Through a special arrangement, presented here for discussion is a summary of a current article from Supply Chain Digest.
There is no question that in the U.S. and most of Europe, manufacturing continues to shrink as a percentage of the overall economy - and that this has been occurring since the 1950s. In fact, when charted, the decline in that percentage, down now to about 11 percent of U.S. GDP, does not look any steeper over the last decade than it did in the 1960s. Again perhaps surprising to many, manufacturing represented only about 25 percent of U.S. GDP in 1966. In fact, the countries that have the highest percentage of their GDP coming from manufacturing are not exactly economic juggernauts (e.g., Cuba, Turkmenistan).
Which reminds me of a quote from business author Jim Gilmore: "The entire history of economic progress involves paying someone to do something for you that you used to do yourself."
If you think about it, that is clearly true. Did your Dad spend a lot of time repairing cars when you were growing up? When was the last time you replaced the brakes yourself? So, at a macro economic level, we have been doing just the same thing for the last 50 years, paying others to make things for us as our affluence has grown.
But there are concerns. Just picking on one, I think there are real and under-explored national security concerns. Would we really want to lose our steel production capabilities, as just one example?
In his 2007 book, Saving American Manufacturing, Mike Collins offers a litany of reasons why U.S. manufacturing should be saved. Just highlighting a few: manufacturing drives most R&D, which, long term, is key to competitiveness; manufacturing offers more broad-based employment opportunities than many of the service sectors, in which only the "highly credentialed" can really thrive; the decline in manufacturing is directly related to the relative decline in standard of living for the middle class.
The National Association of Manufacturers (NAM) also argues that U.S. manufacturers are burdened with too high tax rates and health care costs, and that if adjustments in policies were made, more goods might be made here as well.
Others have noted the potential impact of fuel and logistics
costs on offshoring. At the CSCMP Toronto Roundtable, George Stalk, a well-known
business strategy guru from Boston Consulting Group, also observed that
companies often underestimate the costs of inventory and obsolescence and
lost sales from out-of-stocks resulting from long, offshored supply chains.
Hence, why companies often seem disappointed in the total bottom-line results
from offshore strategies.
Discussion Question: Do you think governments should be stepping in to save U.S./Western manufacturing businesses?