Woods: It’s time to invest in manufacturing

Woods will be addressing the challenges of manufacturing as the keynote speaker at the 2011 Manufacturing/Automation Summit this month in Chicago. In advance of that event, Woods shared his thoughts on the state of manufacturing and how to keep things moving forward.

March 18, 2011

Douglas Woods, president of the Association for Manufacturing Technology is presiding over the association at a time of tremendous growth for the organizations. Its flagship biannual event, The International Manufacturing Technology Show in Chicago drew more than 1 million square feet of exhibit space and 80,000 attendees to Chicago last September, and the 2012 show is expanding with the addition of the first Deutsche Messe Industrial Automation event co-located at the 2012 IMTS.

Woods will be addressing the challenges of manufacturing as the keynote speaker at the 2011 Manufacturing/Automation Summit this month in Chicago. In advance of that event, Woods shared his thoughts on the state of manufacturing and how to keep things moving forward.

Q: OK, the recession is over and growth appears to be taking hold. How do we keep the momentum moving forward?

Woods: Key to keeping this recovery on the move is skilled labor, money and materials. While the credit situation has improved dramatically since the end of 2009, many manufacturers, particularly the smaller ones, have been denied working capital or are facing unusually challenging terms.

Materials are very tight resulting in short supplies and higher prices. The recovery has not been particularly strong but inventories were small before the recession began. The economic pick-up in mid-2009 led to shortages that basic materials producers have yet to catch up on.

While both credit and the supply of materials are reining in a more robust recovery, there is little to be done about the shortage of skilled labor. Developing and training workers to become skilled production labor doesn’t happen overnight. This will be the most difficult issue to address due to the time it takes to complete that training. A portion of the shortage can be offset by investments in more productive equipment.

The average age of production machinery shot up between 2000 and 2004 and again over the past two years. Replacing older, less productive equipment would alleviate some of the stress on the skilled labor shortage but there is no substitute for developing the “smartforce” of the future.

Beyond these three points, there are structural issues that AMT addresses in its Manufacturing Mandate, a wonderful segue to the next question.

Q: What are the governmental barriers to growth? What are the key points AMT wants to emphasize to the President and Congress?

Woods: Among the most troublesome: Excessive regulation, high tax burden, outdated export control policy, an anticompetitive visa policy, programs that are a bureaucratic nightmare to participate in, as well as lack of cooperation and collaboration among agencies.

We need a national manufacturing strategy that emphasizes innovation, global competitiveness, and STEM education, with specific targets for growth and methodology for achieving goals. We need to invest in the future of manufacturing with funding for the America COMPETES Act and other pro-manufacturing initiatives, and eliminate programs that are outdated, duplicative and ineffective.

Q: Conversely, what things can and should manufacturers be doing to grow that isn’t dependent on government? What internal barriers within manufacturing plants are barriers to growth?

Woods: AMT has been chanting the “export” mantra for more than three decades. The need for U.S. manufacturers in general, and manufacturing technology producers specifically, to diversify their orders through exports is even more dire today. Customers of manufactured products are regionalizing production, and to keep their business, domestic suppliers must keep pace with them and remain local to them.

Just as most manufacturers of production equipment spent much of the 1990s diversifying their customer base across industries, the same must be done geographically as well. Finally, manufacturers have to adjust to the numbers. The U.S. used to be a quarter of the world market for production equipment. Today, it’s 7%. The fastest growing and largest markets are overseas.

American manufacturers also need to be investing in new manufacturing technologies. One of the most fruitful strategies for addressing the foreign cost advantage is to lower costs here through more productive equipment and the higher quality that it provides. And as long as the federal government is willing to help, why not take advantage of it?

Two temporary tax incentives extended through 2012 help lower the cost of capital equipment: bonus depreciation and Section 179 expensing. These incentives can really help boost this investment in the short term.

Q: Manufacturing is truly a global business, but with regional and national interests. What does U.S. manufacturing need to do to maintain and expand its role as a global manufacturing leader?

Woods: AMT believes that our Manufacturing Mandate addresses this issue. Increased spending on R&D is a good start. Integrating innovation into our businesses from product development through the production process is essential. Integrating innovation throughout the industry will allow U.S. manufacturers to stay ahead of international competitors that have advantages in structural costs, labor costs and, in some cases, have blatant disregard for patent and copyright protections.

U.S. manufacturers must learn that the game has changed. Their customers have gone global to benefit from cost advantages, address regional tastes, provide assurances through proximity, and reduce logistical challenges. Suppliers to these companies need to see these advantages and take advantage of them also.

IMTS has become the nation’s premier manufacturing event. Look ahead a little to the IMTS 2012. What about that event as it is shaping up will get the manufacturing community to take notice?

Woods: We are seeing IMTS evolve into a place where partnerships are forged and reinforced. OEMs, suppliers and manufacturers alike come together to learn from each other, network for business opportunities, and move the industry forward.

We continue to make IMTS stronger and highly relevant for everyone who visits. Our own partnerships add value as well, such as the one we’ve formed with Deutsche Messe to bring the first ever Industrial Automation-North America show to be part of the IMTS experience.

Exhibitors and visitors can expect to see our focus on bringing leading edge technology and the future of manufacturing in the Emerging Technology Center to continue in 2012.