Topic Category: Manufacturing

American small and medium-size manufacturers (SMMs) are playing an increasingly important role in our nation’s economy. They also are encountering a whole new set of challenges presented by today’s new global realities. Nevertheless, those who have adapted have boosted their level of global competitiveness, created new, more sophisticated supply-chain opportunities, and have taken big steps to secure their future.

The increasing global nature of business and supply-chain relationships has had a tremendous impact on U.S. manufacturing over the last decade. And small and medium size manufacturers (SMMs) are adapting with favorable results.

New Trends Cut Both Ways

Two new trends are shaping the future of SMMs, says Jerry Jasinowski, president of the Manufacturing Institute, the research and educational arm of the National Association of Manufacturers (NAM). “First, large manufacturers are increasing their dependence on suppliers of components as they streamline their operations to increase productivity.”

In today’s rapidly changing global business environment, U.S. manufacturers must develop an efficient and cost effective strategy to satisfy regulatory compliance requirements. But in many cases, it’s not easy.

With few exceptions, most companies operate as quickly as possible in order to beat competitors to market. This generally means squeezing every single unnecessary delay out of the product development process. Unfortunately, this often results in commitments to very challenging — if not impossible — product release deadlines.

The integration of new technologies, sophisticated co-production practices (manufacturing of a product in two or more countries), improved supply chain management and advances in worldwide financing—all spawned by globalization—has transformed American manufacturing.

In turn, resources have shifted to sectors with competitive advantages. And due to the American ability to adapt, innovation has flourished while productivity has skyrocketed. In fact, over the last 10 years, annual manufacturing productivity rose by 4.5 percent, much faster than the 2.7 percent annual growth in overall business productivity, according to the U.S. Department of Labor.

The United States and Mexico have increasingly integrated their manufacturing industries and rationalized production. In turn, the North American Free Trade Agreement partners have based plant locations on the availability and cost of inputs (labor, raw materials, energy and capital), the quality of supply chains and proximity to markets. Increasingly, however, Chinese trade and investment have affected the U.S.-Mexican relationship and raised questions as to the impact on American manufacturing.

Some time ago, China realized that in order to grow and prosper, it would have to become globally integrated and make fundamental adjustments. It also understood that to do so meant becoming a full member of the World Trade Organization (WTO).

On December 11, 2001, after 15 years of negotiations, China officially became the 143rd member of the WTO. As part of its accession agreement, China pledged to undergo massive reform that would include significantly reducing its trade barriers. This move was predicted to result in greater access to Chinese markets. It also was anticipated to significantly improve China's ability to attract foreign direct investment — a necessary step in building a globally-competitive manufacturing sector.

FAQ: Do U.S. production sharing operations abroad destroy U.S. jobs?

Talking Points:

Several anti-globalist groups feel U.S. production sharing (the allocation of different stages of the manufacturing process to different countries) is totally unnecessary and should be eliminated. What they don’t understand is that production sharing actually saves more jobs here at home than would be lost due to protectionist efforts to place a straight jacket on business.

FAQ: How is globalization impacting U.S. manufacturing?

Talking Points:

The integration of traditional manufacturing, new technologies, national markets and improved supply chain management—all spawned by globalization—is transforming American manufacturing. In the process, resources have shifted to sectors with competitive advantages. As a result, productivity has climbed to new highs, and due to the American ability to change and improve, innovation is flourishing. For instance, the use of muscle on the factory floor is a thing of the past. Today, self-directed workers operate in teams and apply more sophisticated skills to create and run new processes. Concurrently, competitive forces unleashed by globalization are forcing U.S. manufacturers to compete less on price and focus more on product design, branding strategies, productivity, flexibility, quality and responsiveness to customer needs. And companies must continue to push the envelope in terms of greater specialization.

We are witnessing one of the greatest periods of transformation in history. The convergence of powerful technological, political, economic and cultural forces are shaping the 21st century. For many manufacturers and workers, adapting to this reality is proving difficult—but necessary.

New Factors Changing Our Lives

Technological advances in microelectronics, computers, telecommunications, biotechnology and other fields are changing the way we live and work. The fall of Communism, which added one-third of humanity to the capitalistic ranks, is sharply boosting global competition and creating new markets.