A recent Booz & Company survey of engineering, science and math undergraduate students found only 50% of them saw manufacturing as an attractive career. The challenge finding the manufacturing talent they need is another factor in why many companies move production offshore.
The authors call for more programs to promote engineering as a major, relaxing H-1B visa to allow more foreign talent to come into the US to fill these jobs or stay here to work after receiving their educatio, and rethinking the manufacturing workplace environment to more appeal to the current generation of employees entering the workforce. It favorably notes a program in South Carolina in which the state will create customized training programs for a given company at certain colleges to supply a steady stream of new workers - a key factgor in why BMW chose the state for its US plant.
2. Invest in High Impact Manufacturing Clusters: Cluster thinking has been around a long time, and is in fact aggressively being pursued in China - though not always with success. Clusters involve development a number of companies in the same basic industry, along with a supporting ecosystem of suppliers, service providers, etc. Silicon Valley is a sort of mega-cluster for high tech. Another example is the medical devices cluster in Warsaw, IN. Clusters provide a sort of oxygen and deliver synergies that make it more likely manufacturing companies in that sector can thrive.
Booz & Company believes federal and state governments can do a lot more to promote cluster development. That include improving logistics and communications infrastructure in and around a potential cluster area, provide tax incentives, and support related research at nearby universities, though the report says government should not try to micromanage cluster development. It also calls for various trade groups within industries to support cluster development more aggressively.
3. Build a Partnership with Mexico: A hybrid approach, say the authors, is to move production work from China to Mexico. This allows a tighter connection to US engineering and product development processes, and enable a strategy where older, less innovative or more commodity products can be produced at lower costs across the border, while more innovative, higher value added products can be made in the US.
"When you combine the US and Mexico as a manufacturing partnership, for the most part it wins over the US and China," the reports quotes Ron Weller, a vice president of global operations at Johnson Controls, as saying.
Of course, concerns about drug violence and related safety issues there need to be resolved before many companies will take this path.
4. Simplify/Streamline US Tax Code and Regulations: At 39%, the US corporate tax rate is the second highest among developed economies. While it's true the effective tax rate is more like 28%, that is due to all the various loopholes, credits and other factors that add to complexity and compliance costs. Plus, most companies and investors use the 39% for evaluating potential returns on investment, because they can't be sure the various loopholes and incentives will be around forever.
All that, plus the overall regulatory burden, is a big barrier to manufacturing in the US. These growing burdens are another reason the US has been falling in the World Economic Forum's global competitiveness index, dropping for the third year in a row to fifth place in 2011.
The authors call for a streamlined tax code (lower rates, fewer loopholes/incentives), and reduced bureaucracy relative to regulations, noting many other countries have more stringent regulations, but with a lot less red tape and therefore costs to get there.
In addition to those sorts of macro-level changes, the authors say US manufacturers themselves need to rethink their approaches to competiveness. Continuous innovation in product and process is not surprisingly at the core, especially with regard to developing globally unique capabilities that are closely tied to larger strategic goals - and that may mean a significant relook at current strategies and how a company is currently executing.
"You better focus on reinventing manufacturing and process technology, and on finding the next breakthrough process that's going to leave everyone else behind, a process the rest of the world can chase," says Johnson Controls' Weller.
Do you think the US can - or will - take advantage of this current inflection point to grow its manufacturing sector? What do you think of the recommendations provided in the report? What else should be done? Let us know your thoughts in the Feedback section below.