The newsLINK Group - US Manufacturing - Starting Over

Editorial Library Category: Manufacturing Topics: Manufacturing Title: U.S. Manufacturing: Starting Over Author: newsLINK Staff Synopsis: Many experts think the U.S. is beginning to pull out of a long industrial manufacturing decline. The question is this: are we talking a short-term cycle or something more lasting? Editorial: U.S. Manufacturing: Starting Over 4064 South Highland Drive, Millcreek, Utah 84124 │ │ (v) 801.676.9722 │ (tf) 855.747.4003 │ (f) 801.742.5803 Editorial Library | © The newsLINK Group LLC 1 Many experts think the U.S. is beginning to pull out of a long industrial manufacturing decline. The question is this: are we talking a short-term cycle or something more lasting? Key factors affecting the answer are capital, currency fluctuations, the cost of energy and transportation, qualified labor talent, market demand, materials, and (of course) tax rates. U.S. currency and the cost for transportation and energy are strong arguments for U.S. manufacturing; taxes and the regulatory environment are a forceful counterpoint. The other factors are currently fairly neutral. It seems clear, however, that more and more businesses are doing more than just think about domestic production. They are actively bringing manufacturing jobs home, and that includes companies like Walmart. In January 2013, far-from-shy Walmart hosted a U.S. manufacturing summit. Since Walmart has more than 4,000 U.S. stores, people paid attention. Five hundred suppliers, representatives from 34 states, and eight governors all attended, along with government officials. In addition to the goods already being produced in the U.S. that Walmart already buys, Walmart pledged to invest an additional $250 billion in U.S. goods over a ten-year period. You should not be surprised to learn it hopes to meet that goal early. In part, this investment is a course correction for Walmart. For many years, Walmart was absolutely relentless about its suppliers cutting costs. Outsourcing jobs was a key part of that philosophy, and it resulted in domestic plants being shut down when production moved to countries where wages were lower than they were in the U.S. When it came to manufacturing, after all, many people thought the best plan of action would have to include significant outsourcing to other countries. Domestic energy prices were high, wages in many other countries were low, automation had its limits, and U.S. manufacturing concerns thought they had all the flexibility they needed when dealing with changes in U.S. product demands. That has all changed. Domestic energy prices have gone down, U.S. wages have become more competitive (especially as foreign wages have increased), there is a renewed appreciation for the benefits of automation, and U.S. manufacturers are welcoming the thought of being increasingly responsive to changes in the U.S. market. One of the real benefits underlying the production of domestic goods is being able to save money that was being spent previously on ocean freight charges and customs duties for the goods being imported. Any business that can successfully make the change from offshoring its goods to producing them domestically will see an improvement in any numbers that used to be associated with those expenses. As a result, Walmart’s commitment is long-term good news: it means more jobs for U.S. citizens and a much shorter geographical distance for goods made in the U.S. to travel before they are sold in U.S. stores. Many U.S. manufacturers are eager for the business opportunity this shift presents. However, the short-term bad news is that much of the U.S. manufacturing infrastructure has been lost along the way, bringing with it many difficult logistical problems to solve: Experience has been lost. Some of the people who used to hold down U.S. manufacturing jobs found other work; most of them are either retired or have died. In other words, they are not available for rehire, and they took their experience and their skills with them. When it comes to hiring, therefore, many companies are being forced to start from the beginning as if they have never been involved in manufacturing at all while still meeting the standards Walmart has set. The pool of local suppliers is a shallow one. That makes it difficult to get the necessary resources for creating goods. H. Kim Kelley, a CEO of Hampton Products International, has discovered this first-hand. His company makes products that include bungee cords, locks, lighting, office hardware, tow straps, and tie- downs. Products that were originally manufactured for Walmart in China during the 1990s are now being made, at least in part, in the U.S.