Looking to 2021 and beyond, there is more reason for hope in U.S. manufacturing than at any time since the 1990s, reports The Wall Street Journal (Dec 17, 2020). Three major themes are gaining traction that will carry manufacturing to new prosperity: a quick recovery from the recession; localization of supply chains (onshoring); and technological advancements that level the playing field between the U.S. and low-cost countries.
U.S. manufacturing lost its lead some time ago. Lack of sustained investment, noncompetitive labor rates and degrading infrastructure opened the door for low-cost countries, notably China, to take the lead as manufacturers shifted production overseas. The end result was an industrial sector that leaked jobs and fell behind in technology. So why a turnaround?
First, the industry is poised to emerge from the Covid-19 recession much more quickly and robustly than it usually does from downturns. Data are overwhelmingly supportive of an industrial economy on the mend. With low interest rates and rising order books, manufacturers are boosting investments in both factories and new products.
Second, pre-pandemic, there was already a rising concern around supply-chain risks. Companies that a decade ago felt comfortable as suppliers consolidated and centralized—often solely in China—began to lose faith in globalization and made plans to onshore. Firms began to see that shipping intermediary products halfway around the world and often back again was no longer productive. These concerns were elevated to near panic as supply chains shut down in the early days of Covid. High-profile shortages, such as the lack of PPE, served as a broader wake-up call for the localization of supply-chains.
Third, automation and other technologies are almost at the point where the U.S. can produce the same quantity of product with half of the employees that would be needed in a similar factory in China. And advancements are accelerating. With progress in data analytics, low cost cloud computing and AI, the American factory is evolving into a new age.
Classroom discussion questions:
- Chapter 1 in your Heizer/Render/Munson OM text describes 3 productivity variables. How does each apply in this article?
- What other current problems have encouraged the localization of supply chains?
I am currently a student of the Master’s Degree in Industrial Administration at UNAM in Mexico City.
The pandemic as an external factor has transformed the world of operations. The strategy adopted by the US in this race to exit the ravages of the pandemic is interesting, and under the question of:
What US strategies could we adopt in other countries to have a positive effect on our economy reactivation?:
a) A rapid recovery from the recession; and is that, The one caused by the Covid-19 pandemic is “the shortest recession in history”, according to published data, the second quarter of 2021, GDP grew 6.5% compared to the same period last year and 1.6% when compared to the previous quarter. This puts the economy at its pre-pandemic level, in our opinion this effect was potentiated by the great medical and research work carried out by the US in the face of the health emergency, they allocated resources immediately to develop their own vaccine, test it and distribute it among its population to control infections and thus begin to reactivate the life of the country. This makes us wonder how it is that the nations of Latin America have not been able to compete in these lines of research and this leaves us vulnerable and at the expense of what developed countries build.
B) Localization of supply chains (onshoring); It is interesting as a country that always looked for the maquila at the best price today thanks to border closures, it will find that the best strategy is manufacturing in national territory, cutting health risks due to imports, transfers, customs expenses and times of delivery or storage, giving continuity to its operations, it is clear that by activating jobs, the income of the population was restarted and with it the reactivation of the economy, definitely a great success, without neglecting the nationalist sentiment that surrounds it. Without a doubt, this is a great call to manufacturing countries to start increasing national productions.
Those affected are precisely the countries that had production and maquila relations with the United States, without a doubt this does affect and will affect the economy of those countries, but this is the huge opportunity to create new business, the future of our economy is now in our hands as profesionals, either with an increase in quality levels, improvements in service, or creation of new businesses.
C) Technological advances, Undoubtedly the technological resources factor becomes crucial and the US has this, currently they are the ones who invest the most in the fields of research and technology, the cradle of world innovation is in Silicon Valley and has shown it through the investments that it has made in its industry today and the speed with which it has responded to the different problems of the pandemic, the mobilization of its workforce through remote work, the adoption of new work schemes, the structuring of the industry .
Although innovation and technification requires economic resources, it also requires creative thinking, the human capital that has that line of thought that solves problems, and it is here that perhaps Latin American countries need to make a change of thought and stop being expert producers and wondering a little more about how we can improve, we are on the way but we still need to consolidate this type of thinking that can bring great benefits to our nations.