The number of recent articles and pronouncements lamenting the loss of manufacturing jobs to China/Asia is almost overwhelming. Is the U.S. manufacturing sector doomed? Those of us who work in the trenches with small and middle-sized U.S. manufacturers have a different perspective: There is an antidote to the “radioactivity” from the “neutroning” of the manufacturing sector.
To be sure, jobs have been (and will be) lost, manufacturing sites have been closed, and likely forever. There is speculation that no autos will be domestically manufactured here in five years, and the survival of key supply industries such as steel will only occur with consolidation of manufacturers and massive government subsidies. While harsh, these “insights” are indicative of the current thinking. Others believe that only a series of tariffs to “level the playing field” will prevent decimation of the U.S. manufacturing sector.
Companies that have no definable edge, something that differentiates them from competitors such as skill levels, unique products, specialized equipment, and leaner cost structures, will likely not survive. But these firms would probably not survive anyway in the long run in a normal competitive environment. In the current global, hypercompetitive marketplace, they are an endangered species. Companies that have not kept pace with changes in their marketplace face a huge challenge, particularly if their products have become commoditized over time.
So what can be done? First, plastic products companies must decide what they are best at. Can they offer product innovations, precision tolerances, flexible product variations, fast turnaround, unique technology, combined systems, etc.? When these factors have been identified and their desireability tested among current/potential customers, the next task is to match these best attributes to customers that will pay for them as part of the pricing mechanism. Yes, there are still customers who value specialized expertise in medical, aerospace/defense, and premium construction products, for example. And there are others. While there are virtually no customers that will pay for inefficiencies in operations, they will pay for products that give them better manufacturing throughput or technologically advanced products, for example. Operational inefficiencies can be reduced/eliminated using Lean Manufacturing and/or Six Sigma programs. Technology improvements need not be high-tech, just differentiating enough to give the customer what is desired. Finally, the company's management must realize that they may have to enter entirely new market sectors to remain economically viable. Some may elect to create an Asian subsidiary, which is not always effective for small/medium firms for a number of reasons (finances, manageability, unfamiliarity with foreign business practices, etc.). But most can find other niches right here in NAFTA. After all, most small/medium businesses were based on niche strategies at their beginning, and they are nimbler in general than larger firms: for example, they usually are less committed to status quo because of an installed equipment base, or dependent on a concentration of traditional customers for production volumes. For current owners, it is a return to what the company founder based his or her original strategy on doing something needed by customers better than others or filling an unmet need ... and getting paid for it.
Too simple an approach? It is really just that simple, and just that hard to do. But it works. It takes courage, foresight, determination, creativity, integrity, partnering with customers/banks /suppliers, and especially having, developing and attracting capable management and manufacturing people: All qualities that have underpinned American manufacturing success in the past, define it now, and will characterize it for years to come.
Stephen R. Hudson is a management consultant in Bedford, N.H., with over 12 years experience in P&L and manufacturing operations management.