Manufacturing is back. Now what?
More than 700 manufacturing leaders will descend on Phoenix this week for the MFG Meeting (Manufacturing for Growth), an annual gathering of manufacturing leaders from across the country, to discuss the state of the manufacturing industry and the path forward. The conference is hosted by three manufacturing associations: AMT-The Association For Manufacturing Technology, the National Tooling and Machining Association (NTMA), and the Precision Metalforming Association (PMA), each focused on a different segment of the manufacturing chain.
The Markit Flash U.S. Manufacturing Index, a key indicator measuring the strength of manufacturing in this country, recently rose to 56.7 from 53.7 in January – the highest level in almost four years and the fastest overall improvement in conditions since 2010. This spike occurred despite one of the worst periods of severe weather this country has seen in years, which is traditionally a hindrance to manufacturing activity. Several studies also report a reduction in inventories and a steep rise in orders – all good signs for the industry. In addition, January marked the sixth-straight month the manufacturing sector added jobs to their payrolls and boosted their share of the labor market. In fact, manufacturing has been one of the few bright spots in the employment picture over the past few years.
The “reshoring” trend in manufacturing is picking up steam. Many major American manufacturers are slowly but steadily bringing production back to the U.S. from foreign, traditionally low-wage locations. While the logic behind many offshoring moves was driven by savings in labor costs, manufacturers are now seeing the risks that go with a long supply chain, along with quality control issues. Additionally, those once low labor rates have begun to climb. Manufacturers have a desire to be closer to their customer base and are taking advantage of reduced domestic energy costs. The trend is being driven by major U.S.-based companies such as Ford, Whirlpool, and GE, but even international manufacturers are getting on board with U.S. production. Laptop-maker Lenovo is making its PCs in Whitsett, N.C., and other international manufacturers are following suit with increased investment within U.S. borders.
At the onset of the recession, the future of manufacturing did not look bright. The sector had been losing jobs for more than a decade and many small and medium-sized manufacturers were struggling to keep their doors open – particularly those with strong ties to the automotive industry. Many doubted that U.S. manufacturing would be able to continue in an impactful way, but it was an underestimation of the resilience of American manufacturers.
Fast forward to today, and manufacturing has become a high-tech and high-skilled industry, spurring innovations that ripple throughout the rest of our economy. Recently, President Obama announced plans for the Digital Manufacturing and Design Innovation Institute (DMDI), to be located in Chicago, and the Lightweight and Modern Metals Manufacturing Innovation Institute (LM3I), coming to Canton, MI. As part of the National Network of Manufacturing Innovation, these institutes join America Makes and the Next Generation Power Electronics Innovation Institute as places where industry, academia, and government work together to accelerate R&D and shorten the time it takes for new innovations to go from design to production.
Yet the comeback of manufacturing is still a process in the making. To make sure we sustain it, we need to make certain we are doing everything we can to nurture its growth and attract investment.
We first have to address our public relations challenge. Many parents and high school guidance counselors still have the wrong view of the manufacturing industry. We need to get the message out that this is not your father’s manufacturing sector anymore. Manufacturing offers great careers – good jobs at very competitive wages utilizing high-tech skills. Our sector’s pay and benefits often significantly exceed the national average. Yet manufacturing suffers from a severe shortage of skilled workers, with 74% of companies recently reporting job openings that remain unfilled.
We need to get the positive message about manufacturing out through grassroots efforts like MFG Day, which encourages manufacturers to open their doors and invite the community in to experience modern 21st-century manufacturing facilities. Another example is the National Robotics League and FIRST Robotics, which are programs that partner teams of middle school, high school, and post-secondary school students with local manufacturers to build robots, thereby directly engaging the next-generation manufacturing workforce. Additionally, the Smartforce Student Summit at IMTS (The International Manufacturing Technology Show) will host more than 9,000 educators, students and their parents in Chicago this fall to introduce them to exciting new innovations in manufacturing technology. The Student Summit is designed to allow young people to interact with today’s manufacturing industry so that they can translate their STEM education into real-world results within high-tech and high-value careers.
Beyond these initiatives, Washington could lend a hand by providing more predictability on tax provisions such as the R&D tax credit and the improved Sec. 179 expensing, both of which expired last year. Capital-intensive companies rely on the continuity of these provisions from year to year when making decisions to purchase new equipment, invest in R&D and hire new employees.
The manufacturing sector has gone from being written off to heralding a new wave of American innovation. It’s time for all of us to think about what we can do to help keep up the momentum. Just as these manufacturing leaders make their way to Phoenix to discuss how to keep their businesses moving forward, the conversation needs to stay on the national stage all year long. It’s one of the best ways we can ensure U.S. economic growth and prosperity – both in the immediate future and in years to come.
Bill Gaskin is President of the Precision Metalforming Association (PMA), Dave Tilstone is President of the National Tooling & Machining Association and Douglas Woods is President of AMT- The Association for Manufacturing Technology. The three associations are jointly sponsoring The MFG Meeting, a conference that begins today in Phoenix, AZ and brings together more than 700 manufacturers representing the complete chain of manufacturing to discuss the current and future state of the industry.