Home' AME : AME Target Summer 2016 Contents SUMMER 2016 TARGET 21
We don’t make things here
The U.S. has lost a lot of manufacturing
jobs, and we see “Made in China,” or
Mexico or India on apparel, toys and
many other consumer goods. These
facts often lead to the misconcep-
tion that everything was offshored. In
fact, the U.S . is still the second largest
manufacturer in the world. Since the
recession, manufacturing employment
is up by 900,000, and overall output is
up 20 percent. However, manufacturing
employment is still down by almost 5
million from the year 2000. At least half
of that reduction is due to offshoring
of manufacturing jobs. Fortunately, for
the last two years, we are net neutral or
positive on job flow. We are doing the
best we have in the last 15 years, but we
still have a long way to go.
Manufacturing jobs won’t come
back because automation will
replace human labor.
In the present day, jobs are now coming
back in large part because of automa-
tion, which is a key component in help-
ing U.S. companies produce competi-
tively. The following factors ensure that
jobs will continue to be created even as
factories become more automated:
• Robots require technicians to build, run
and maintain them.
• The multiplier effect: Manufactur-
ing drives about 32 percent of U.S.
employment with a multiplier effect of
3.6, not the 1.4 previously believed, per
recent research by MAPI. That means
for every new manufacturing job, 3.6
other jobs are created that wouldn’t
have existed otherwise.
• Balancing the trade deficit will increase
U.S. manufacturing by about 30 per-
cent. It will take years of both auto-
mation and job increases to increase
output that much.
U.S. manufacturing cannot be
cost competitive with offshore
Not true! One argument for reshoring
is that some consumers are willing to
pay more for higher quality (made in the
USA). This is sometimes true, but it is
hardly a requirement of the equation.
Many industries are developing meth-
ods that allow them to produce goods
that match or beat prices from Asia. For
1. First Solar: This U.S . OEM now
makes the lowest-cost high efficiency
solar panels available on the market.
(Solar was an industry previously as-
sumed to belong permanently to China.)
2. GE: When GE decided to reshore
water heaters, the company was able
to produce a higher quality model for
a retail price 20 percent lower than the
Chinese-made model it replaced. The
case created 1,300 jobs and lead to
reshoring of refrigerators and washing
machines as well.
3. Walmart suppliers: So far, we
know of 46 companies participating in
Walmart’s Made in USA initiative. These
companies have supplied U.S .- made
goods at the same or better prices as
the imported goods they are replacing.
See more in the Walmart section below.
We do not have to be competitive with
the Chinese by selling in China. We do
have to be competitive selling in the
U.S., where we have about a 30 percent
home field advantage vs. selling off-
shore, as shown in Figure 1.
*Based on exports adding 15 percent of logistics and other “hidden” costs
Getting the facts straight is the only
hope for voters, politicians, CEOs and
consumers to make the right decisions.
What happens when
we lose manufacturing?
As we have seen in the U.S., manu-
facturing loss translates to job loss, a
declining middle class, an increase in
income inequality, larger budget defi-
cits and a weaker consumer market.
In addition, the entire ecosystem of
supply chains, skilled workforce, R&D
and the ability to innovate has been
severely eroded, making recovery much
tougher. Additionally, the U.S. economy
has become more vulnerable to global
economic shocks, and the military more
vulnerable to counterfeits and less able
to rapidly source material.
In essence, offshoring companies
became overly focused on short-term
profits at the expense of their internal
infrastructure that makes their very ex-
istence possible. This is a pattern based
on what Forbes writer Steve Denning
refers to as “the world’s dumbest idea,”
that “companies embraced the notion
that the very purpose of a corporation is
to create shareholder value as reflected
in the current stock price.” The subse-
In essence, offshoring companies became overly
focused on short-term profits at the expense of their
internal infrastructure that makes their very existence
possible. This is a pattern based on what Forbes writer
Steve Denning refers to as “the world’s dumbest idea,”
that “companies embraced the notion that the very
purpose of a corporation is to create shareholder value
as reflected in the current stock price.”
Links Archive AME Target Spring 2016 AME Target Fall 2016 Navigation Previous Page Next Page