Last week I went out on a limb and wrote an editorial view on the current state of US Manufacturing, stating that we need to stop calling it a “revival” and call it what it really is….a TRANSFORMATION. As with all of our posts, I put that particular post into the various Manufacturing LinkedIn Groups I have joined and actively engage in. If you are not engaged in LinkedIn Groups around this space, I highly encourage you to do so, as it is a great way to stay sharp and discuss current topics with some true experts.

In fact, I have that experience frequently, where I have the opportunity to talk to people who are driving transformation themselves, every day, in their jobs, and see it live and in person. This is very valuable to me as a Director of Marketing for a third party logistics company so that I may better understand our marketplace and continue to add value, by way of our educational blog and changes to our products and services so that manufacturers can stay lean and mean around freight management and logistics in general.

When I put the blog post about stopping using the word “Revival” to talk about what is happening with US Manufacturing, I got a great response from an industry expert, who describes himself as a “Business transformation enabler, Value Chain thought leadership, SAP benefits realisation expert.” His thoughts around my post were fantastic, and with permission, Sean Culey, shares his thoughts with all of you about the current state of Manufacturing, mentioning the off shoring, reshoring, and what is really driving US Manufacturing in transformation: Value Creation. As a bonus, we will also include a YouTube video of Sean speaking at a conference on the subject of “Transformers: Supply Chain 3.0 – The Rise of the Fully Automated”

A Response to “The Myth of the Manufacturing “Revival”, and WHY We Need to Stop Using That Word”

Hi Adam, this is a very interesting post and you raise a really important point between ‘revival’ and ‘transformation’. In reality I think that there are elements of both, but I agree a ‘transformation’ is what’s really going on.

Manufacturing WAS impacted by the recession, especially for SME manufacturers who relied on credit whilst the order book was converted from demand to cash. This debt restriction curtailed innovation and investment in the manufacturing sector for these smaller producers, whilst for larger manufacturers the lure of low cost labour in order to increase efficiency and drive greater profits proved too good to resist. This accelerated the globalisation movement, where workers in the emerging countries were able to raise themselves up to the role of consumers, which in turn created greater market opportunities for manufacturers to sell their products.

Thus output, driven through increased exports, made up for the shortfall in domestic trade caused by the lack of cashflow and austerity purchasing practices during the years 2008 – 2012. Manufacturing is now back, and GDP is now growing, but the real question is ‘where are the jobs?’ A revival is occurring because currently we are still experience the growth in the emerging markets because of globalisation, whilst similarly experiencing a growth in domestic demand due to increased buyer confidence.

However, where transformation has replaced revival is in the fact that it is no longer the mass employer it once was. Your chart maps GDP and output, but the one thing that is missing is labour. Manufacturing is coming back, and re-shoring is a reality as companies have found that the total cost of off-shoring (plus the risks involved) are greater than the cost of localising production in more high-tech units. Plus you don’t get any of those unpleasant headlines about exploitive working conditions.

The drive for efficiency, linked to the constant desire to increase profits and thus short term shareholder value, has indeed transformed manufacturing. Previously manufacturing was the game, a game won by those companies able to produce their goods at a level of operational efficiency greater than the competition. Hence the growth of practices in Lean, Six Sigma, Kaizen etc.

Now the game lies in new areas of value creation; in design, added value and service.

Manufacturing is being transformed – and this transformation has only just begun. Wait till BAAM (Big Area Additive Manufacturing) and Contour crafting really start to take off, till robots like Baxter are upgraded and widely adopted and nanotechnology enables 3D printing at an molecular level. Wait till 3D printers become household items, and goods are digitally downloaded rather than physically purchased.

The new supply chain will be personalised, localised and automated.

Dan Ikenson is absolutely correct to point out that we should not aspire to go backwards, to curtail innovation in order to simply create jobs. That path has been trodden before by countries that created societies that no-one aspired to live in, nor hopes to return to. Neo-luddism won’t bring any long term benefit, and the choices society makes determines the rate of innovation. Any society that has historically tried to stifle innovation has ultimately been left behind and no longer exists (i.e. Chinese Dynasties or the Ottoman Empire).

However, the transformation that really needs to take place is in the provision of the skills of the future, to enable people that would have once been employed in the production of goods to now be able to compete on the world stage for the new skill sets, so that we don’t transform the industry to the point that so few people actually have a job it breaks the whole system that consumerism, capitalism and the market is built upon.

That’s the transformation that really needs to take place.

Transformers: Supply Chain 3.0 – The Rise of the Fully Automated