We can’t wait for the government subsidies to kick in. Congress is too slow. And Asia will just out-subsidize over time.
We can’t count on tariffs. There is always K Street looking to tear them up in favor of global corporations whose home market is not one for allegiances, but merely a place to sell a widget.
And we all know that pursuing anti-dumping strategies might make you go broke before the government rules in your favor. Even if they do, those duties don’t last forever.
What is a manufacturer to do when the government doesn’t always have your back? How can the mostly privately held, small to midsized manufacturer improve the playing field on their own? Either you’re going to win at it, or you’re going to lose. The good news is that hundreds of companies are winning at it. It just needs to be thousands if America is going to have economic security.
Once considered the economy of the past, leaving us with services, installation, and assembly of foreign parts the only thing left to do, U.S. manufacturing has hit a pivot point. That pivot can turn hundreds more manufacturers here into world-class players able to compete with the low wage, low regulatory landscape of Asia and elsewhere.
“There is vibrant opportunity out there to be import competitive, and to restructure the supply chain and target industry sectors of the future,” said Doug Berger. Berger has spent much of the last 20 years helping companies become world-class competitors through lean manufacturing practices, innovation, and by adopting modern technologies. Berger, a University of Rochester physics major who later got his MBA from Carnegie Mellon’s Tepper School of Business, has spent many years doing the corporate “talk show” circuit as a national speaker on the topics of disruption, breakaway growth, and corporate entrepreneurship. Nine months ago, he launched Industry Reimagined 2030, which seeks to take the best practices of people, processes and technologies from ‘showcase manufacturers’ and make them available to mainstream manufacturers of all sizes.
“American manufacturing is not past its prime. As we shift to the smart manufacturing of what’s known as Industry 4.0 – artificial intelligence, the Internet of Things (IoT), 3D printing, robotics – and move it into the mainstream, American companies become more competitive and are able to produce entirely new types of products. The most innovative companies are seizing this opportunity. They are the ones that are becoming import competitive. But by and large, we have not crossed the Rubicon to the mainstream manufacturer,” said Berger. “Most are them are not doing this. They’re ‘heads down’ with eyes on the day-to-day work on the factory floor rather than ‘heads up’ with eyes on the future.”
A compendium of studies published in IndustryWeek magazine on September 23 looked at what percentage of American manufacturers were innovating or were investing in increased automation. In one blue-collar manufacturing state, Ohio, only 18% were using automation profitably and only 10% were involved in the IoT supply chains.
This is where Industry Reimagined 2030 comes in. “You can recast the processes and training that already exist to make it scalable to others,” he said.
For now, this is in its early stages, and more like a gathering of like-minded manufacturers, national associations, educators, and manufacturing advocates who want to join their ranks. Industry Reimagined is a repository of where that info exists.
He mentioned organizations that are taking the lead including Associating of Manufacturing Excellence for lean manufacturing; Association for Manufacturing Technology and the regional Manufacturing Extension Partnerships (MEPs) for Industry 4.0 as well as Tooling-U/SME for technical upskilling.
What are some of the commonalities shared amongst these so-called showcase companies?
“It always boils down to leadership at the top,” said Berger. “Leadership that sees opportunities to advance the people side of the business, the process side, and the technology side in a way that leads to innovation and profitable growth. They are looking out towards the future and building healthy companies on a sustainable growth trajectory.”
Berger is looking for companies who are looking to improve or to “reimagine” their own manufacturing strategy.
Industry Reimagined 2030 has bold targets in mind:
- See domestic manufacturing add $1 trillion to the economy (a 40% increase from 2020)
- Create ~5 million middle-income manufacturing jobs
- Establish 50,000 world-class domestic “showcase companies” (a 10x increase)
- Reduce environmental footprint by half; meaning fewer pollutants, less C02, a policymaker favorite.
If Berger is right, American industry would have bridged the chasm from a few innovators to the many – meaning we have more innovators in the mainstream of American manufacturing who are adopting and imitating the best practices of the best-in-class manufacturers.
To make that happen, Industry Reimagined envisions “scaled lessons and capabilities” shared among members of national industry associations, for instance. Those “lessons” would be like learning the ropes for companies who wish to follow the Tiger Woods and Tom Brady’s of domestic manufacturing.
But will all that IoT and AI investment just replace workers?
“Not anytime soon anyway,” said Berger. “Manufacturing in the U.S. has a shortage of workers across the board. Technology will replace lower-skilled and that is where you will need the vocational schools and the technical training to fill in ‘new collar’ skill gaps.”
Looked at from 30,000 feet up, Industry Reimagined 2030’s view is one of “generational sea change” going from a race to the bottom and offshoring to reshoring supply chains and building new product lines thanks to new technologies the Asian’s can’t beat you with.
Still, the “pick yourself up by your own bootstraps” mode of operation will not ever be enough. Companies here exist within a nation state that is competing with companies that exist within another nation, with government support. The U.S. government can’t quietly sit back and say, “you guys will figure it out.”
Many companies here know what it is like to compete with the bottomless pockets of mostly Asian companies. They spend tens of millions on lawyers, on the verge of going broke (or actually going broke) because of subsidized competition. Domestic capital stays away from that kind of risk, putting companies in dire straits, and surely unable to invest in the technologies of the future.
“Berger makes a lot of good points,” says Zach Mottl, chairman of the board at CPA. “Those points won’t matter if our manufacturers are competing against governments and subsidized competition. Overseas companies can be just as creative and just as innovative and just as automated and can beat you, especially the Chinese, because they profit motive isn’t really there.”
CPA believes we cannot let the government off the hook. Without any policies in place to protect local industry and expand on our critical needs (essential medicines, food, semiconductors, energy-related manufactured goods and prime resources), then we risk ending up with a hobbled manufacturing sector too hamstrung by day to day survival to think long term. Our lack of industrial policy is a headwind. We are often more interested in collecting IP revenues, than we are in making the product derived from it. The recent semiconductor shortage is a case in point. Almost all of our chips are made in Asia.
Innovation cannot happen without some sense of support from policymakers.
Berger thinks manufacturing is heading in a better direction.
“What I noticed in the last 20-plus years in industry is that the narrative was the U.S. manufacturing base was in decline and we were going to favor the service sector,” Berger said. “When you look back at the last four years, accelerated by COVID-19, we are seeing a shift in attitude and attention towards domestic supply chains. We are shifting from a worldview of inevitable decline to one focused on opportunity and possibilities. Industry Reimagined is about building a community of change-makers who inspire and act to make industry a vital part of the economy,” Berger said. “We’re going to show you examples of the future happening right here, right now.”
Members can find Doug Berger at Doug.Berger@ir2030.org