manufacturing jobs – The OM Blog by Heizer, Render, & Munson

OM Podcast #19: U.S. Manufacturing Careers and College Students

In our most recent podcast, Barry speaks with Mike Nager, an executive at the large German firm Festo Didactic. Mike is the author of Smart Student’s Guide to Smart Manufacturing and Industry 4.0, and is an advocate for U.S. manufacturing careers. Barry and Mike discuss the awareness gap around U.S. manufacturing. Mike tells us that manufacturers are offering lucrative, technology-driven careers, and that he and Festo Didactic are doing innovative things to help prepare students for those careers.

Heizer Render OM Podcast · OM Podcast #19 (5/3/24): US Manufacturing & the Awareness Gap

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Transcript

A Word document of this podcast will download by clicking the word Transcript above.

Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM. See our earlier blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more! https://www.pearson.com/en-us/help-and-support/contact-us/find-a-rep.html

OM in the News: Chinks in China’s Armor Create Opportunities for U.S. Industrial Recovery

China is facing a number of domestic issues including labor shortage, shipping and electricity. Prices there are rising at a record pace as a result of the inflationary forces hitting economies across the globe, including increasing wages and soaring energy costs. China’s official producer price index for the month of September showed a 10.7% increase over a year ago, following a 9.5% jump in August– the fastest increase since the mid-1990s.The U.S.-China relationship is facing additional issues: Taiwan and the possibility of decoupling.

While these issues will continue to cause problems for U.S. global supply chains, they are also propelling a long overdue push in the U.S. toward greater self-sufficiency. The U.S. trade deficit continues to rise. The deficit with China is up 10% from 2020, projected to reach $340 billion, which represents about 2.5 million manufacturing jobs. Recent reports from the Reshoring Initiative (Nov. 2021) indicate that the U.S. is starting to focus on key actions to pivot away from dependence on China.

Reshoring Initiative indicates that logistics managers are now beginning to pivot towards regional/domestic supply chains. The manufacturing industry plans to limit future disruptions by using advancements in technology, reshoring of production, and growth of the supply chain as-a-service business model. In the wake of ongoing global supply chain disruptions, a consortium of North American manufacturers has launched a new endeavor with the express intent to reverse the 5-decade trend toward offshoring. Its goal is intended to help the U.S. achieve balance with China.

Manufacturing executives expect the following five skills to increase significantly within the next 3 years: (1) technology/computer skills; (2) digital skills; (3) programming skills for robots/automation; (4) working with tools and technology; and (5) critical-thinking skills.

Shopping “Made in America” and sustainability are also found to be top of mind for consumers of all generations by Reshoring Initiative, with new data revealing: (1) that consumers are gravitating toward local shopping and American-made goods, and (2) that 63% of consumers want personal products and cosmetics to be made within the U.S. with 52% citing materials used in manufacturing as the reasoning.

Further, a recent survey of 1,000 U.S. respondents aged 18-24 found that the COVID-19 pandemic has had an impact on Gen Z’s perception of manufacturing. More than half of respondents (54%) said they had not considered frontline manufacturing as a potential career before the pandemic; while 24% are now open to it.

Classroom discussion questions:

Why the move to reshoring now?
How do your students feel about jobs in manufacturing and OM?

OM in the News: German Apprenticeships in South Carolina

BMW’s plant in Spartanburg, S.C., is its biggest production facility in the world. It produces 1,400 cars a day and sends 70% of them overseas, making BMW the biggest car exporter in the U.S. By employing 9,000 people and training 100 apprentices at any one time, the BMW plant contributes to a skilled American workforce.

Overall, German companies employ about 700,000 people in the U.S. Often they implement the German-style training schemes for young people. In Germany, half the graduates of high schools and junior high schools choose a track that combines training on the job with further education at a public vocational institution. “This apprenticeship model,” writes the German ambassador to the U.S. in The Wall Street Journal (May 5, 2017), “is one reason why Germany has the lowest rate of youth unemployment in Europe and has been able to keep manufacturing jobs in the country.”

