Why manufacturing matters for America
September 21st, 2012
11:10 AM ET

Why manufacturing matters for America

Watch the latest GPS special ‘Global Lessons: Putting America to Work,’ this Sunday at 8 p.m. ET.

By Willy Shih and Gary Pisano, Special to CNN

Editor’s note: Gary Pisano and Willy Shih are authors of the new book ‘Producing Prosperity: Why America Needs a Manufacturing Renaissance,’ and professors at Harvard Business School. The views expressed are their own.

Both U.S. presidential candidates have promised to bring back manufacturing jobs by promising new initiatives to support manufacturing. Listening to them, it would be easy to believe that growth in manufacturing will solve our unemployment problem. But if we look beyond the promises, we believe the reality will be a little harsher.

Manufacturing only employs 9 percent of our workforce, so expecting manufacturing to address our high unemployment rate is unrealistic. With any reasonable amount of productivity growth, we would have to grow manufacturing disproportionately relative to the rest of the economy in order for manufacturing to put a big dent in the employment rate. And while the offshoring of manufacturing led to the loss of many jobs, most of those jobs will not be coming back. The reason is many of those jobs were very sensitive to comparative labor rates (whether they are for lower skill assembly or more complex tasks), and as nations and regions who compete with us can offer equivalent capabilities at a lower cost, wining those factories and jobs back would require us to lower our pay rates and standard of living. We don’t want to do that.

We believe that the most important reason to bring manufacturing back and grow it in this country is that the ability to manufacture underpins our ability to innovate in many fields. When manufacturing process technology is not yet mature, or when products are tightly integrated systems that are not easily modularized, a great deal of the work in “industrializing” a product – that is getting it ready and putting it into volume production – is high value-added knowledge work that supports future innovation in the field.

A great example is Intel Corporation’s latest generation of “Ivy Bridge” family of microprocessors. Intel has invested tens of billions of dollars in its factories in Oregon, Arizona, and New Mexico so that they are able to produce the most advanced semiconductors. In order to produce its Ivy Bridge chips in the latest generation technology, it had to maintain a tight loop between the engineering team designing the chips and the engineers designing the manufacturing process. Understanding how to make a product in volume is very different from being able to build a one-of-a-kind prototype, and the process that engineers and workers go through is an important part of innovation. Many in the industry say that Intel has a two year lead on its competition as a result.

Another outstanding example of manufacturing capability sustaining innovation can be found at the GE Aviation Durham Engine Facility in North Carolina. If you walk across the floor where they assemble commercial engines that power the world airliner fleet, you see skilled teams who are constantly improving manufacturing processes. We saw one last year on a product that had been in production for over 10 years. Yet the constant back and forth with engineering, the teaming both on the floor and across disciplines, embody a unique capability that keeps GE in the lead in the large turbofan engine market.

Keeping manufacturing close to R&D is vital when you are innovating in biotechnology based drugs. Just because you can make a few milligrams in the lab does not mean your job is done – producing it in quantity at an economically viable price requires innovating the process. And the ability to do that requires nearly constant interaction between R&D and manufacturing. If the United States wants to be a leading innovator in biotechnology, it needs to have the capacity to innovate in manufacturing.

The manufacturing jobs that come back to America (and we hope there will be many) will not be the ones that left. The manufacturing jobs of America’s future will be more demanding of the skills of our workers, they will require more sophisticated computer skills, and an ability to work hand-in-hand with product designers to improve processes, or to assemble complex systems. They will require more education and training, and they will require continuing education as the pace of change in products and processes steps up. In short, manufacturing is becoming knowledge work. And more and more, such work will be a key enabler for America to continue as the most innovative place on the planet.

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Topics: Business • Economy • United States

soundoff (21 Responses)
  1. manmohanmanu

    Informative article. I work for McGladrey and there's a annual report on the State of Manufacturing on the website " http://bit.ly/IzVhuU " with insights from industry experts and information you may find it useful.

    September 21, 2012 at 11:48 am | Reply
  2. deniz boro

    Look at it as a pyramid or simply triangle. The base of the triangle is the man labour or unskilled workers; About the middle comes the white colors. Not mentioning the summit...comes the higher VAT employees who do only management and brain works.
    With this structure, there is a global administrative challage of encouraging citizens in working in high VAT jobs. Like management, advertisement, banking, and generally service sector. This is all OK if you have subcontracting countries, markets and cheep outsourcing countries. Simply put, if you can get cheap labor force in developing countries and sell goods to developing countries and meanwhile get your basic food cheap from developing countries than you can pay your white collar administrators and high VAT service projects. This is the down-side of the so called globalisation and free market economy. The other end of it is unfortunatelly unemployment and self-emposed dependency on other countries. Directing citizens to high VAT production and services was the EU policy. I do not think it worked or else resulted in disastrious things like the Mad Cow disiese (feeding cows the entrails of their kind) and various genetically manipulated products. This Continental version may be far from the USA farmers. But I 'am sure they can find a meaning in it.

    September 21, 2012 at 12:08 pm | Reply
  3. Constant Geographer

    Reblogged this on Constant Geography and commented:
    The United States will always need local manufacturing. But, we do need a new manufacturing philosophy and new economic plans for continued success. Our current manufacturing environment continues to support labor practices and strategies which are still firmly rooted in early 20th century labor sentiments. We will never hold our own against other countries if we continue to behave as if we are a developing nation. We need heavy investment in education, training, and workforce enhancement to moderate structural changes in U.S. labor markets.

