When you consider the future of U.S. manufacturing, it’s important to distinguish long term from short term. First, the long term.
The Chicago-based Digital Manufacturing and Design Innovation Institute opened May 11. The main purpose of the federally and privately funded institute, which I’ve written about before, is to help transform how manufacturing is performed and make it a seamless, computerized (digital) process. It’s pretty gee-whiz stuff.
The institute will help create a platform where all the manufacturing data on a product, across its entire life cycle, can reside in one place, according to William King, chief technology officer. That includes data generated by the machines making the parts, as well as from assembly, testing, QC, packaging, shipping, logistics, point of sale and even post-sale. That will allow manufacturers to not only go from design to prototype digitally, but also to digitally design their factories.
Sounds like a great idea, but getting from today’s manufacturing processes to the digital future will take a lot of time. People and companies are still slow to adopt the latest technologies, and it always takes a lot longer than expected to change how we do things. For example, there’s really no practical reason we should still be using paper money, coins, money orders and checks, yet they’re still around. They could be replaced tomorrow with credit and debit cards and mobile phone payment systems, but until then I’ll end up behind the lady in the grocery checkout line who, after all of her products are scanned, starts digging in her purse for the check book.
So, because digital manufacturing will not be implemented next week, what’s the near-term outlook for U.S. manufacturing? Apparently, still pretty good. The value of manufactured goods made in the U.S. has been growing steadily since the Great Recession. That’s primarily because of proximity to the customer, which allows small and midsized U.S. manufacturers to provide custom products, value-added inventory management and quick delivery, according to Scott Anderson, chief economist for Bank of the West, San Francisco, and author of a very well-written report, “Made Here: The Business Outlook for U.S. Manufacturing.”
“Despite the relatively high costs of U.S. production, the manufacturing sector is showing healthy growth,” Anderson stated. “Seven years after the financial crisis, U.S. manufacturers in general, and small and midsize producers in particular, have more than made up for ground lost during the crisis.”
He noted rising labor costs overseas and improvements in U.S. productivity have allowed manufacturing output per employee hour to more than double in the U.S. over the past 2 decades. U.S. industrial production growth was 4.5 percent, well above real GDP growth of 2.4 percent, through the fourth quarter of 2014. Access to commercial and industrial credit, which has increased at a compounded annual rate of 14.3 percent in recent months, has also fueled expansion.
“To win in this environment, small and midsize U.S. manufacturers will have to leverage the advantages at their disposal,” Anderson said. “They are close enough to the market to forge deep customer and supply chain relationships, which improve service, speed-to-market, raw material management, quality, corporate reputation, customization and, ultimately, new product development.”
And imagine what U.S. manufacturers will do after they figure out this digital thingy. CTE
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