Making Value for America Embracing the Future of Manufacturing, Technology, and Work (2015) / Chapter Skim
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1 The Manufacturing Value Chain in Transition
1 The Manufacturing Value Chain in Transition
Pages 20-46
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From page 20... ...
US companies continue to capture value throughout the manufacturing value chain, but manufacturing employment in the United States has declined. All these forces are causing increased pressures -- on both companies and workers in the United States -- that demand increased agility.
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From page 21... ...
As a result of these trends, manufacturing value chains have become more widely distributed around the world. Between 1995 and 2009, the cross-border flows of intermediate goods and services as well as final products associated with manufacturing value chains significantly increased (Baldwin and Lopez-Gonzalez 2013)
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From page 22... ...
Output is on a value-added basis. Value added is the amount contributed by a country, firm, or other entity to the value of a good or service and excludes purchases of domestic and imported materials and inputs.
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From page 23... ...
, it makes sense to minimize transportation costs by locating near buyers; such products include industrial machinery and household appliances. Similarly, when just in-time delivery is important, locating a plant as close as possible to customers is one way to improve delivery times.
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. • Location of supply chains: Certain industries, such as the automotive industry, have complex supply chains that must be carefully coordi nated, so it makes sense to locate plants near suppliers.
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Toyota, among others, has located much of the design and production of its minivans and large pickup trucks in the United States because it is home to many of the customers of these vehicles.3 In the case of research-intensive products such as those in the biomedical industry, research activities drive the location of activities in the latter stages of the value chain. The biomedical industry today includes a number of new medical devices, therapies, diagnostics, imaging, and medical genomic services that are highly research intensive.4 Production, testing, and treatment are best located close to the academic and medical center laboratories where the relevant research is done so that the companies can take advantage of their expertise.
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From page 26... ...
The United States has certain advantages, such as a large market, a strong legal system, access to affordable and reliable energy, and highly developed R&D and supply chain capabilities that attract facilities where labor costs are relatively less important. Some of these factors are undergoing significant change.
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From page 27... ...
If the United States wants to both retain and attract facilities along the manufacturing value chain, it needs to create an environment that supports continuous development of its innovation, manufacturing, and lifecycle services capabilities. Emerging Markets as an Opportunity for US Growth Discussions of the standing of US-based value chains in the global economy frequently focus on the challenges presented by other countries, especially a rapidly developing country such as China.
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From page 28... ...
When asked whether the Dart would be manu factured in the United States, she said no and explained that they did not have the time. Companies such as FINsix have an incentive to bring their products to market as quickly as possible to satisfy their funders, and as a result it is difficult to devote much time to the latter stages of the value chain, such as production.
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From page 29... ...
If the United States has only the world's second largest economy, for example, the dollar might lose its dominance as the currency that central banks prefer for their reserves, which could increase US borrowing costs. But Kenny contends that any negative consequences will be outweighed by the benefits of other countries getting wealthier.
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From page 30... ...
The preferences of emerging-market consumers also will drive global innovation in product design, manufacturing, distribution channels, and supply chain management, to name just a few areas. (Atsmon et al.
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In short, emerging markets will offer tremendous potential for US companies in the coming decades, but only if companies and policymakers recognize the potential and then act to develop and maintain the capabilities to take advantage of it. ADVANCES IN COMPUTING POWER AND AUTOMATION The ongoing digital revolution is a second major factor driving changes in the US and global economy.
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Besides improving the quality of design and manufacturing directly, new computing tools provide entirely new ways for engineers to get feedback from customers. For example, Keith Diefenderfer, principal technology director in the advanced technology center at Rockwell Collins, described the use of virtual reality immersion labs at the company to let customers try out design variations before a design is finalized.8 These labs provide a three-dimensional virtual experience of a new technology, making it possible for individuals to "use" the 7 Remarks of Gary Cowger at "Workshop on Making Value: Integrating Manufacturing, Design, and Innovation to Thrive in the Changing Global Economy," June 11, 2012, Venable LLC Conference Center, Washington, DC.
