Business, Technology, Culture, & Ideas That Matter

Manufacturing in Massachusetts

Manufacturing has been on its heels, in Massachusetts and elsewhere.  There can be no argument about this.   The reasons for this (as well as the reasons, pro and con, for manufacturing itself) have been discussed to exhaustion elsewhere.  Massachusetts is taking some welcome fresh steps to revitalize the manufacturing sector.  Only time will tell if these new programs mean that we are finally going “on offense” with some strategic long-term solutions that signal a genuine new-found respect for a sector that is the source of so much innovation and vitality.

The Brookings Institution tells the story of manufacturing in these numbers:

“Manufacturing’s share of total employment fell from 13.2 percent in January 2000 to 8.9 percent in December 2009….[A]t the rate of manufacturing job growth that the nation has seen since December 2009, it would take until 2037 for the nation to regain all the manufacturing jobs it lost between January 2000 and December 2009.”

A common proposition is that increasing productivity in the manufacturing sector has been key to declines in employment.  While we will not try here to address the validity of this proposition, it is worth noting that economists and others are pointing out significant issues with how productivity is measured.  Some are suggesting that productivity increases in the manufacturing sector have not been as large as reported and not large enough to correlate with,  or explain, employment declines in the manufacturing sector.   (As one example, see Changing Gears: “The Controversial Economic Report That Challenges Everything We Think We Know About U.S. Manufacturing” (Dustin Dwyer).)

Another popular canard is that the U.S. has lost manufacturing jobs due to high labor costs.  So it is worth noting other analysis from the Brookings Institution proposing that while the U.S. ranks only 13th in terms of the wage rate (i.e. 12 countries pay higher average manufacturing wages), 6 of the countries with higher average wages (Australia, France, Germany, Italy, the Netherlands, and Sweden) have not experienced the same rate of job loss as the United States.

Going on Offense

One of the biggest problems for manufacturing, however, is not any one of these, or numerous other issues, that have been raised, but, rather, that these issues invite defensive responses.

What is needed more than anything is a solid offensive strategy.

While manufacturing is responsible for just 11 percent of GDP, manufacturing clearly generates the vast majority of research and development.  This investment in innovation means that, according to the Brookings Institution, “that manufacturing firms are far more likely than non-manufacturing firms to introduce new products and new production or business processes”.

Having worked myself in manufacturing companies and plants from Monroe Bridge, MA to Milford, from South Hadley to Wellesley to Dorchester, MA, I have come to know the special pleasure of walking through the bowels of a manufacturing plant and watching the disparate parts of a manufacturing plant synchronize with precision their specialized functions, each operation putting focus on its input and great pride on its output.  If you want to talk to a person with a special kind of smart, find yourself a plant manager.  Texon‘s Don Young was my first exposure to a plant manager, and I observed with considerable awe the breadth of technical and practical knowledge that he needed to run the operations under his command.

Manufacturing in Massachusetts

It is exciting to see, therefore, Massachusetts launch the Advanced Manufacturing Collaborative, mirrored on President Obama’s Advanced Manufacturing Partnership (AMP), to focus principally on five (5) areas:

  • Promoting Manufacturing
  • Workforce & Education
  • Technical Assistance and Innovation
  • Cost of Doing Business, and
  • Access to Capital

The accompanying press release last fall spoke of two (2) mandates:

  •  To convene and manage an industry‐led dialogue that would lead to actions to help make successful enterprises even stronger through programs targeted at companies that have proven success or clear potential for growth.
  • To foster a New England perspective and leverage the potential for regional synergies while focusing on Massachusetts as the epicenter of the region’s advanced manufacturing capabilities.

Governor Deval Patrick has positioned this as a comprehensive effort involving an “all-hands-on-deck” collaboration of public and private resources and experts.

Massachusetts’ Gregory P. Bialecki, Secretary of the Executive Office of Housing and Economic Development and Chair of the Board of Directors of MassDevelopment, has brought together many of the best and brightest of industry and academia.