As high-wage countries, Germany and the U.S. face similar challenges in protecting existing production facilities and creating new manufacturing jobs. One of the most decisive factors for companies is whether they can find skilled and motivated workers, which is what apprenticeship programs provide. It’s also important to prepare for the industries of the future. In the era of New Manufacturing (what Europe has dubbed “Industry 4.0”), artificial intelligence and other digital technologies will transform factories and the workplace.

We all know that there is a tendency toward higher education in the U.S. Nevertheless, the success of the German apprenticeship model builds on the conviction that it is an equivalent alternative to college education. That approach in Germany has provided a solid return on companies’ investment, helped them to innovate, and contributed to warm relations between employers and employees.

Classroom discussion questions:

Why is this model so rare in the U.S?
What other German company has widely used apprentice training in the U.S? (see Chapter 1)

OM in the News: China Begins to Lose Jobs

Some assembly line jobs are reshoring or moving to cheaper countries

Between 1999 and 2011, the U.S. lost 2 million jobs because of a surge in Chinese imports. With its large pool of workers who earned much lower wages than their U.S. counterparts, China attracted manufacturers seeking to reduce costs, bolster profitability and keep prices low. But “China’s labor market has changed sharply in recent years. China is moving up the value chain,” reports The New York Times (July 23, 2016).

Wages for Chinese factory workers now average $424/month, 29% more than just 3 years ago, and labor costs are now significantly higher than in many other emerging economies. Workers in Vietnam earn less than 1/2 the salary of a Chinese worker, while those in Bangladesh get paid 1/4 as much. The costs of manufacturing in China are now almost the same as in the U.S., after taking into account wages, worker productivity, energy costs and other factors.

Without the lure of large cost savings, more American companies are “reshoring,” with 24% saying they are actively shifting production home from China or are planning to do so over the next 2 years–up from only 10% in 2012. As a result, the number of manufacturing workers here is expected to increase over the next 5 years.

But it is not just the U.S. that is taking jobs away. Almost 1/2 are moving into other developing countries in Asia, while nearly 40% are shifting to the N. America. Foxconn, which makes Apple iPhones in Chinese factories, is planning to build 12 new assembly plants in India, creating 1 million new jobs there. Many Chinese companies are burdened by excess capacity, and downsizing may be unavoidable. China estimates that 1.8 million workers could lose their jobs in the steel and coal sectors alone.

Classroom discussion questions:

1. Will the U.S. recapture all the manufacturing jobs it lost? Why?

2. What is China doing to stay competitive?

OM in the News: Will Manufacturing Jobs Ever Return?

The production line of a lamp factory in China. Despite efforts to revive manufacturing in the U.S., economists say the chances of a recovery are slim, and developing countries face extra challenges as industry fades. — A lamp factory in China. Developing countries face extra challenges as manufacturing jobs fade.

Half a century ago, harvesting California’s 2.2 million tons of tomatoes required 45,000 workers. In the 1960s, though, scientists at U. California-Davis developed an oblong tomato that lent itself to being machine-picked. César Chavez’s United Farm Workers union was furious and made stopping mechanization its No. 1 priority. In 1980, the Carter administration declared that the federal government would no longer finance research that could lead to the “replacing of an adequate and willing work force with machines.” The freeze on research may have slowed the mechanization of California’s harvests, but 20 years later, only 5,000 workers were employed to pick a 12-million-ton crop of tomatoes.

In America’s factories, jobs are disappearing, too. Despite political rhetoric, though, the problem is not mainly globalization. Manufacturing jobs are on the decline in factories around the world, reports The New York Times (April 27, 2016). “Global employment in manufacturing is going down because productivity increases are exceeding increases in demand for manufactured products by a significant amount,” says Joseph Stiglitz, Columbia U.’s Nobel economist.

