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The manufacturing value chain is bigger than we thought

Posted by Gino DiCaro, VP, Communications on March 24, 2016

Manufactured goods are ubiquitous for our ultra consumer society but the narrow definition of manufacturing industries in national statistics often has the industry accounting for only 11 percent of gross domestic product (GDP) and about nine percent of full-time employment. Those numbers are only the tip of the iceberg though. A recent study by the economic think tank MAPI shows much larger impacts from downstream and upstream activities related to manufacturing that include research and development, corporate management, logistics operations, marketing, and others.

All manufacturing plant activities lie at a hub of a large and complex value chain that is composed of an upstream supply chain that gathers materials and services and a downstream sales chain that moves goods to market and sells and services goods. Manufactured goods are also intermediate inputs in non-manufacturing industries’ supply chains.

The MAPI Foundation's report "The Manufacturing Value Chain is Much Bigger than You Think" accounted for all of these economic activities.  Their results showed that the industry is actually responsible for 33 percent of our country's GDP, basically triple what is traditionally reported. This and other findings eclipse even our own numbers here at CMTA. More reasons for California policymakers to always account for manufacturing impacts in new legislation.

Below are a few of MAPI's key additional findings:

  • The manufactured goods value chain plus manufacturing for other industries’ supply chains accounts for about one-third of GDP and employment in the United States.
  • The domestic manufacturing value-added multiplier is 3.6, which is much higher than conventional calculations. For every dollar of domestic manufacturing value-added destined for manufactured goods for final demand, another $3.60 of value-added is generated elsewhere.
  • For each full-time equivalent job in manufacturing dedicated to producing value for final demand, there are 3.4 full-time equivalent jobs created in nonmanufacturing industries.
  • Most (54 percent) of the value-added in manufactured goods destined for final demand is from the downstream sales chain; the upstream supply chain accounts for the remaining 46 percent.
  • Domestic manufacturing accounts for only 22 percent of the value chain of manufactured goods for final demand. Non-manufacturing value-added is 53 percent and imports are another 25 percent.
  • 60 percent of manufacturing imports ($1,024 billion) are final goods; these directly enter the downstream sales chain. The other $694 billion of manufacturing imports enter the value stream in the upstream supply chain of domestic manufacturing.
  • Relative to other industries, manufacturing is efficient in delivering value-added. It takes about 5.8 full-time equivalent manufacturing jobs to achieve $1 million in value-added, compared with 7.7 for both transportation and services and 16.9 for retail trade.

 





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