Saturday, July 3, 2010

The Great USA Manufacturing Myth: We Simply Can Not Compete

There is a great myth that Americans have gotten stupid/lazy and we simply can not compete in manufacturing anymore.  We have no choice but to off-shore everything.  
"Most Americans, I suspect, believe we're losing manufacturing because we can't compete against cheap Chinese labor.   But Germany has remained a manufacturing giant notwithstanding the rise of East Asia, making high-end products with a workforce that is more unionized and better paid than ours.  German exports came to $1.1 trillion in 2009 -- roughly $125 billion more than we exported, though there are just 82 million Germans to our 310 million Americans. Germany's yearly trade balance went from a deficit of $6 billion in 1998 to a surplus of $267 billion in 2008 -- the same year the United States ran a trade deficit of $569 billion. Over those same 10 years, Germany's annual growth rate per capita exceeded ours."

The quote above comes from a very interesting article by Harold Meyerson in the Washington Post on Thursday July 1st, 2010 that was titled:

                         In recession battle, Germany and China are winners

The bottom line with manufacturing is cost.  How Germany has been able to remain a manufacturing giant is by being more productive and thereby reducing cost.  This is where technologies such as MTConnect is so important.   As a manufacturing plant increases its productivity of its manufacturing equipment, the human cost becomes a smaller factor with other costs such as power becoming a larger slice of the pie.  In the US we have significant advantages in the power area.  The average machine tool is only in cycle 25% of the time.  As the number continues to increase, the cheap labor becomes less and less relative. 

Loosing manufacturing is a slippery slope, because there are so many industries that manufacturing touches.  Below is from the same article:

"In 1960, manufacturing accounted for a quarter of our gross domestic product and employed 26 percent of the labor force. Today, manufacturing has shriveled to 11 percent of GDP and employs a kindred percentage of the workforce."

Manufacturing is the tail that wags the economy....