Will America be able to produce a manufacturing renaissance at home? “The likelihood that we will get a manufacturing recovery is close to nil,” says Stiglitz. Over the course of the 20th century, farm employment in the U.S. dropped to 2% of the work force from 41%, even as output soared. Since 1950, manufacturing’s share has shrunk from 24% to 8.5% of jobs–and is still in decline. But the shrinking of manufacturing employment is global–and a worldwide zero-sum game. Japan’s long stagnation is a consequence of a decades-long development strategy that left it overly dependent on manufacturing. What options does the U.S have? Health care, education and clean energy, to name a few.

I highly recommend you read this thoughtful article. It is a great piece to share with students as you cover Chapter 1.

Classroom discussion questions:

Why are manufacturing jobs important to any nation?
What is keeping the U.S. from regaining millions of factory jobs?

Good OM Reading: The Coming Robot Apocalypse?

Merrill Lynch just sent me a 300 page report the firm recently released called Robot Revolution – Global Robot & AI Primer. It makes for fascinating reading. “We are facing a paradigm shift which will change the way we live and work,” the report states. “The pace of disruptive technological innovation has gone from linear to parabolic in recent years. Penetration of robots and artificial intelligence (AI) has hit every industry sector, and has become an integral part of our daily lives.” We are in the midst of a fourth industrial revolution, following steam, mass production and electronics, concludes the study.

Merrill Lynch estimated robots could boost work productivity by 1/3 in countries and reduce staff costs by about the same amount. Manufacturing jobs, as well as jobs that require little to no creativity, are at risk of being replaced by robots. Jobs that pay less than $35,000 a year are five times more likely to be replaced by robots than jobs that pay $100,000 a year or more. The firm estimates this will be a $153 billion market by 2020, with robots performing 45% of manufacturing tasks by 2025, compared with 10% today.

“Robots and AI are becoming an integral part of our daily lives,” says the report, “as providers of labor, mobility, safety, convenience, and entertainment. We anticipate growing risks around robots, the smart grid, autonomous cars, and drones and commercial flights. Managers are raising legitimate, longer-term questions as to when robots/AI reach a point that machines are smarter than humans, and around the development of fully autonomous weapons. The report cites a Pew survey that found 48% of industry leaders worry about the effects of robots on society. If robots take all these jobs, for example, it risks societal upheaval and collapse. Then there are the military drones. The firm estimates that $123 billion will be invested in drones over the next decade. Who is going to control the drones, asks Merrill Lynch, and what are they going to do with them?

OM in the News: Why Manufacturing Still Counts in the U.S.

“The U.S. economy,” writes The Wall Street Journal (Jan.14, 2015), “is dominated by service work but manufacturing matters because it includes many middle-class jobs.” The Bureau of Labor Statistics estimates that employers in manufacturing, mining and construction pay an average of $36.37 an hour in wages and benefits, compared with $31.46 paid by stores, restaurants and other service companies. The U.S. lost more than 6 million manufacturing jobs between 1998 and 2010, largely to low-cost countries. Since then, the number of U.S. factory jobs has recovered nearly 7% to 12.2 million, compared with about 17.5 million in 1998.

Manufacturing creates demand for supplies and raw materials, as well as such services as delivery and machinery repair. Every $1 of sales by U.S. manufacturers yields $1.37 of output in other parts of the economy. A dollar of retail sales adds 64 cents. Expanding U.S. manufacturing allows the country to export more and rely less on imports. (The U.S. has run trade deficits every year since 1976). Manufacturing also is a source of innovation. It accounted for 83% of R&D conducted by businesses in 2013.

More U.S. companies would shift production from abroad if they analyzed the costs of overseas production to include such things as the shuttling of executives abroad and holding large inventories as a hedge against supply disruptions, says the Reshoring Initiative. But Harvard Prof. Willy Shih is less optimistic. “China has really captured the whole electronic supply chain,” he said, “and that is unlikely to return to the U.S. Instead of trying to make established products in the U.S., we’re going to have to focus on next-generation technologies” in, for example, advanced pharmaceuticals.

