Is there hope for manufacturing? You bet!

I’m in Milwaukee today, speaking at a private group of manufacturers from across the country, who work within a particular industry.

The theme, to a broad degree, is the future of manufacturing in the US. I’m covering a huge variety of trends and issues, but two notable themes stand out:

• manufacturing is alive and well for those who have or who are transitioning out of competing with low cost off-shore competitors. Instead, those who are focused on higher-value products that carry important and intrinsic value for the consumer are, by and large, doing ok
• accomplishing this involves innovation: with business models, skills and capabilities of staff in the manufacturing facility, branding, marketing — with a whole series of things.

Typical news coverage of the sector is all doom-and-gloom. That’s not quite true; there’s a lot of pain out there, but there are many who are undergoing a real transition.
Did you know Brooks Brothers makes most of its ties in NYC? “Of course we could go to China and make a tie less expensively ….But that’s missing the whole point” commented Joe Dixon, Brooks senior VP of Production, in a recent trade publication. “We do a lot on the fly, which would be hard to do offshore,” states Lauren Rowen, Director of Manufacturing. They are focused on rapid style turnover, fast time to market, short logistics. You can’t do that if you are tying up your inventory on a container ship somewhere.

Here’s an interesting thought about Indiana — a recent study suggested that the “top 25 manufacturing companies have consistently outperformed the DJIA“; “job losses…have largely run their course…” ; “employment will stay steady or expand slightly for next two years or beyond” ; “ranked first in investment-per-worker and private sector R&D“. In other words, they’re not doing too bad. A lot of companies are gone and going, but a 2nd tier has transitioned to the new manufacturing.

I think we’re at a watershed point with manufacturing trends. The reality is, there is plenty of life left in the American manufacturing sector, for those who are choosing to move to what I might call Manufacturing 2.0 — focused on agility, flexibility, fast time to market, automation, mass customization: a whole series of attitudes and capabilities.

There’s a wider issue here too: we’re at the point that many Asian, Chinese and Pacific region manufacturers are going to find that the price of oil, and their inability to act-fast, will be two things that will make them less competitive. They are going to have to focus on rapidity of action, and as I understand it, many of them aren’t positioning with the sophisticated I/T infrastructure and deep insight that other companies in the US and Europe have put in place. So while their advantage has been low cost, they might not have the scalability, flexibility and automation that others are putting in.

To trasnsition to manufacturing 2.0, you have to make BIG BETS. Molex, an electrical manufacturer did, investing $125 million in process transformation. They state they saw a 36 million payback through year one, and expect perhaps a $100 million payback year two. Post flat strategies aren’t for the feint of heart, but the payback can be real.

In other words, it might be renaissance time in manufacturing, if you do the right things, and make the big bets. Spend some time reading the manufacturing posts on this blog, and maybe you’ll find some of the insight and encouragement that you need.