Finally, the U.S. electorate and potentially the U.S. Congress have awakened to the fact that Manufacturing is the foundation of a growing economy, but is it too late?

An article featured in CNNMoney.com notes that a political poll conducted in the spring of 2010 found “deep popular angst with the decline of America’s manufacturing might.”

Nearly four in ten respondents indicated that manufacturing based industry is the most important to the overall strength of the American economy, and 78% want the U.S. to develop a national manufacturing strategy.

While Supply Chain Matters applauds this effort, we cannot help but remain skeptical as to whether any substantive strategy will ever come forth.

U.S. Democrats, who face serious hurdles in the upcoming Congressional elections in the Fall, are apparently positioning to have various legislation addressing U.S. manufacturing introduced, but this article notes that some of these efforts may turn out to be political posturing in order for Democrats to have a rallying cry in the Fall elections.

One of the most interesting bills being proposed is the so-termed “The National Manufacturing Strategy Act” which directs the President to create a manufacturing strategy every four years.

The complete void of a manufacturing or supply chain capability strategy for the U.S. has been a constant rant within the Supply Chain Matters blog. Our latest rant in February noted that if an economy doesn’t build value in the manufacture of goods, which in-turn drives the need for robust supply and value-chain capabilities, than we may as well all get in line for those very few service jobs left in retail, financial services or restaurant sector.  The world economy, and particularly China, continues to up the ante on world class competitive manufacturing and supply chain capabilities, and the U.S. muddles along with both political parties stalemated.

For what it is worth, we should all pass along some stern advice to our U.S. Congressional leaders.  If readers will indulge, let me start the ball rolling:

Yes, the U.S. lacks a strategic manufacturing strategy, and the proposed bill to create one should pass post haste.  By the way, include in that bill that the strategy needs to be delivered to the President in less than six months, since it is way overdue.  The President should appoint a commission that is balanced among senior executives of well known manufacturing focused companies such as Ford, GE, Caterpillar, 3M, and others.  The commission should also include people who understand the importance of building supply and value chain capabilities to support strategic industries.  Andy Grove should chair the Commission, since he has already nicely articulated the challenge and the need. While the U.S. is addressing supply chain capabilities in alternative energy vehicles, it probably needs to address other strategic industry as well, and please Mr. President, refrain from appointing anyone from the Wall Street insider community on this commission.

My observation is that Americans are highly frustrated with their political leaders because of a lack of movement in the economy and in the longer-term economic welfare of their families. Posturing and bickering only adds to the frustration, and quite frankly, if Republicans and Democrats really believe in the vibrancy of private enterprise, they should be enthusiastically sponsoring and supporting a strategic manufacturing and value-chain strategy for the U.S.

A message to Republicans- your stance of do-nothing for the sake of political posturing or protecting against the deficit has little meaning if the U.S. cannot revive its economic and job growth.  These are hollow without a vibrant U.S. manufacturing resurgence with a strong U.S.-based supply chain.

A message to Democrats- advocating for a comprehensive manufacturing strategy is the right issue, but please, please do not give it the lip service.  Provide leadership and substance and actively work with the opposition to get it done.

For the health of the American economy, don’t waste time.  The stakes are very high, and supply chains do matter.

Bob Ferrari

While checking-in on Twitter before the holidays, MfgCrunch alerted to a Washington Post article, Dollar’s decline a boon for U.S. manufacturers.  (free sign-up account required)  The article reinforces what most procurement sourcing professionals already know, that the weak U.S. dollar is helping U.S. manufacturers to win back business previously lost to other global competitors.  This is certainly positive and uplifting news as these manufacturers approach the New Year, but I would add a bit of a cautionary note to the conclusions of this article.

Do not misperceive my intent.  Putting people back to work in U.S. manufacturing is absolutely a positive development and a critical need.  My point is to not get swept-up in point-in-time euphoria.

While the economics of product cost, quality, and logistics tradeoffs are shifting more toward U.S. manufacturing sourcing, the political dynamics of today’s world economy must also be factored.   Here are some points for discussion and consideration:

• The U.S. dollar remains pegged lockstep to the price of oil, and as the price of oil rises and falls, so will the dollar. Thus far, most economists predict fairly stable oil prices in 2010, but all of that can change rather dramatically with another international terror incident leading to supply disruption.
• In today’s global economy, most manufacturers are better off in the long-term being recognized for product and service innovation as opposed to being the lowest-cost producer. Customers will establish a long-term supplier relationship with an innovative supplier, as opposed to an opportunistic relationship with this year’s lowest cost provider.
• Other countries such as China fully understand the economics of the dollar, and will compete aggressively to maintain business, even if it means slim margins. China’s monetary policies help to protect the cost advantages for manufacturing in China.
• Finally, the IMF predicts that the bulk of industrial growth in 2010 will stem from the developing Asia regions such as China, India and South Korea. Any significant shift in sourcing outside of these regions is sure to trigger more internal market protectionist policies such as the recent China policies on government sourcing for high tech and electronics purchases.

