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Supply Chain News: Reviving US Manufacturing Key to Reducing Inequality, McKinsey Leader Says


Getting their will Take Investments in Digitization and Workforce Development

Jan. 19, 2022
SCDigest Editorial Staff

Efforts to revive US manufacturing after massive outsourcing to China and other low costs countries over the last two decades or more continue to struggle.

Meanwhile, there is growing concern about the level of income inequality in the US.

Supply Chain Digest Says...

Attracting more labor and talent into the manufacturing sector will be key to the successful adoption of these new digital technologies.

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McKinsey & Company managing partner for North America Asutosh Padhi says that relative manufacturing decline is connected to the growing inequality.

He adds that recent McKinsey research found that restoring growth and competitiveness in 16 key manufacturing industries could boost annual US GDP by more than 15%.

To get there, more investment is needed, Padhi says.

“Renewing capital stock in US manufacturing could help the industry realize its full potential and get billions of dollars of investment flowing” Padhi says, adding that “This would not only serve to modernize and digitize manufacturing infrastructure, but also trigger a virtuous cycle of increased economic activity in communities across the country.”

Done right, this could also drive factories and jobs to areas of the country left out of the booming tech and finance industries.

Padhi says that manufacturing remains the main economic engine and primary employer in approximately 500 counties across the nation. In those communities, manufacturing employs a large and broad share of the overall population – “and it does it more inclusively” Padhi says.

Most factory related jobs don’t require a college degree but pay better than service sector jobs. Padhi says that with the right approach, as many as 1.5 million such production jobs could be created in the US.

“Revitalizing manufacturing means revitalizing communities,” Padhi observes.

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He says there are two keys to making this happen: modernization and workforce development.

There of course is already tremendous efforts to embrace and deploy so-called “industry 4.0” technologies. However, many smaller players lack the digital tools they need to keep up, Padhi says.

He says that private and public sector leaders can play a key role in modernizing smaller manufacturers by through financial programs and targeted business accelerators.

But attracting more labor and talent into the manufacturing sector will be key to the successful adoption of these new digital technologies.

And right now, manufacturers across the country are struggling to find workers for current job openings.

“Attracting new talent will require strengthening the industry’s reputation among workers,” Padhi says, adding that “To this end, companies should engage with schools and communities through university partnerships and trade school funding.”

However, attracting new manufacturing workers by itself will not be it enough. It will also take upgrading the skills of existing workers. Done right, “digitization can make the workforce more productive, their work more enjoyable, and the industry more competitive,” Padhi observes.

“If the manufacturing industry capitalizes on this opportunity by investing in innovation and workforce development, the gains will propel sustainable and inclusive growth while simultaneously fueling the United States’ competitiveness on the global stage,” Padhi concludes.

What do you think of Padhi's views on a US manufacturing revival? Let us know your thoughts at the Feedback section below.


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