It is too soon to tell whether this will go way beyond a dialogue and perspective, and governmental lip service, and  be the game-changer that this needs to be.  This is, however, an extremely important initiative that has the potential to make a very significant impact on the manufacturing base in Massachusetts.

The “Staying Power II” report by Northeastern University‘s Barry Bluestone, et al., is a comprehensive and timely piece of research for Mr. Bialecki and the Advanced Manufacturing council to use as a strategic guide.  The Advanced Manufacturing Collaborative needs, however, to (1) focus on developing the networks that will provide access to rich research and development networks and resources to more manufacturing firms; (2) assess and learn from other models of success; (3) craft strategic, actionable policy, and accelerated execution plans;  (4) develop networks that forge closer collaborations for manufacturing firms across Massachusetts with academia, financing, training &  apprenticeship, and research and development resources; and (5) support these with even more pragmatic out-in-the-field problem-solving resources.

As the Brookings Institution has pointed out, the manufacturing sector has historically been an important source of innovation.  That alone should make the manufacturing sector an area of great interest and focus.

Manufacturing and government needs to go on offense, and stop playing defense.  There are outstanding leaders heading many of these manufacturing firms. It is high time that we tapped into the ideas and insights that these leaders have, look at other models of success, and to “go on offense” delivering the resources, research and development, stable financing, and continually training workforce that these firms need to realize their true potential.  Many of our Massachusetts manufacturers are smaller, family-owned firms.  Massachusetts needs to make this an irrelevant, and historical, demographic fact.

Model of Success

Of the many models of success, one that the Brookings Institution takes note of is Germany’s.  This is not, of course to suggest that what works well in Germany should be thoughtlessly instituted here. There is good reason, however, to examine Germany’s support for its manufacturing base, and to assess how and why Germany’s support for its manufacturing sectors has resulted in higher manufacturing employment, higher manufacturing employment retention,and higher average manufacturing wages.  Brookings notes four (4) big differences between the U.S. and Germany’s support for manufacturing firms.

  • Much more robust research and development spending and networks
  • Continuous vocational training
  • Considerable access to finance, in the form of long-term exclusive financing relationships
  • Unions that protect 62% of workers from short-run cost-cutting

See The Brookings’ Institution’s “Why Does Manufacturing Matter?” (pgs 26-29), by Susan Helper, Timothy Krueger, and Howard Wial, for an excellent discussion of each of these factors.

Training is a particularly pressing challenge.  Everyone has heard by now that companies in general and manufacturing firms in particular are looking for skilled workers, and reporting some difficulty.  Everyone has also heard of  (or experienced) the escalating cost of education.  So the training area appears to present the proverbial “win-win” opportunity.

The “Staying Power II” report identifies an important training-related issue, with the surprising report that only 1 in 8 of the Massachusetts firms surveyed have faith that community colleges can provide the required training.  This may be the most critical issue of all.  Massachusetts needs to urgently look beyond workforce training grants, and the accepted community college wisdom, and assess new comprehensive strategies, and models used elsewhere, for a much more effective solution to this challenge.  New solutions are needed.

Talk and programs are, however, just the start.  The value of manufacturing, and the enriching experience of working for a manufacturing firm, large or small, has to be as much a part of our conversation – and our experience – as other life work opportunities.  Massachusetts has to make a very visible and assertive commitment to the manufacturing sector with aggressive, long-term support for continual workforce training & education, access to capital and financing, robust research and development  networks, sensible regulations, and protections for the labor force.  Crafting aggressive and effective solutions to these issues will be all the promotion that the manufacturing sector needs.

“We need to arrive at a point where anytime someone asserts that the loss of manufacturing jobs is due principally to superior productivity growth, the statement is challenged as inaccurate.”   – Robert D. Atkinson, Luke A. Stewart, Scott M. Andes and Stephen Ezell, The Information Technology and Innovation Foundation, in “Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline“.

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October 9, 2012 - Posted by | Business, Supply Chain | , , ,

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