Friday, January 4, 2013

Why Recovery is Imminent in US Manufacturing

2012 has been “interesting” from the perspective of the manufacturing industry.  Over the past years, perceived higher costs were driving many manufacturers offshore.
Beagle Research Group recently published a white paper, “Five Key Success Factors for Subscription Vendors.” Although the topic was responding to the changes a subscription-based business brings, one interesting factoid from this paper was:  “…the U.S. is no longer a manufacturing economy either as nearly seventy percent of the GDP is in services.” 

Yet, there are strong signs that manufacturing recovery is imminent…and the US the beneficiary. Read on.  

Here’s why I’m optimistic on recovery:
  1. An article from Downstream Today cites that the cost of natural gas is lowering to the point that large industrials are planning multi-billion dollar investments in North America:
  2. A posting by CNN Money today indicates that US manufacturing is rebounding—and that although 7,000 jobs were lost (the Hostess shutdown loses 18,000 alone) the manufacturing index reaching 50+ is a leading indicator of growth.
  3. The Heritage Foundation points out that although the manufacturing sector lost jobs, it was due to the increased use of technology, versus a decline in output. This statistic points out what we in the automation industry have been saying for years—that investments in our products will lower your costs of manufacturing by making your employees more productive, so you can invest in other areas (vs new employee acquisition) to expand your business.
It’s happening, but we were not guiding our customers to manage the transition, so now, although we have the market share, we haven’t done OUR job in helping our customers reach that next level of worker development.

4.     Lastly, and most importantly, is the concept of “re-shoring” (also called on-shoring) which reflects a return to manufacturing on US soil.  JobMarketMonitor (and others) cover this trend==the outshoot which is, the total costs of manufacturing a product weren’t considered when placing factories in China, for example—the distance, the phone calls, the lack of quality and business controls, are all leading to companies rethinking their off-shoring strategies. 

So there it is—a positive view on the results of 2012, and an optimistic view on recovery for 2013.  Happy New Year to all!

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