Planning for Small and Midsize Manufacturers. Chicago: First Flight Books, 2006.