My advice to U.S. manufacturers large and small is to enjoy the current advantage of the dollar, but do not waiver from the primary goal of competing in today’s global economy, which is having the most innovative products, services, and supply chain fulfillment capabilities.

As noted in a previous posting, U.S. manufacturers need policies and incentives that insure the most innovative supply networks reside in the U.S.

Agree or disagree?

Bob Ferrari

Last week, Vice President Joe Biden met with a group of executives from manufacturing companies to lay out a framework for boosting more manufacturing jobs in the United States.  At the meeting, the Vice president announced support for an Obama Administration sponsored program for $5 billion expansion in tax credits to encourage the manufacturing of wind, solar and other alternative energy technology.  This proposed additional credit is supposed to be part of the previous $787 billion economic stimulus package passed earlier this year, but needs additional legislation.  Interested companies in this tax credit are noted as Vestas Wind Systems A/S and First Solar Inc.

President Obama’s senior advisor for manufacturing policy had issued an earlier statement: “It is vital to have a concerted effort across the administration to support an innovative, vibrant manufacturing sector that creates and sustains good paying jobs.”  CEO’s attending this meeting noted that the administration needs to do more to open foreign markets and lower corporate taxes.

I’m sorry; while the intent is noble the effort is weak!  Enough already!

The last thing that thousands and thousands of unemployed or displaced manufacturing people in the U.S. need to hear is more political speak from their legislative and industry leaders. What apparently prompted this activity was outrage concerning a planned Texas wind farm that received more than $400 million in stimulus funding and has supposedly sourced a good portion of the manufacturing in China.

What is needed is concerted action. Somehow leaders in the U.S. do not clearly understand the fundamental tenants of supply chain.  In order to globally compete in innovative technology, you have to deploy a world-class supply chain capability, which either provides leading-edge innovation or competitive cost.  As Thomas L. Freidman so eloquently points out in his book, Hot, Flat, and Crowded, the ultimate winners of the global race for dominance in alternative energy innovation will be those countries that develop the infrastructure and supply chains to sustain such innovation.  The brute reality is that solar, wind, and other alternative energy companies are sourcing current activity outside the U.S. because they have either begun forming their own perceptions of where innovation resides, or that the profit motive overrides consideration of U.S. based production.

It has been more than a year since the Obama Administration and the Congress began discussion a comprehensive stimulus plan for the U.S. Politicians and manufacturing executives need to stop with the self-serving sound bites and get serious on building world-class alternative energy supply networks that reside in the U.S. Build the network, the jobs will follow. In case anyone forgot, the billions of dollars spent to save GM and Chrysler did not necessarily help the multitudes of key suppliers to that industry prepare for the new generation of technology.

Remember that rowing team analogy, every member of the team has to be rowing in the same cadence.  The U.S. does not need a senior advisor for manufacturing policy, rather it needs an advisor for building and sustaining competitive supply and value-chain networks.

 Bob Ferrari

In catching-up on newsletter and blog reading this week, I ran across an interactive poll being conducted by Industry Week Magazine which poses the question: What will the election of Barack Obama mean for U.S. Manufacturers?  I don’t know about you, but I noted a slant of cynicism in the layout of the potential responses. 

In full disclosure, I was a supporter of President-elect Obama, and took great joy in observing the positive and supportive reactions of both U.S. and global citizenry to the final results of the U.S. presidential election.  I also take some comfort and trust in reading that President-elect Obama will seek out the smartest people vs. the most politically connected to makeup the leadership team that must address the most challenging global economy experienced in many years. So let’s accept this at face value, at least for now, and put our collective heads together in constructive descourse towards a bold direction.

In an unbiased way, let us reflect upon a required agenda for U.S. manufacturing and supply chain needs for the next decade.  I will pose three key questions to Supply Chain Matters readers, provide some of my initial thoughts, and encourage comment and opinion from our community of blog readers.

1. Will the Obama administration provide active leadership and commitment in insuring that the United States is a global leader in product innovation and manufacturing capability in the next ten years?

My view is yes on leadership, but time and money will tell the story on execution and commitment.  For me, Barack Obama clearly articulated an understanding that in order to grow the economy, the U.S. must be prepared to assume a leadership role in the technologies and products of the next decade.  This would include areas such as alternative energy, green and sustainability technology, nanotechnology, and others related to computing, electronic content, and electronic infrastructure.  As pointed out in Thomas L. Friedman’s latest book, Hot, Flat, and Crowded, the potential rebuilding of the U.S. energy, utility, and information infrastructure are all possibilities that must be realistically considered.

Execution and commitment, on the other hand, relies on the ability of industry leaders and politicians coming together in a joint understanding that solving the U.S. financial crisis and investing for the future will require tough and informed decisions as part of a strategic plan based on prioritization. Not all technologies and products can be realistically funded and supported without an abundance of private equity or corporate funding. 

2. Will the Obama administration understand the strategic importance of manufacturing in spurring the growth of the U.S. economy?

