Tag: manufacturing

Good OM Reading: Make It in America

Andrew Liveris’ new book, Make It in America (Wiley,2011) is certainly timely. The author, CEO of Dow Chemical, calls for  a national strategy to revive manufacturing, a plea repeated by President Obama in his State of the Union talk last night. Liveris wants the government to draw a  plan to encourage more manufacturing, to cut taxes, and to make regulations uniform, as in Europe and Asia.

No economy as large as the US can sustain itself without manufacturing, he writes. “Accepting such a future (as a nation of great innovations, and not as a manufacturing society), means accepting a level of joblessness that would make recent years look like a warmup”. This is a good point. If we look at a Top 10 of big time innovators (say Amazon, Apple, Dell, Facebook, GE, Google, HP, IBM, Intel, and Microsoft), we see they only employ an average of 61,000 workers. Since there are 29 people working at Wal-Mart and 2 at Disney for every one at a big time innovator, it becomes clear that we cannot count on innovators for job creation.

Being passive, as we have been for 4 decades, is not a growth strategy, Liveris adds. China has a strategy  to be more than the world’s low-cost toy manufacturer. Brazil is moving beyond its role as an agricultural leader. Some Americans imagine we can thrive by dreaming up new Kindles and iPods, while the Chinese make them. But when we move our capacity to make high-tech products overseas, we lose skill for whole sets of products.

Liveris gives the example of the Kindle. Amazon invented it, but couldn’t find the screen-making expertise and capacity to produce it in the US, so it went to Taiwan. He closes by writing: “Manufacturing is America’s future. Not just its past. Manufacturing is the foundation upon which our economic  prosperity, our growth and wealth and jobs depends.”

Click here to read excerpts of this excellent book.

OM in the News: GE Decides Making Stuff is the Future

An interesting way to end this semester–or start next semester– is through a series of quotes from GE CEO Jeffrey Immelt in a major story in the New York Times (Dec.5,2010). GE, as you probably know, lost 3/4 of its market value with the recent financial crisis–hit harder than any company not in the banking sector, because of its finance arm called GE Capital. With a heritage of industrial innovation going back to Edison’s light bulb, GE lost its way to GE Capital’s cash machine that bolstered the bottom line for over a decade.

GE, according to Immelt, “must rely more on making physical products and less on financial engineering–a path that …is also necessary for the American economy as a whole.…Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led consumption-based economy–and still expect to prosper. That idea was flat wrong”.

“Technology-based manufacturing of all sorts has to be the central part of reinvigorating the economy”, he adds. A White House advisory board has called for doubling US manufacturing employment, to 20% of the workforce. (Refer to Figure 1.4 and Table 1.3 in the text). GE, by the way, is the 2nd largest US exporter, after Boeing.

The products where GE has competitive advantage and a strong manufacturing presence are: next generation jet engines, power turbines, locomotives, nuclear plants, water-treatment systems, medical-imaging equipment, solar panels, and windmills. GE plans to add 4,000 manufacturing jobs in the US.

GE  is stating what is becoming increasingly obvious. We must get back to basics in this country, creating not just services, but goods as well. Nations that do not produce goods sought by others will not be able to compete in the competitive global economy.

Discussion questions:

1. What if  we do continue to become a service driven-economy, with fewer and fewer jobs in manufacturing?

2. Why the change in GE’s attitude?

3. Can we ever revert to making most of the goods we consume, or will China be our biggest supplier for decades to come?

OM in the News: BMW Loves Making Cars in the U.S.

As the Big 3 auto makers still struggle to reclaim markets and manufacturing leadership, BMW announces that employment will hit 7,600 workers in its South Carolina plant next year. Its $750 million expansion means the plant will be the largest car factory in the U.S., dwarfing any Detroit operation.

Of course, with the economy so bad, this is good news, even if some profits end up in the company’s German headquarters. And because of high-tech firms like BMW, South Carolina is the 4th largest net importer of college-educated adults.

Why did BMW decide to make its luxury SUVs here, when it exports 70% of these vehicles to the rest of the world? The Wall Street Journal (Oct.14,2010) reports that US production helps BMW hedge against currency fluctuations around the globe. Another reason…according to U.S.-BMW President Josef Kerscher (in Fortune, Oct.15,2010): This U.S. group has absenteeism of “less than 3%, better than in Germany”.

 Similar good news is that Mercedes plans to shift some production of its best-seller, the C-class sedan, from Germany to the US in 2014. Its not only a currency issue for Mercedes, but the strategy reduces labor and other costs. As we note in Ch.8 (Location), Mercedes already makes SUVs in it Vance , Alabama plant.

Discussion questions:

1. What others reasons are there for foreign car makers to be attracted to the US?

2.Why is South Carolina  a primary destination for auto manufacturers?

3. What brought Mercedes to Alabama (see Ch.8’s OM in Action box)?

OM in the News: Whirlpool Domestic Expansion

Ref: WSJ, Wednesday, Sept. 1, 2010

 Wednesday’s WSJ reports on Whirlpool’s $300 million  upgrade of domestic manufacturing. Both the Cleveland Tennessee plant and the Clyde Ohio plant are seeing major upgrades.  Whirlpool is aggressively restructuring their North American plants… which includes closing plants in Evansville, Ind., Oxford, Miss. and a Michigan plant.  The Clyde plant  is to reduce time to build a washer by 10% and boost output by more than 10%.   

Also while great concern is continually exhibited in the press about the fact that manufacturing employment continues to decline… as OM profs we need to explain (apparently again and again) that manufacturing production and productivity continues to expand. Manufacturing employment does continue to drop ….

But the US is still the largest manufacturing country in the world with  annual productivity increases on the order of 3.4% since 1950.  

This article open a great discussion:

(1) about Whirlpools 2006 purchase of Maytag (industry consolidations… economies of scale) and

(2) the fact that while a plant in Mexico was considered, Whirlpool is making these expansion in the US.

(3)  You can also ask students by how much manufacturing employment drops each year (the article says .1%) or what percent of the work force is employed in mfg.  (the text says 11.2%, but perhaps lower this year).

(4) What are  the implications if manufacturing employment was not dropping … what if employment had never dropped in agriculture or the number of  telephone operators.