Why End the Perturbing Myths About Manufacturing

Why  End the Perturbing Myths About Manufacturing

What is the Flavor of the Day?

In the 1980’s and ‘90’s, the management theory du jour was clearly to reduce one’s out of pocket production outlays at all costs.  Frequently seen as a faulty implementation of ‘Lean’, the errant utilization of a well thought-out offshoring strategy simply wreaked havoc on supply chains, intellectual property protection and quality systems.  Unfortunately, it also sidelines qualified and experienced workers.

Never Say Never…

With enough risk mitigation built in to cover any company’s ‘assets’, bottom-line success was attainable.  The proper utilization of the strategies did enhance the market position of many manufacturers in this country.

How Are These Myths Hampering Recovery?

Economics have now dictated that those very outsourced products are coming back to the U.S. to be sold by Firm X in you-name-the-state, right?  The ‘reshored’ products, as they are now known, are encountering some backlash in the form of obstructive myths. 

Those that followed the directives to ‘make offshoring happen…’ are now some of the staunchest proponents of the myths confronting (…and retarding the progress of) U.S. manufacturing, ala Colonel Klink or Sergeant Schultz, “…I was only following orders…”

In a savvy May 2013 article in Industry Week by Scott Gold, multiple myths were enumerated which could stymie future growth of that practice:

Myth 1  ‘We don't need to make anything here to create wealth.’

While his tongue-in-cheek statement was made in jest, how many actually believe it?  This microscopic (and myopic) view of the total supply chain misses some pretty important components.

The concept of ‘wealth’ must be viewed from an overall perspective of:

• Overall, Link 1(v) + Link 2(v) + ….Link X(v) → Firm ABC(v) → Customer, where Link(v)= value (wealth) earned by each link in the chain.  Replace each link designation with ‘packaging’, ‘trucking’, ‘labor’, ‘raw materials’, etc., for a concrete comparison and combination to yield the ‘wealth’ created.  Firm ABC purchases, either directly or indirectly all of the wealth components of each player in the supply chain, adds a markup onto the finished good and passes it on to the Customer

• Contrast this with Offshore Supplier → Firm ABC(v) → Customer.  A pretty short chain, eh?  All of the wealth created by the intermediate steps is accrued somewhere else-most likely, the low cost producing country

True, Firm X has goods to sell, and the B to C chain is complete, but how about the rest of the chain?  If the goods are made overseas, that created wealth never sees the U.S. market.

Myth 2  ‘We're in the midst of a manufacturing renaissance.’ 

Little by little, glimmers of hope emerge, and appear to be getting more predictable.  Gold says, “…While a U.S. manufacturing renaissance is possible, we're not there yet. In fact, U.S. manufacturing hasn't even fully recovered from the Great Recession and isn't expected to until the 4th quarter of 2014.”  Sometimes yes and sometimes no.  A recent report in Industry Week also shows Manufacturing Expands for the Sixth Consecutive Month.  Next week?  Who among us can foresee?

Myth 3 ‘ "American made" means made by a U.S.-based company.’

• Just as the calculation and marginal propensity to be ‘creative’ in declaring the actual percentages in the source of supply/origin on imported goods, the definition of ‘American Made’ no longer carries the veracity it once had. 

Scott Gold observes, “…The transition to a global marketplace has altered the way we must define "American made." The auto industry is a case in point: For years, an American car was perceived as one made by Ford, GM, or Chrysler (which has, in fact, been foreign-owned since 1998). But more than half of the so-called foreign cars sold in the U.S. today are actually made here.” 

Akin to phrases like ‘reduced fat’ and ‘supersized’, the definitions have clearly shifted, and become rather indistinct over time.  It pays to do a little homework to see what the company says vs. what it means.

The Result?

As has been said by the inimitable John F. Kennedy, “The great enemy of the truth is very often not the lie, deliberate, contrived and dishonest, but the myth, persistent, persuasive and unrealistic.”  Any erosion caused by the myths or ‘marginal truths’ can only cause, at best, confusion, or at worst, a real detrimental effect on the entire system. 

The noise created by the myths becomes similar to tying a rope on the bike of a child you are trying to teach to ride.  Why encumber the forward progress with anything that will slow it down?  There are sufficient impediments to progress, whether regulatory, market or competition driven.

Manufacturing in the U.S. needs to be nurtured and supported, as each of our livelihoods depend on it!