Some of the hurdles are practical. The U.S. needs to rebuild its supplier base, as well as invest in more efficient manufacturing equipment. The average age of industrial equipment in the U.S. has passed 10 years old, the highest since 1938. This article is a good way to start off the new semester as it brings current OM issues to the fore.

Classroom discussion questions:

1. What factors work against the U.S. regaining the millions of manufacturing jobs that were lost?

2. Why is manufacturing so important?

OM in the News: Why U.S. Manufacturing is Poised for a Comeback

Manufacturing in the U.S. is starting to make a comeback, and is poised for even bigger gains in the years ahead, opines The Wall Street Journal (June 2, 2014). The number of factory jobs has started to rise after plunging for decades, edging up by about 600,000 over the past 4 years to more than 12 million. Some U.S. companies are bringing jobs back home, and foreign businesses are setting up shop. “The economics of the world are changing in favor of U.S. manufacturing,” says Boston Consulting Group. Here are 4 proposals why this is so:

1: U.S. Costs Are Getting More Competitive. While wages soar at double-digit rates in China and some other emerging countries, they have stayed roughly level in the U.S. in recent years, narrowing the gap between America and Asia. China’s overall manufacturing-cost advantage has shrunk to just 4%. When wages are adjusted for productivity and the costs of shipping and inventories are included, it can be more economical to make some products in the U.S. than in Asia. Further, the surge in U.S. production of oil and natural gas, made possible by fracking, has pushed down energy costs.

2: Companies Are More Eager to Produce Near Their Customers. Companies are increasingly focused on reacting quickly to changes in demand, which is a lot easier when they’re making their products close to the customer. Manufacturing here can reduce the time needed to obtain goods to days or weeks from the 2 months needed to ship goods across the Pacific and get them through customs.

3: The Political Climate for Manufacturing in the U.S. Has Improved. State and local governments in the U.S. now are competing fiercely for investments and offering some rich packages. The declining power of U.S. unions also encourages some manufacturers to set up here rather than Europe or elsewhere.

4: Foreign Companies Are Betting on U.S. Manufacturing. China remained the No. 1 destination for foreign direct investment in 2013, but its total last year rose just 2% from 2012 to $258.2 billion. The U.S. attracted $193.4 billion, up 16%, to rank No. 2.

Classroom discussion questions:

1. Ask your students to make a rebuttal to each of these 4 cases.

2. Which factor do you think is most important?

OM in the News: Whirlpool Jobs Return to U.S.

Whirlpool is shifting some production from Mexico to this Ohio plant

Whirlpool is moving some of its washing-machine production to a plant in Clyde, Ohio, from one in Monterrey, Mexico, reports The Wall Street Journal (Dec. 20, 2013). The shift—another sign of the trend for U.S. manufacturers to bring back some of their production from abroad—will create 80-100 jobs at the Clyde plant, which currently employs about 3,300 people and is the company’s biggest washing-machine factory.

Wages for production workers in Clyde, typically around $18-$19 an hour, are roughly five times higher than in Monterrey. But the shift should lower costs overall. The Clyde plant is more automated and electricity costs are much lower than in Monterrey. Whirlpool also expects to save on transportation because the products won’t have to be shipped across a border before going into the company’s North American distribution network. Like many other companies, Whirlpool is trying to make products closer to where it sells them. That reduces the time needed to respond to changes in demand.

Since 2010, companies have created more than 80,000 manufacturing jobs by moving production to the U.S. from foreign countries, states the head of the non-profit Reshoring Initiative. “The U.S. continues to lose other manufacturing jobs to offshore plants, but those losses now are being offset by inflows,” he says, adding: “We’ve stopped the bleeding.”

