The US Department of Commerce's GDP analysis of manufacturing estimates the industry represents ~11% of the economy and has 1.4x multiplier effect for every dollar spent. Those figures are already quite significant; however, this article outlines research from the MAPI showing that the US manufacturing sector’s economic contribution is actually 32% and has a multiplier effect of 3.6x for every dollar created. Suffice to say, US manufacturing creates significant economic contribution to our national economy as a whole, as well as local economies across the country.
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US Manufacturing is resilient and has never been in a better position to reclaim what was previously given away, as discussed in Now is the Time to Take It Back. Outsourcing inherently introduces significant risks to service and quality, and the calculations typically used to make the case to outsource are highly inaccurate and overstated; even a 20-30% miscalculation would single-handedly negate any potential savings. Any remaining cost gaps can easily be solved for by leveraging lean methodology to eliminate waste. This concept of Leanshoring is already happening around the country, led by those willing to do the work by aggressively and creatively finding lasting solutions that solve the real problem all businesses face: waste.
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Fool Me Once…
There’s an old adage, “fool me once, shame on you, fool me twice…shame on me”. Side note, I can’t help but read that in George W Bush’s accent and chuckle. Looking at the world around us, it’s safe to say industry and society were collectively taken by surprise. The effects are evident across everything from the price of crude, to the number of jobless claims, to the visible impact on the supply chain. Despite all of that, manufacturers and distributors are still being called on to answer the bell and produce and deliver goods with minimal disruption.
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Resiliency is becoming a buzzword now because of the global stress test that supply chains are facing today due to the effects of the COVID-19 pandemic and highlights the vulnerability of the distributed network of global supply chains. Starting in January, the COVID-19 effects on the global supply chain were starting to reveal themselves as product stopped moving from the Chinese interior to the ports. As the factories started slowing, the linkage to the ports failed as well when Wuhan and surrounding provinces were quarantined. Then shipping companies cancelled sailings causing vessels and empty containers to be out of position across the globe. Even after countries and businesses re-open, the affects of this disruption will be felt for at least a year to reposition people, right-size assets, and determine the new demand profile going forward.
Position to change
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Two weeks ago we published a blog called Now is the Time to Take it Back which serves as our overall call to action for manufacturers in 2020. We exposed that the over-rotation on outsourcing to China over the last 40 years – particularly over the last 17 years – is responsible for the lack of supply chain resiliency we’re experiencing right now as well as the hollowing out of US manufacturing workers. Automation is not the culprit and never will be. The real culprit is bureaucratic complacency (and complicity) influenced by the invisible hand of central banks. Neither of which is the fault of the American Company or the American Worker.
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Supply Chain Resilience amidst the Coronavirus
Now is the time for US manufacturers to take back what’s been given away. The current Coronavirus related global supply chain disruptions are exposing what we all already knew: we have drastically over-rotated on Chinese buy and left our supply chains vulnerable and unstable. Every company I have spoken to in the last month is feeling the impact and currently scrambling to rebalance their spend – this is the time to reclaim volume and US manufacturers must rise to the occasion. Put yourself out there and get that volume back. Get aggressive and reassert yourself as the top supplier again. You can do it. A lot has changed in the last 20 years and now is the time to usher in that previously elusive US manufacturing renaissance.