For the past two years Mary Isbister, president of Wisconsin fabricator GenMet (one of The FABRICATOR’s past Industry Award winners), had a friendly bet with colleagues of the Manufacturing Council, a group that meets to propose ideas to Commerce Department Sec. John Bryson, who in turn reports those ideas to the president.
How many times would the president mention manufacturing in his State of the Union address?
In both 2011 and 2012, Isbister won the bet. Last year Obama didn’t mention manufacturing at all. This year it was more than 15 times. Watching the address with her family, Isbister felt a bit of pride. Some ideas the Manufacturing Council had proposed, such as worker training and regulatory simplification, made it into Obama’s speech.
Most of the pundits have pigeonholed the speech as a primer for the campaign season. Whether any of the ideas mentioned in the speech become reality is another question. But the fact that a president mentioned manufacturing so many times does lend some credence to the country’s changing attitude toward this industry. Manufacturing creates jobs, bolsters the middle class, and anchors entire communities. Public opinion of manufacturing has been shifting. According to a recent survey, 55 percent of Americans believe government funds should be used to subsidize U.S. manufacturing.
Take that, “new economy.”
Still, I wonder how those same people feel about working in manufacturing. Obama’s proposals for corporate tax credits and reductions certainly help level the playing field of global business, at least to some degree. But the playing field is complex. As Isbister recalled, the issue of low wages overseas hasn’t come up much at Manufacturing Council meetings.
“It’s not about labor costs anymore,” she said. “It’s about labor availability.”
Consider The New York Times article about the electronics industry, and Apple in particular, outsourcing its manufacturing to China. Sources contended that the reason electronics are made in China is the country’s mind-bogglingly large population of technically capable workers--not just assembly line workers, but also engineers.
As the article states, “China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones.® The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.”
Low wages are part of the equation, but more important it seems is, again, that availability of workers. Thousands of workers stand ready at giants like Foxconn to respond to ever-changing demands that ultimately come from fickle product designers across the Pacific.
Jennifer Rigoni, who was Apple’s worldwide supply chain manager until 2010, told the Times, “[Chinese companies] could hire 3,000 people overnight. What U.S. plant can find 3,000 people overnight and convince them to live in dorm rooms?”
They don’t take months to retool and shift direction. They can be producing millions of one product, stop on a dime, build a new factory, and be producing millions of another, entirely different product. According to the article, Chinese manufacturing has unimaginable scale and surprising agility.
These kinds of stories are why manufacturing often hasn’t made the State of the Union speech. America simply doesn’t have the cheap labor and, more significant, the number of technical workers available to compete with this.
Then, I read a newsletter earlier this week from Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association. In it he described how inventories in the supply chain may have been built up a tad excessively. U.S. consumers didn’t buy as much as many thought they would.
I then thought of GH Metal Solutions, a metal fabrication job shop I visited in mid-January. The Fort Payne, Ala.-based company makes impressive use of robotic welding, running extremely low-volume orders and changing over fixtures within minutes. Like so many fabricators, GH Metal now ships smaller batches of products more frequently, instead of infrequent large orders.
Why? It is because, ultimately, customer demand is so unpredictable. Consumers buy just what they need, when they need it, and every link in the supply chain does its best to react to it quickly. Postrecession, modern supply chains can’t afford excessive inventory.
One of the most expensive items on many manufacturers’ balance sheets isn’t direct labor; it’s material, including raw stock, work-in-process, and finished goods. Producing so many products (like iPhones) in so little time only can happen if you have a massive labor force. But how does producing so many products so quickly work with fickle consumer demand?
Industries like consumer electronics get a lot of press, probably because people in the press use these devices every day. Heck, I’m typing this blog on a consumer electronics device. But the high-volume manufacturing of iPhones--and, for that matter, most of the other products we see in the mall--is just one slice of the global manufacturing pie.
Most other slices don’t require such volumes--but they all require quick response. America’s population is a small fraction of China’s (and thank goodness for that), but its manufacturing sector still is one of the largest in the world. With more capable technical workers entering the ranks, just imagine how competitive it could be.
With headline stories of China’s insanely high manufacturing capacity, it’s no wonder the industry can’t find enough people. And that’s where the Manufacturing Council’s concern comes into play: the availability of labor. But last week, before both houses of Congress, the president mentioned manufacturing more than 15 times. That, at least, is a start.