Creating U.S. Manufacturing Jobs/Broadening a Domestic Supply Base: More Commentary

In the past two weeks we have penned two Supply Chain Matters commentaries that reflect on the challenge for re-invigorating manufacturing and supply chain jobs growth in the U.S.  These included a commentary on GE’s CEO Jeffrey Immelt being appointed to the new Presidential Commission on Jobs and Competitiveness, and a commentary reflecting on the recent state visit by China’s President Hu Jintao to Washington. In both commentaries, we pointed to the depth of the challenge, either in business or political terms, in fostering a concerted strategy for U.S. innovation and job growth in the midst of a growing global economy. We also noted that the political leaders, and multi-national corporations need to quickly move beyond the rhetoric and posturing to address some serious realities of why so many jobs have been lost and from where future job growth will come.  That would include some sacrifices for each stakeholder, a candid reality check relative to existing trade and IP protection policies.

There was a rather provocative article in the Wall Street Journal, U.S. Firms, China Are Locked In Major War Over Technology, penned by John Bussey. (paid subscription may be required)    The article’s conclusion is that a titanic battle is under way between U.S. business and China, one which is destined to dominate relations between both countries for years to come.  It notes that China’s legislative leaders have been rolling out an array of interlocking regulations targeted to make China a technology powerhouse by 2020.   The article makes reference to a U.S. Chamber of Commerce report: China’s Drive for ‘Indigenous Innovation, A Web of Industrial Policies, which has become rather important reading for many multi-national companies with hopes of continuing to tap China’s lucrative markets. The WSJ concludes its article with following statements: “ In the innovation race, China is thinking long term—and big. Its goal isn’t just to tinker with foreign technology.  It plans to supplant it.  As any competitor might.”

We would recommend that our readers, before internalizing the WSJ statements at face value, actually read the U.S. Chamber report, as we have.  The executive summary of the report makes a very important observation. It notes that many multi-national corporations are becoming ever increasingly dependent on their China revenues as contributions to profitability. They actually expect their own technology coming back in the hands of a Chinese competitor, and believe they have the strategic and management savvy to out maneuver these threats.  However, the Chamber report also points out that many single industry or single product companies could be destroyed in the process, and the end result could be a chilling effect on innovation from a global perspective.

The term context is a very powerful term, and has special meaning when it comes to the challenge of creating more U.S. manufacturing and associated supply chain jobs.  The context of jobs is a direct correlation to innovation and customer demand.  Create or foster a market, and innovative companies will come.

The objective of business is to make profits, pure and simple.  Robert Reich’s astute commentaries point this out.  The objective of policy makers and of governments is to foster and promote policies, incentives and frameworks that fuel national economic growth. That is what China is doing, and doing very well at that.  Businesses are currently creating and continuing to grow supply chains and job growth in emerging markets because of the compelling economics.

Some pundits argue that job growth stems from a positive sense of business confidence. The reality, at least from the lens of supply chain, is that job growth stems from economic incentives that reflect a market for products, the cost of materials and labor, and the overall cost of getting products shipped to markets and customers.

Creating U.S. manufacturing jobs and broadening the domestic supply base equates to legislative and business leaders putting their own economic interests aside and reflecting on the lack of an articulated strategic framework that will address America’s plan to win.

Reflect on those final lines of the Journal article. Thinking needs to be long term and what it takes to win in innovation and jobs.

Bob Ferrari