Excellent artilce from the Harvard Business Review on the importance of manufacturing to the North American economy.
Just How Important Is Manufacturing?
Since joining the Harvard Business School in 2007 (after a long career at IBM, Kodak, Silicon Graphics, and other companies), I have visited hundreds of factories. They include ones that produce a million notebook computers a week, a significant proportion of the world's ibuprofen and acetaminophen, sophisticated biopharmaceuticals, microchip engine controllers for 40% of the world's cars, key components for iPhones, commercial jet engines, scientific instruments, heavy construction equipment, tools for making semiconductors, and solar panels.
With the exception of two jet-engine factories and two plants that make heavy equipment, all were located outside the United States. If that surprises you, you're not alone. Most Americans have no idea where the stuff they buy comes from and don't appreciate how much of the U.S. manufacturing base has disappeared.
A Lot of Manufacturing Is Knowledge Work
Most Americans believe factory work is mechanical, snapping together plastic parts or assembling electronic devices. No thinking required; just put in these four screws 2,400 times a day.
There certainly is a great deal of such routine manual labor going on in the world, but there is also an enormous amount of sophisticated knowledge work. Many of the jobs in the most advanced semiconductor-manufacturing plants are as complex as a lunar-landing mission. Making parts for an iPhone is a challenging mix of materials science, mechanical engineering, precision fabrication, and managing mind-boggling complexity in the supply chain. Producing biologics involves enough biochemistry, chemical engineering, and cell biology to make a graduate student wince.
Working in these plants are inventive people who are the source of important ideas for making products better or in different ways. The best factories routinely conduct scientific experiments to improve their processes, and the best factory managers are teachers and innovators as well as leaders of people.
When R&D and Manufacturing Must Be Near
Manufacturing provides the foundation for many kinds of innovations. If manufacturing processes are immature or the know-how needed to develop the product or process to produce the product is tacit and not well codified, you cannot innovate in a country if the factories are on the other side of the world. R&D and manufacturing must be located close to each other so their people can together figure out how to develop a product that can be manufactured at a cost and level of quality that will make it a commercial success.
This is why I cringe when I see pharmaceutical makers shipping more and more of their production and development capability offshore, or when I see semiconductor tool makers move their manufacturing from the U.S. to Asia.
The bottom line is if a country loses the ability or the capacity to manufacture, its innovation space will be truncated. To me, that is why we have to manufacture in the United States.
This post is part of the HBR Insight Center on American Competitiveness.
2 Comments
Great article Tracy! Nothing to blame for if we talk from the companies' perspectives; they just move forward for making the profit. Yes, indeed, that is a short term thinking but, how long is long term for even a Fortune 500 company? The future happens every day and, if it doesn't happen, long term is just an elusive term, as the company might be gone... today.
My point is that all these, nevertheless disturbing trends, need to be reversed by the government. The only institution that can look far enough without necessarily being worried of its today's existence is the government. Unfortunately, many times they are driven by the same principles as the companies, and that is wrong. Short term gains are overemphasized for successful re-election on the account of long term strategy.
Until we find solution(s) to that problem, we can keep "blaming" the companies for moving out from an environment that is not anymore conducive to their needs. They will rightfully continue to do just that as long as the internal strategy continues to be short-term driven by exactly the institution that is supposed to set different directions. At least that is my opinion...
Tracy, the spirit of your article is extremely relevant for the current trends in the North American manufacturing sector, and it resonates with our experience in the last few years.
The irony is that we live in a world that is increasingly virtual, triggered by the aspirations of the young generations and fueled by the rapid advancements in the digital technology. In this context, the tangible values - that manufacturing excels in creating - receive less recognition and diminished appreciation. Everything is portrayed as easy to make - therefore less valuable - and the glory and the rewards are mostly retained by the story tellers (paraphrasing Seth Godin from his book "All Marketers are Liars"). Too many influential factors in our society - starting with politicians, continuing with financial investors, advertising industry and ending with media - are totally focused on uninformed, and often manipulated public opinions, as well as short-term interests.
Everything you said makes logical sense. But other factors seem to prevail and guide our decisions these days. In the end, as members of the public, we all bear some responsibility: complaining about the negative consequences of the massive off- shoring happens mostly in business settings, and yet, as individual consumers, we are all rushing at the end of the day to buy discounted products manufactured in low-labor-cost countries. For as long as the hypocrisy continues, I am afraid that the self inflicted pain has no antidote.
As active members of the manufacturing community, we can only continue to advocate the mature and responsible principles that your article promotes. Until the society changes course, we remain faithful to that cause.
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