Wednesday, January 28, 2004

What's happening to manufacturing in America?

The cover story of the January 2004 issue of the Industrial Engineer magazine raises the same questions that me and a couple of my friends have been wondering about recently, a time that has coincided with our still unsuccessful job searches. Some of my friends who are completing their Masters degrees in Industrial Engineering have been getting interviews, but then their specializations have been in either supply chain management or their research has involved extensive coding in Java. People whose specializations have been in core manufacturing like me (my specialization is in Production Planning and Control), whose skill sets do not include major programming skills, have not been able to even elicit responses from recruiters, atleast here in Ohio where manufacturing has been in the decline.

In this scenario comes the cover story (download a PDF copy here) in IE magazine. The story, authored by Steven Averett, looks at the various factors that quantify the trends in manufacturing. The accompanying graph presents an interesting picture. While industrial production in the US has been (the obvious decline in the last few years not withstanding) steadily increasing in the last 25 years, while the employment figures have been steadily on the decline.

p. 30

But this scenario is nothing but the effect of better use of the resources that companies have - the 3 Ms in manufacturing i.e. Men, Machine, Money. Companies have been steadily going the lean way, prompting the discarding of positions rendered redundant by the infusion of new technologies. So that picture is accounted for. The next reason is globalization, with countries like India and China being the key areas where companies have been shifting their newer operations, due to lower costs with comparable quality. Again this is nothing new.

However, this rise in production rates is not what it should have actually be possible with the new technologies. If you would look carefully into the production figures of these companies, it would be immediately apparent that they are probably not producing at their maximum possible rates. So is it possible that a turnaround could be accomplished by reducing the effect of imports by actually producing more (decreasing some of the overhead costs due to this increase in the bargain) right here in the US, increasing availability of local products and exploiting the jingoistic tendencies of the average American who would probably buy it over similarly priced foriegn made material. By the way, I am not advocating trade laws against imports. In fact, imposing tariffs on imports from certain countries would only drive importers towards others which are not covered by them, which happened with the steel industry. Instead, proper resource usage could be used to create artificial pressure on the consumer to buy American, by increasing availiability at affordable costs. This could probably effect a turnaround in the manufacturing segment.

However, what strikes me as surprising is the quoting of a survey by a couple of manufacturing research organizations and Deloitte & Touche which postulated that hile the number of manufacturing jobs has declined rapidly in the past few years, the number of qualified fresh grads wanting to take these kinds of jobs has declined too. So there lies the paradox, a classic hen or the chicken question. What decreased first, the number of positions or the number of people wanting those positions? The study mentions that organizations feel that fresh grads do not have the qualities that they require. However the story transfers the onus to the companies saying that they themselves should take it upon themselves to educate the students in this regard via more internships etc.

This last statement seems more or less valid because, I, as someone who has been searching for that elusive position, have noted that almost all the companies call for experienced candidates. This, in my view, reeks of the companies resolve to look for short term gains. I think that if companies could be more accommodative of entry level candidates, this scenario could drastically change. It almost looks as if companies know what they want, but want to get it for free. Don't we all know that there is no such thing as a free lunch?

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