    September 21, 2012 at 12:40 pm | Reply
  4. drywells

    Boeing is the best.

    September 21, 2012 at 2:53 pm | Reply
  5. deniz boro

    Historically, we are only 2 centuries away from waging war agains a better off country (for any reason whatsoever) to get at the resources we need. Chengis Khan raids were only a few centries before that. Nowadays it is done more sophisticatedly and over the table. And certainly not by looking in the eye and beeing honest while speaking. Such dealings are what used to sustain an otherwise unbalanced economy. Because when you take a mega look at the global economy; someone has to give for others to take...regardless of how you proceed.

    September 22, 2012 at 11:00 am | Reply
  6. deniz boro

    A man said to the universe:
    "Sir I exist!"
    "However," replied the universe,
    "The fact has not created in me
    A sense of obligation."
    Stephen Crane

    September 22, 2012 at 1:16 pm | Reply
  7. j. von hettlingen

    Indeed, education is crucial to improving the manufacturing skills of America's working force. Education has to be universal, not just available for those who can afford it. The country has to invest more in schools and universities. Would Romney do so, if he were elected?

    September 23, 2012 at 3:38 am | Reply
    • j. von hettlingen

      I meant to say GOOD eduation has to be universal,

      September 23, 2012 at 11:57 am | Reply
      • sliperystuf

        nice thought,but after education?putting what you learn to practice,to get results,or it was in vain,my piece is that it seems to me the industries forget the people side and focus there subjects or numbers,when at the end of the day your still an individual cause it start with one,no two person are alike.i need a job and because i dont,repond to a question a curtain kind of way or look,whatever the reason,i can do the job but i wont get base on the numbers, so keep looking

        October 1, 2012 at 5:26 pm |
  8. Scott

    Outsourcing does produce cheaper products, because pay rates are less in other countries and/or because certain products, like steel are subsidized by their governments, in order to lower the costs paid in the US. The assumption is that because products are cheaper, that this helps the US and that it makes US companies cheaper. This is true in one sense. But the reality is that corporations pad their bottom lines and set up offshore companies. So shareholders benefit, but not workers. Workers get to buy cheaper toasters, for example. But if you don't have a job, who cares if the toaster is cheaper? Business loves to say that we are just shipping lousy jobs offshore and that everyone should retrain to become a computer programmer or engineer. But this isn't realistic. Most of this talk about free trade, comes out of corporations who love to have lower costs without giving back any benefit to those of us who live in the US. The US needs to follow the example of Alexander Hamilton who enacted tariffs, to protect the "infant industries" of the US.

    September 23, 2012 at 4:39 pm | Reply
    • Darlene

      Well said, Thank You!

      September 27, 2012 at 1:54 am | Reply
    • telleroftruth

      Most manufacturing jobs and locations are some of the fugliest places to work. Not only do you work side by side with blue collar white trash, but in terms of salary and hours they are horrendous. to compete you are guaranteed to work at least 50 hours a week, on salary, therefore no chance for overtime. Not to mention during summers the plants are akin to sweatshops anyway. this fascination with manufacturing needs to stop. Goodbye and good riddance!! China you can have it, enjoy

      Not to mention, how about the 'person without a job' gets a real education instead of working on an assembly line the way his gran-pappy did back in dubya dubya two. Everyone preaches the good old days of yore, but in fact that is simply looking at the past with rose colored glasses. Manufacturing positions are and will always be some of the worst job environments out there, run away from them as fast as you can,

      October 9, 2012 at 9:39 am | Reply
  9. G.J.Robinson

    Fareed Zakaria / Re: Apprenticeship Program – not only in Germany!! Very strong in England in the 1950's!!
    Introduce it here to North America for guaranteed jobs!!

    September 24, 2012 at 3:11 am | Reply
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    September 25, 2012 at 3:42 pm | Reply
  11. ka5s

    Too many eggs, in too small a basket. We need to make or sell enough to pay for what we buy. We would LIKE to make more, but so far we are not even able to pay for everything we buy with what we sell.

    One reason for that is that we don't make or sell what the rest of the world needs, at prices the rest of the world - or enough of it - can afford or wants to pay. Solve that problem, and its still not instant prosperity, for a good deal of our overhead is clean air, clean water, good working conditions and wages high enough to offer many hourly workers (not all) a Middle Class standard of living.

    Other countries may not have that overhead, and when we compete with them, other things being equal, they will win the business. Are they equal? Sometimes. And sometimes not.

    September 28, 2012 at 11:50 am | Reply
  12. telleroftruth

    most manufacturing jobs and locations are some of the fugliest places to work. Not only do you work side by side with blue collar white trash, but in terms of salary and hours they are horrendous. to compete you are guaranteed to work at least 50 hours a week, on salary, therefore no chance for overtime. Not to mention during summers the plants are akin to sweatshops anyway. this fascination with manufacturing needs to stop. Goodbye and good riddance!! China you can have it, enjoy 🙂

    October 9, 2012 at 9:35 am | Reply
  13. Rakesh

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    December 26, 2012 at 9:09 pm | Reply

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