My view is yes, but again, setting realistic goals and moving beyond just politics as usual will be the challenge.  President-elect Obama’s campaign efforts were directed at building the basis of an economy that could lead the U.S. beyond its current recession.  This was especially a driving concern for those regions of the U.S., such as Illinois, Michigan, Pennsylvania and Ohio where manufacturing and supply chain jobs were once a mainstay of the economic well-being of those residing in those regions.  This new administration will have no choice but to address the question of re-invigoration of manufacturing in the U.S.

Reality is grounded in the fact that a lot of the existing U.S. manufacturing jobs have moved to other global manufacturing regions such as China, Eastern Europe and other key regions. They moved for two fundamental reasons, economics related to lower-cost manufacturing, and more importantly, access to more growth-related markets.  Global manufacturers cannot turn their backs to these new growth markets, and thus manufacturing will remain in these high growth regions.  The real issue, therefore, is the long-term growth of the U.S. related market, and insuring the U.S. manufacturing capability is able to compete in supporting this geographic market.

The first real test is already underway, reflected in the current posturing for continued financial assistance of certain of the big three U.S. auto manufacturers.  This will most likely spread to concerns and calls for help among the other industries related to autos and other capital-related goods.  These are the industries that are first to suffer the consequences of a severe recession, and usually the first to see daylight on the recovery.

In my opinion, what really should matter is whether these hat-in-hand U.S. based companies that make up a substantial amount of manufacturing and supply chain employment can finally be motivated toward an objective for compelling products and world-class global manufacturing capability to lead in the green revolution.

3. Will the Obama administration provide active leadership and commitment to renewing U.S. supply chain infrastructure?

I have often commented that the U.S. logistics and transportation infrastructure is long overdue for investment.  Bridges, rails, ports and highways are deteriorating. Countries such as China, Singapore, and Europe continue to invest in assuring their countries have the most modern and efficient infrastructure for the 21^st century. India may join this list in the near future. 

A lesson we have collectively learned in my home town of Boston is that “big-dig” projects are not necessarily the answer, since they tend to gravitate quickly to money sink-holes and serve only one geographic area. Broader vision as to what is required for a 21^st century transportation network for the entire U.S. that meets the commitment to global competitiveness, low carbon emission and sustainability must be outlined and evaluated.  I believe that such a network must include more leveraged use of railways in connecting port facilities, natural resource regions, as well as major population areas, and should include supporting the movement of larger volumes of goods and people.  Americans need a serious option of high and normal speed rail networks connecting coast-to-coast supply chains and business center needs. One example, California voters just approved the funding of a high-speed rail network connecting San Francisco and Los Angeles.

A suggestion I would offer is to “draft” knowledgeable and visionary executives of experienced global-based transportation carriers, rail companies, and consulting agencies to layout the vision and long-term strategic plan for investment, and insures that when this plan reaches Congress, it transcends earmarks, political favors and ‘bridges to nowhere”.

Now it is your turn to share a comment.  What are your expectations regarding these three questions? You can provide your input in the Comments section directly below this post.

Bob Ferrari

The Detroit Free Press last week featured a well-timed article written by Bill Ford, the Executive Chairman of Ford Motor Company, entitled Why Manufacturing Still Matters. Mr. Ford’s current concern is that maintaining manufacturing capability in the U.S. absolutely matters not only in producing jobs and tax revenue, but in fostering innovation and new technology. I could not agree more.  I found this quote to be the most powerful takeaway from the article. “Our home team – America – can no longer take its economic leadership for granted.  Other countries have strategic plans and carefully thought-out growth policies.  We don’t have a plan, and sometimes it seems we don’t have a clue”.

Coincidentally, in the backdrop of this week’s financial crisis, the U.S. Congress did pass a $25 billion loan subsidy bailout for the three major U.S. auto companies, Ford, General Motors and Chrysler, and several of their suppliers.  This legislation provides so-called loans that would allow each of the big three to borrow money at interest rates as low as 4 percent, and have five years time to start repaying the government back for these loans.  Indications are that there are few strings attached as to where these companies can apply this money, and we would all hope that based on Bill Ford’s eloquent article, that some of these monies would be invested in new manufacturing capability. Interesting enough, the same industry lobbying group that influenced the legislation is also seeking another $25 billion in loans, but the political climate right now is probably not the best for implying bailout.

Rather than adding more political commentary as to why U.S. legislators continue  to prop-up specific U.S. auto companies that have a legacy of being non-competitive in fuel efficient products and cost-competitive manufacturing capabilities, I will rather take to heart the spirit of Mr. Ford’s comments.  I would propose that if there is going to be any consideration of another $25 billion legislative proposal, that it instead be directed at developing a U.S. long-range plan for manufacturing innovation and capability that would be available to all U.S. companies. One would think that Mr. Ford and all of his other auto industry executive colleagues would take to heart the message of having a carefully thought out U.S. strategic plan available for all U.S. industry. Isn’t that what America is all about, all boats rising!

Bob Ferrari