The evolving nature of manufacturing

By CMTA Staff

Capitol Update, Nov. 21, 2012 Share this on FacebookTweet thisEmail this to a friend

"Manufacturing the future: The next era of global growth and innovation" is a recent report by McKinsey Global Institute. The researchers highlight the diversity of manufacturing types – ranging from global innovation firms for local markets, regional processors, energy resource-intensive commodities firms, global technologies innovators and labor-intensive tradeables.  Each type has a unique set of characteristics – intensity of R&D, labor, capital, trade and “value density”. CMTA membership includes all types, with our goal to make California a place where all manufacturers have an opportunity to prosper.

Globalization and technology are two forces that have greatly increased complexity and risk for manufacturers. Being able to invest and operate with “agility” is a key attribute for manufacturers who want to succeed in this environment. Massive capital investments that are often required for manufacturing need seven to ten years to achieve break-even returns. This argues for wise public policy to overcome any reluctance to make such investments. The message to policy makers is clear – it’s already risky enough to be a manufacturer – we should remove “man-made” barriers to encourage investment and employment wherever possible.

Executive summary and full report is available here:

Here are some interesting excerpts from the executive summary:

".... in the United States trade and outsourcing explain only about 20 percent of the 5.8 million manufacturing jobs lost during the 2000-10 period; more than two-thirds of job losses can be attributed to continued productivity growth, which has been outpacing demand growth for the past decade."

“….manufacturing generates 70 percent of exports in major manufacturing economies...and up to 90 percent of business R&D spending."

"As manufacturing evolves, policy makers must adjust their expectations and look at manufacturing not as a source of mass employment in traditional production work but as a critical driver of innovation, productivity and competitiveness.”

“As policy makers develop new approaches to support manufacturing, they need to consider the full policy tool kit. They need to remove regulatory barriers to growth (from red tape to trade barriers) and strengthen underlying enablers by supporting R&D and investing in infrastructure....A key policy priority for manufacturing is education and skill development."

"The global supply of high-skill workers is not keeping up with demand, and (we) project a potential shortage of more than 40 million high-skill workers by 2020.”

"As governments compete for manufacturing, they can help tilt the decisions for these companies by taking a comprehensive view of what multinational manufacturing corporations need; access to talent, reliable infrastructure, labor flexibility, access to necessary materials and low-cost energy, and other considerations beyond investment incentives and attractive wage rates."

"The new era of manufacturing will be marked by highly agile, networked enterprises that use information and analytics as skillfully as they employ talent and machinery to deliver products and services to diverse global markets."

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