Apple, which relies heavily on plants in China for its top selling gadgets, recently began making some of its high-end Mac Pro desktop computers in Austin, Texas. Wal-Mart Stores Inc. has been prodding some of its suppliers, including makers of socks and light bulbs, to provide U.S. made alternatives.

Classroom discussion questions:
1. Why are more firms “reshoring” in recent years?

2. Name several companies (besides the 3 in this article) that have brought manufacturing back to the U.S.

Good OM Reading: GE’s American Manufacturing Comeback

For much of the past decade, GE’s storied Appliance Park, in Louisville, appeared less like a monument to American manufacturing prowess than a memorial to it. Six factory buildings, each one the size of a large suburban shopping mall, line up neatly in a row. The parking lot in front of them measures a mile long and has its own traffic lights, built to control the chaos that once accompanied shift change. But in 2011, Appliance Park employed not even a tenth of the people it did in its heyday.

Back in 1951, GE didn’t build an appliance factory so much as an appliance city–a facility so large it got its own ZIP code (40225). By 1955, Appliance Park employed 16,000 workers and by the 1960s, the workforce was turning out 60,000 appliances a week. Employment peaked at 23,000 in 1973, but by 1984, it had fewer employees than it did in 1955. Former CEO Jack Welch suggested shuttering it. Current CEO, Jeffrey Immelt, tried to sell the entire appliance business in 2008, but as the economy nose-dived, no one would take it. In 2011, the number of employees bottomed out at 1,863.

Yet this year, writes The Atlantic (Dec., 2012)– in a great cover story article you may want your students to read–something exciting has begun to happen! Appliance Park opened an all-new assembly line (its 1st in 55 years) in Building 2— dormant for 14 years—to make low-energy water heaters, which had previously been made for GE in China. Then GE opened a 2nd new assembly line, this one in Building 5, to make new high-tech French-door refrigerators that had been made in Mexico.

Another assembly line is under construction in Building 3, to make a new stainless-steel dishwasher. Building 1 is getting an assembly line to make front-loading washers and matching dryers; GE has never before made those in the United States. And a new plastics-manufacturing facilities is now making parts for these appliances.

In the midst of this revival, Immelt made a startling assertion. Writing in Harvard Business Review, he declared that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.” Just 4 years after he tried to sell Appliance Park, believing it to be a relic, he’s spending some $800 million to bring the place back to life.

OM in the News: A Tale of 2 Auto Workers

If you want to add a human touch to your discussion of Human Resources and Job Design in Chapter 10, ask your students to read Businessweek’s (Oct. 15-21, 2012) article called “A Tale of 2 Auto Workers.” Here are excerpts.

Joe Geiser, 51 Blank and shear operator at GM’s metal fabrication plant in Lordstown, Ohio. When General Motors announced plans to shut down its plant in Massena, N.Y., in 2008, Joe Geiser pulled up roots and moved to the automaker’s factory in Lordstown, Ohio. Six months later, Geiser was laid off when GM, which posted a loss of $31 billion for 2008, continued cutting costs. But slowly, manufacturing picked up. In 2009, after nine months out of work, Geiser was rehired. “I was getting 40 hours a week at my full rate—$28 an hour,” he says, noting that his UAW contract guaranteed him pay security. Eventually, GM added back its third shift. It also hired new workers, though their “Tier 2” union contracts aren’t as generous as the costly legacy contracts that have made competition with nonunionized automakers difficult for GM. “I feel bad for them,” says Geiser.

Terry Gosha, 46 Assembly-line group leader at Kia’s plant in West Point, Ga. Kia Motors opened its first American plant in West Point, Ga., in 2009. Before landing his job there that year, Terry Gosha was laid off by Panasonic twice. The first factory relocated to Mexico, and the second shut down. Today, with Kia doing brisk business, he feels secure. “Now I got bills caught up, and when I’m off the job I can actually relax, get a good night’s sleep, and enjoy my family.” In the past three years, Gosha has been promoted from a $14.90-an-hour assembly-line job to a salaried group leader position overseeing 35 people. “I’ve been here since the plant’s infancy, before there were even 1,000 people,” he says. Right-to-work states like Georgia and S. Carolina, where companies are freed from union demands, have attracted automakers including Honda, BMW, and Mercedes. Gosha doesn’t mind that he’s not part of a union. “There’s plenty of work here—and everyone feels secure,” he says.

