Growing production capacity and increasing efficiency closer to customers: propelling U.S. manufacturing and economic expansion
On-shoring, Near-shoring, Re-shoring, De-globalization, De-coupling:
it all has the same goal
By Bill May
Manufacturing companies are realizing the need to be closer to customers, and they are taking action. After recent, dramatic supply chain disruptions across many industries, manufacturers in the United States desperately want to better meet customer requirements while simultaneously reducing shipping time, costs, and other factors that impede profitability. Establishing operations closer to US customers is possible with plant relocation, new facility launches, and/or added production capacity.
Reinvigorating US manufacturing, now
Company leaders are signaling this intention to move closer to customers. Ryan Beene (Bloomberg) indicates CEOs have been highlighting plans to relocate production. According to a review of earnings calls and conference presentations transcribed by Bloomberg, these references are up over 1,000% compared to pre-pandemic periods.
Construction investments are evidence of companies’ motives. Many manufacturers have taken this next step beyond planning. According to Dodge Construction Network, construction of new manufacturing facilities in the US has soared 116% over the past year, dwarfing the 10% gain on all building projects combined. Some of this construction is aimed at added capacity; semi-conductor chips are one such example.
Near-shoring operations or expanding capability and capacity in both Canada and Mexico will allow manufacturers to have better access to US customers as well. New plant launches and expanding production capacity have the potential to improve shipping times and reduce costs, while strengthening supply chain resiliency.
Decline of US manufacturing, no more
Twenty to 25 years ago, the Manufacturing Sector comprised about 25% of the US Gross Domestic Product (GDP). Today, while the remainder of the world’s GDP is still comprised of about 25% from the Manufacturing Sector, the US GDP has dropped to something less than 12%. Likewise, since 1979 the US has lost 7.9 million manufacturing jobs.
If the US regains just half of the lost manufacturing capability, representing 6% of GDP, that would be an increase in Gross Domestic Product in excess of $1 Trillion. This is clearly a five-year goal the US business sector should be focused on achieving.
The correction of these factors will provide for positive economic growth not seen since the 1960s.
It is achievable.
Cooperation and capital from all stakeholders, required
It’s not just manufacturing companies that are responsible for reinvigorating the Manufacturing Sector in the US. In addition to manufacturers, dealmakers and connectors – such as Venture Capitalists, Private Equity Firms and Industrial Banks – must all actively and optimistically participate. These stakeholders must generate the necessary capital investments needed to regain the manufacturing prowess of the US.
As the $100 billions of new capital investment will be spent in the re-shoring of manufacturing into North America, each dollar must be evaluated on how to more effectively utilize the scarce resources to ensure the manufacturing capability is recaptured. Operational efficiency that improves throughput, meets on-time delivery, and reduces costs will also lead to a stronger manufacturing sector. And, as an added benefit, manufacturers will have greater capability and higher profit margins.
This endeavor to not only grow manufacturing, but to improve operational performance within manufacturing, will require a private-public coordinated effort. The effort will need to resemble something of the order of the 1960’s “land a man on the moon” effort to achieve. A focused and cooperative effort is necessary for the US to regain its global standing as a world leader in manufacturing.
All hands on deck!
There are numerous stakeholders/players in this shift toward supporting and growing manufacturing. Not only do consumers want quality products readily available, but US citizens want employable skills and well-paying jobs. Educational institutions want to train next-level thinkers and workers. Communities and economic development organizations want to grow local business for the benefit of their constituents. It is a shared opportunity.
In this discussion, we must include public institutions, state and local economic development groups, Chambers of Commerce, universities, junior colleges, trade schools, post-secondary vocational training, high school and middle school vocational and STEM (Science, Technology, Engineering and Mathematics) training programs. All of these groups are involved and tasked with generating new, adequately skilled workers to meet the challenge.
Current labor resources in manufacturing facilities can be further developed through additional technical skills, retraining, and professional development opportunities. Just as growth in manufacturing capacity and the size of its workforce will expand the economy, maximizing operational efficiency and enhanced knowledge of hands-on workers will lead to higher productivity.
Likewise, there are existing organizations comprised of knowledgeable and experienced manufacturing professionals that must be available to support and advance the inevitable changes in the Manufacturing Sector. Contract technical staffing and consulting companies with experienced manufacturing professionals must be prepared to provide more resources, training, and mentoring of both new and existing employees as required by this unique situation. New service offerings will be necessary to capture existing skills and carry them forward to a new generation of manufacturing workers.
Manufacturing the future
In this effort to strengthen supply chain resiliency and operate closer to the customer, manufacturers and investors are creating a massive opportunity that will positively change the US economy, workforce, and American resolve. Companies’ goals to expand production capacity and increase efficiency – with strategies of On-shoring, Near-shoring, Re-shoring, De-globalization, De-coupling – will require the US to rise to the challenge.
In summary, these wise words come to mind: “Those who do not learn from history are doomed to repeat it.”
If you would like additional background on how the US got to this position, I would highly recommend the referenced article by Michael Collins: “How the US Economy Lost Its Independence, and Workers Their Livelihoods.”
At High Value Manufacturing we realize manufacturing companies today struggle with several planning, operational, and resource challenges. As a world class manufacturing consulting firm, our goal is to help our Aerospace, Automotive, Defense and other manufacturing clients assess current operational issues, plan for future needs, offer concrete recommendations, and provide the skilled resources required for sustainable growth. HVM provides the combination of highly skilled and highly experienced resources to deliver necessary technical support to advance even your company’s most aggressive growth (On-Shoring, Near-Shoring, Re-shoring, De-globalization, De-coupling) strategies.
What growth challenges is your company facing? Let’s talk.
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