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Manufacturing Globalization

Globalization—an overwhelming trend that is affecting almost every facet of manufacturing—is a reality for U.S. manufacturing, in both the civilian and defense sectors. In this new reality, manufacturers must find ways to exploit the advantages of globalization of production and expansion of world markets to the benefit of everyone, including employees, companies, consumers, and the nation as a whole. In addition, maintaining defense capacity must be taken into consideration.

A combination of factors is responsible for the movement of production overseas. Although labor costs in developing countries have traditionally been lower than those in the United States, only in recent years has the infrastructure of these countries improved enough to allow them to manufacture with reliable quality. Their transportation and communication systems are much more robust than in the past, and because these systems are often built on new technologies, they have not required the same investment as older systems. The infrastructure for education and training of workers is also much improved in many countries around the world.

Labor organizations and businesses have serious concerns about the loss of U.S. manufacturing jobs resulting from this movement of capacity overseas. While this is a clear trend, some corporate representatives at the workshop claimed that moving certain jobs overseas resulted in overall job retention in the United States. Because globalized production can enable the efficient distribution of engineering and manufacturing responsibilities, it can result in decreased overall costs and the creation of better jobs in the United States. Additionally, the globalization of production has created opportunities for many companies to capture new market growth in developing regions around the world.

Such influences as trade policies, dollar valuation, and tax policies are arguably crucial in the competition with the low labor rates and varying regulatory environments abroad. If manufacturing cannot provide a distinctive competitive advantage in new or existing markets, companies stand to gain by channeling their resources into functions and activities that will result in a competitive advantage to them. This may lead to a further reduction in investment in domestic capacity.

Information Technology Opportunities

New information technologies present a continuing and growing number of opportunities to manufacturers. Information, data communication, and data processing technologies are powerful tools that can be used in every element of the manufacturing enterprise, including just-in-time delivery of raw materials, activities on the factory floor, shipping, marketing, and strategic planning. The power of information technology has contributed to globalization and the ability to outsource manufacturing activities both inside and outside the United States. These trends could result in reduced domestic content in the products of U.S. manufacturing firms, with significant implications for national and regional manufacturing jobs and labor markets. At the same time, the growing reliance of manufacturing and other economic sectors on information and communications technology has spawned completely new industrial sectors—and occupations—devoted to the production and implementation of these systems.

Maintaining Innovation

Technological innovation and engineering design capabilities are critical for the creation of new industries and jobs. The growing demand for products with improved quality, functionality, and reduced time to market can strain established production processes, making

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