Discussion questions:

1. Compare the policies of the two companies.

2. For which company would students prefer to work? Why?

OM in the News: US Productivity Gains Make Manufacturing More Competitive

Two recent articles in the Wall Street Journal provide some good talking points as you start your new semester, discussing productivity in Chapter 1. The first piece (Jan.12,2012), reminds us that manufacturing employment in the US has declined steadily in the past 6 decades. And despite a growth of 334,000 jobs in the past two years, we are still down 2.3 million factory jobs since the recession began. “That’s not to say American manufacturing is withering,” writes the Journal. “Factories have been producing more with fewer workers.” Productivity is up an amazing 40% since 2007 as producers have adopted new technologies, with better-skilled workers whose wages are staying low. And, “Productivity, in the long run, is good. US manufacturing may do ok in the decade ahead,” especially as the cost of manufacturing overseas narrows. Modern factory jobs that require “brainpower often pay well and are secure.”

The second Journal piece (Jan.6,2012) cites sharply lower costs in the US relative to Canada and describes how US manufacturers have become more competitive globally because of efficiency, flexible work standards, and increased automation. The US, with a decrease of 13% per unit of output since a decade earlier, has outperformed Germany (where costs are up 2% ), Canada (up 18%), and Korea (up 15%). This means some manufacturers are bringing production back to the US, partly to reduce logistical snarls and to take advantage of the cheap dollar and cheap natural gas.

In particular, the article cites Caterpillar (moving jobs from Ontario, to Illinois, where wages are 1/2 of what they are in Canada), Navistar (from Ontario to Ohio for lower wages and more flexible work rules), Electrolux (from Quebec to Tennessee), and Siemens (from Ontario to North Carolina). There is a short video embedded in the Journal article.

Discussion questions:

1. Will the US ever recover the full number of manufacturing jobs lost?

2. Why has productivity increased so dramatically in US factories?

OM in the News: “Comparative Advantage” and American Jobs

This is the first time I recall The Wall Street Journal (Jan.26,2011) treating the subject of the Theory of Comparative Advantage. We cover this topic in Supplement 11 as a means of justifying outsourcing. The theory basically states that each country should concentrate its energy and skills on the goods and services that it is more productive at than the rest of the world.

Matt Slaughter, a dean at the Tuck School at Dartmouth, points out that the last time the US had 11.7 million manufacturing jobs (the number we have today) was in 1941. Should we have more? He writes: “A competitive America does not mean competitive success for every American industry. Many voices argue that manufacturing is somehow special….But a key insight into the principle of comparative advantage…is that hard-working Americans are not going to excel at everything….It’s okay that Phil Mickelson is better off on the golf course and not painting his own house”.

“Imports do not represent failure”, Slaughter adds. ” They raise the standards of living”. Questions of whether we have a comparative advantage in emerging clean technologies “are best left to the markets”.

He suggests that for the US to be globally competitive, we must invest abroad as well as export there. Manufacturers of aircraft engines, elevators, and earth movers, for example, require after-sales maintenance and support that requires foreign investments on our part. More maintenance and repair of tractors in China and India mean more R&D jobs here. And more Wal-Marts and Red Lobsters in those countries mean more logistics jobs in the US.

He concludes that “excessive government backing of particular companies and industries typically squanders taxpayer resources and stifles sustainable growth”.

Discussion questions:

1. Compare Slaughter’s comments to the ideas of Liveres in yesterday’s blog.

2. What is our comparative advantage in this country?

3. Where do services fit into this mix?