US Factories Maintain Edge?

Turret lathe operator machining parts for tran...

Image via Wikipedia

[tweetmeme]
AM General plans to lay off 300 workers … Evergreen Solar is closing a Massachusetts factory that employed 800 people … Over 66,000 Michigan manufacturing employees have been laid off over three years … The United States Labor Department reports 430 major layoff events involving over 40,000 manufacturing employees in December of 2010.*

After years of headlines like these, how can it be that there is any manufacturing left in the US?  Yet AP Economics Writer Paul Wiseman reports via Yahoo! that US factories maintain an edge in spite of China’s growing might.  American manufacturers still produce more goods than any other nation ($1.7 Trillion {US}) and out produce #2 China by more than 40%.

While the US maintains a significant lead, Industry Week reports projections that China will overtake the US by 2025 as if it were a foregone conclusion.

To this I say, not so fast.”

After all, it has taken decades for China to get this far and a lot can happen over the next ten to twenty years.  Additionally, incremental growth becomes more difficult sooner or later-just ask WalMart.  And if nothing else, 40% of $1.7 Trillion is quite a gap.

Some of you may recall the feeling in the 70’s when Japan was the up and coming manufacturing machine.  Detroit lost a lot of market share to the Japanese automakers.  Toyota and Datsun (Nissan) were producing Quality vehicles and seemed to react to the drivers’ needs while the Big Three and others were not.  It seemed as if Japan would take over the manufacturing world.  Japan’s Lean Manufacturing and Quality enabled them to make a run as the worlds #2 manufacturer that lasted over four-decades.  It also woke up many American companies who are now on the Lean Journey.  It is no coincidence that US manufacturers have ranked near the top for productivity gains since getting this wake-up call.

Volkswagen Factory Wolfsburg/Germany

Image by Werner Kunz (werkunz1) via Flickr

The message is clear.  No one can rest on their past success and expect to continue manufacturing.  Factories in the top manufacturing countries like Japan, Germany, the UK, France, and especially the US cannot rest.  Those of us in the global manufacturing industry need to be on our game.  We need to provide the top Quality products.  We need to be in touch with what the customer wants and needs.  We need to be Lean organizations that eliminate waste in all forms.

[tweetmeme]Let me hear from you.  There are certainly other factors to consider besides being Lean.  What other factors are in play?  Will China be able to continue it’s growth and for how long?  What can you do to make your organization more Lean and provide better Quality today?

Best regards,
Christian Paulsen
Lean Leadership Blog
Written for the Consumer Goods Club

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Sources for these headlines and data:

Herald BulletinBusiness InsiderKalamazoo Gazette, The Bureau of Labor Statistics, Yahoo!, Industry Week

*As grim as this sounds, the news from Michigan and across the United States is not as bad as it was in 2009.

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About Christian Paulsen

Christian Paulsen is an Executive Consultant with 20 years of Lean Manufacturing. Chris adds value to organizations by driving process improvement and bottom line savings. Chris intends to help others by sharing the lessons learned after a quarter century of operational leadership, marriage, parenting, and even longer as a Cubs fan. Your comments on this blog are welcome. You can also connect with Chris via LinnkedIn, Twitter, and Facebook in the right sidebar. Chris welcomes your comments. Christian's professional services are available by contacting him through LinkedIn (right side bar)
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10 Responses to US Factories Maintain Edge?

  1. Michael says:

    Hi! I don’t take a lot of stock in projections, because like you said a LOT can happen between now and 2025 in this case. In general, most projections are just assumptions or opinion, and many even use the word “may”, which in reality also means “may not”!

    Yes, we are seeing a time where the U.S. manufacturing sector is becoming leaner, but to stay that way, our lifestyles will have to become so also, and that may be the problem. We (American’s), do like our “stuff”!

    Anyway, thanks for the great article! I look forward to your next post!

    Michael
    CCO OutMaturity

    • Hello Michael,

      Thank you for your comments and insight. Yes we do love our stuff…You are right, we need to get much leaner at work, at home, and in Washington, DC. Waste and excessive spending has us on the brink on several fronts. Fortunately there are some signs that we are just starting to bounce back in spite of the continued government spending. The recovery will be on thin ice though if we don’t get lean across the board.

      Thanks again,
      Chris

  2. Matt Wrye says:

    China, like Mexico, will start to slow due to the rise in labor costs. This rise is going to cause a lot of companies to leave China or not locate manufacturing there to begin with. The difference between Mexico and China is China manufacturing is getting pushed by the Chinese government.

    I am surprised by the numbers from the article. Not what I would’ve expected.

    • Hi Matt,

      Interesting points about labor costs and Mexico. What happened in Mexico, Japan, and even WalMart show that the continued growth just keeps getting harder. The numbers surprised me as well. I wasn’t really that surprised to see that the number of people working in manufacturing is roughly half of what it was in the late 70’s because I’ve seen those graphs before. It was more surprising to see that US manufacturing nearly doubled during that time. Thanks for your comments.

      Chris

  3. John Hunter says:

    I have been trying to get the word out for years http://management.curiouscatblog.net/2006/02/22/global-manufacturing-data-by-country/ that the the USA remains the number 1 manufacturer.

    However, I do think that China will take over as the number 1 manufacturer by 2016 (likely before). I could certainly be wrong. I also do not think the USA manufacturers 40% more than China today (the data is not nearly as easy to get as you might think). http://investing.curiouscatblog.net/2011/01/04/top-15-manufacturing-countries-in-2009/

    • John,

      The data certainly is a challenge. The author of the Yahoo article stated he was using UN data which you reference as well. Apparently there is some interpretation. In any case the gap is closing. It looks like China’s growth was at a slower pace in 2009. How long do you think they will be able to sustain the high level of growth they have had for much of the decade?

      I like the graph on your blog. It’s interesting to see how close Japan came to the US in the ’90’s only to taper off. Do you expect them to rebound soon?

      Thanks for sharing your insight.

      Chris

  4. john henry says:

    I just found your blog. Very nice.

    Thanks for pointing out that while manufacturing jobs are declining, the US still produces about 19% of all goods manufactured in the world. This proportion has held steady for 30 years or so.

    We do produce higher end goods and we do it with less labor. That sounds like a good thing to me overall.

    John Henry

    • Hi John,

      The Yahoo article did bring some good news about US manufacturing. I’d like to see the US become an even better place to do business through Lean efforts and less government. Thanks for checking in.

      Chris

  5. Megan Burns says:

    John,

    There are a couple other factors that need to be considered, such as what impact China’s “One child” policy will have on it’s available labor force. This will surely have an impact on it’s ability to produce.

    Secondly, some manufacturers in China don’t have the same standards as US manufacturers in the areas of quality, cleanliness, or innovation. Now, this is not a blanket statement, but in my experience working with Chinese companies material quality, manufacturing quality, the ability to hold tolerances, and cleanliness were typically areas they lagged the US in. The other major concern encountered was protecting intellectual property (IP). The companies we were working with seemed much more interested in learning everything they could about our IP rather than developing their own technology or collaborating to innovate new designs.

    Considering those factors, I think China will remain a manufacturing country, but I don’t think it will be manufacturing the more complex, highly-engineered, and innovative products we produce here in the US.

    ~Megan

    • Megan,

      Very interesting insight. It’s great to hear from someone with first hand experience. There are certainly some consumers that are concerned about product safety after the issues with Chinese imports. Thank you for your commnets.

      Chris

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