More Debates and Discussion on U.S. Manufacturing Competitiveness

General Electric CEO Jeff Immelt is the Chairperson of President Obama’s Presidential Council on Jobs and Competitiveness, a commission that is addressing a set of policy recommendations for long term U.S. competiveness and job growth in manufacturing.  In a previous Supply Chain Matters commentary, we provided our impressions of the interim report of this commission.

Immelt recently hosted a select group of financial media journalists on a tour of three GE manufacturing facilities.  The GE team took the time to share with reporters some significant trends and observations regarding manufacturing, and the critical role played by industry supply chains.

Daniel Gross, economics editor at Yahoo Finance penned a fairly comprehensive blog commentary sharing his impressions of the GE tour. In his commentary, you will note some rather insightful points:

Modern manufacturing process is all about doing more with less: less time, metal and labor.  Work teams have repeatedly developed time and material saving innovations, which translates to higher and higher levels of manufacturing productivity.  Noted is that GE can accommodate a 20 or 30 percent increase in order volumes without the need for a corresponding increase in its employee base.

Readers may ask- where, if anywhere does job growth come from?  According to Immelt, it comes from the supporting supply chain.  Large manufacturers such as GE have placed ever more dependency on networks of suppliers.  GE’s Greenville South Carolina plant relies on 16 Tier One suppliers,  Immelt’s ratio is that for every employee at the factory, there are 8 jobs in the supply chain, because smaller suppliers lack the scale and resources to invest at the same level as global manufacturing OEM’s.

Another belief from Immelt is that the U.S. has to take market share in order to drive growth. Market share for U.S. based manufacturers is the product of endless product and process innovation, along with export markets. During the recent severe recession, GE elected not to cut back on research and development and came out of the recession with more products in the pipeline.

Some readers, and indeed journalists come to different conclusions, namely that the U.S. is in the midst of a jobless recovery.  John Gapper, and editorial writer at the Financial Times were also invited on the GE tour. In his column, (paid subscription or free metered view required) Gapper expresses the view that from what he observed, there is little cause for optimism in U.S. job growth. He cites statistics from the McKinsey Global Institute indicating zero growth in U.S. manufacturing jobs by 2020. He notes that the best hope is that manufacturing productivity rises so high that offshoring is no longer worth the effort.

For our part, Supply Chain Matters offers two of our own conclusions for readers and legislative policymakers to consider.

Long-term U.S. manufacturing competiveness must be predicated on a robust and competitive supply chain networks, particularly in key growth industries such as alternative energy and aerospace.  Mid-marker and smaller suppliers continue to struggle with financial lending and legislative policy practices that stem growth and investments in innovation.  Make no mistake that countries such as China have adopted policies and mechanisms to promote domestic manufacturing and supply chain growth, including favoring of domestic companies for strategic growth markets.

Second, with the current gridlock in the U.S. Congress, any form of a long-term strategic strategy seems to get totally lost in short-term parochialism and playing to the next election.  The U.S. needs a long-term strategic manufacturing and supply chain competiveness strategy and the time is now.

Too much time is being wasted on political gamesmanship and agendas. Mr. Immelt and GE should be applauded for raising more awareness but what is needed now is not tours, but concrete initiatives and action.

Bob Ferrari

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