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From page 33... ...
The US automotive industry realized that new technologies were not paying off as expected in terms of improved productivity and began to accept that changes in the processes used in design, testing, manufactur ing, and assembly were necessary to achieve the full potential of the new technologies. IMPROVED PROCESSES A third factor that has been transforming industry in the United States and around the world is the development and application of new organizational processes, such as lean manufacturing and design for manufacturability that improve productivity and decrease lead time.
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From page 34... ...
In 1990 three researchers from the Massachusetts Institute of Technology published The Machine That Changed the World, which described in detail the lean production system developed by the Toyota Motor Company and documented its advantages over the system of mass production that GM and most other automotive companies had been using since Henry Ford popularized the assembly line for constructing cars (Womack et al.
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The conclusions were based on data from more than 300 manufacturing firms in the United Kingdom. According to a more recent study based on data from more than 30,000 manufacturing establishments in the United States, companies that adopted lean production principles were significantly more successful than those that did not, according to a variety of measures of success (Bloom et al.
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From page 36... ...
Effects on Manufacturing Employment Globalization of manufacturing and pronounced increases in worker productivity have dramatically affected US manufacturing employment. According to the Bureau of Labor Statistics Current Employment Statistics Survey, total manufacturing employment in the United States dropped from approximately 19 million in 1980 to 11.5 million in 2010 (Figure 1-4)
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From page 37... ...
. The number of employees in manufacturing without a high school degree declined from 10 million to less than 2 million in 1960–2010, and manufacturing employment requiring a college or more advanced degree increased by more than 2 million jobs.
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From page 38... ...
But in 2012 GE began making cutting-edge, high-efficiency water heaters and refrigerators in its Appliance Park plant in Louisville, Kentucky. In a dramatic example of reshor ing -- bringing back to the United States manufacturing that had been offshored -- the company opened the first new assembly lines in 55 years in Appliance Park, which at its peak in the 1960s turned out 60,000 appliances a week (Fishman 2012)
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For smaller products, manufacturing in the United States will require more automation, Nolan said, to reduce labor costs. But it should be possible to produce heavier products in the United States at lower total costs even without much automation by implementing lean manufacturing practices.
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. from 10 million to less than 2 million between 1960 and 2010, manufacturing employment requiring at least a college degree increased by more than 2 million jobs (Figure 1-5)
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From page 41... ...
. Wages of men without a college degree have declined 11 percent since 1980 and those of male high school dropouts declined 22 percent, whereas wages of men with a college or advanced degree increased between 20 percent and 56 percent, with the largest gains among those with advanced degrees (Autor 2014)
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From page 42... ...
2.2 Doctoral degree 1,623 2.3 Professional degree 1,714 3.4 Master's degree 1,329 4.0 Bachelor's degree 1,108 5.4 Associate's degree 777 7.0 Some college, 727 no degree 7.5 High school diploma 651 11.0 Less than a 472 high school diploma All workers: 6.1% All workers: $827 FIGURE 1-6 Earnings and unemployment rates by educational attainment, 2013. Source: Current Population Survey, US Bureau of Labor Statistics, US Department of Labor.
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Real weekly earnings rĞůĂƟve to 1963 (men) Real weekly earnings rĞůĂƟve to 1963 (women)
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From page 44... ...
An increasing number of jobs -- particularly high-wage jobs -- require high skills in particular areas, such as engineering and computer programming, and not enough people are acquiring these skills. A Global Talent Management and Rewards Survey of more than 1,600 companies around the world found that 72 percent of them reported that they had trouble finding and hiring critical-skill employees.
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From page 45... ...
Avail able at www2.census.gov/ces/wp/2013/CES-WP-13-01.pdf (accessed April 7, 2014)
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From page 46... ...
2012–2013 Global Talent Management and Rewards Study. Available at www.towerswat son.com/en-US/Insights/IC-Types/Survey-Research-Results/2012/09/2012-Global-Talent Management-and-Rewards-Study (accessed April 23, 2014)
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