SCDigest: Can – and Should – Western Manufacturing be Saved?
By Dan Gilmore, Editor-in-Chief, SupplyChainDigest
Through a special arrangement, presented here for discussion
is a summary of a current article from Supply Chain Digest.
There is no question that in the U.S. and most of Europe,
manufacturing continues to shrink as a percentage of the overall economy
– and that this has been occurring since the 1950s. In fact, when charted,
the decline in that percentage, down now to about 11 percent of U.S. GDP, does
not look any steeper over the last decade than it did in the
1960s. Again perhaps surprising to many, manufacturing represented only
about 25 percent of U.S. GDP in 1966. In fact, the countries that have
the highest percentage of their GDP coming from manufacturing are not exactly
economic juggernauts (e.g., Cuba, Turkmenistan).
Which reminds me of a quote from business author Jim Gilmore: “The
entire history of economic progress involves paying someone to do something
for you that you used to do yourself.”
If you think about it, that is clearly true. Did your Dad
spend a lot of time repairing cars when you were growing up? When was the
last time you replaced the brakes yourself? So, at a macro economic level,
we have been doing just the same thing for the last 50 years, paying others
to make things for us as our affluence has grown.
But there are concerns. Just picking on one, I think there
are real and under-explored national security concerns. Would we really
want to lose our steel production capabilities, as just one example?
In his 2007 book, Saving American Manufacturing, Mike
Collins offers a litany of reasons why U.S. manufacturing should be saved.
Just highlighting a few: manufacturing drives most R&D, which, long
term, is key to competitiveness; manufacturing offers more broad-based
employment opportunities than many of the service sectors, in which only
the “highly credentialed” can really thrive; the decline in manufacturing
is directly related to the relative decline in standard of living for the
The National Association of Manufacturers (NAM) also argues
that U.S. manufacturers are burdened with too high tax rates and health
care costs, and that if adjustments in policies were made, more goods might
be made here as well.
Others have noted the potential impact of fuel and logistics
costs on offshoring. At the CSCMP Toronto Roundtable, George Stalk, a well-known
business strategy guru from Boston Consulting Group, also observed that
companies often underestimate the costs of inventory and obsolescence and
lost sales from out-of-stocks resulting from long, offshored supply chains.
Hence, why companies often seem disappointed in the total bottom-line results
from offshore strategies.
Discussion Question: Do you think governments
should be stepping in to save U.S./Western manufacturing businesses?