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Does Manufacturing Matter?

By Herb Shields | 05/03/2010 | 8:19 AM

 

Last month I participated in a lively discussion on this topic at a local APICS sponsored breakfast.  Since many of the attendees have careers that are at least in part related to manufacturing, there was admittedly some built in bias towards the answer, “Yes it does.”

It matters to all of us as consumers because in spite of the conventional wisdom that says little is still made in the USA, in consumer products in particular, that is not true.  Most readers of DC Velocity work with or for companies such as Proctor & Gamble, Kraft Foods, Pepsico, and/or their suppliers with significant manufacturing capacity in the US.  One concern expressed by many of my colleagues during our discussion had to do with reminding those not in the CPG industry that manufacturing remains an essential part of the domestic economy.

Can the government save manufacturing?  The group did not think it could or should.  We would like to see more assistance for small manufacturers that would lower the cost of doing business and provide incentives for new markets such as renewable energy.  Yesterday’s Wall Street Journal had an article on the approval of the first off shore wind farm off the coast of Massachusetts.  Two nuclear power plants were approved for construction earlier this year.  Yet both the wind turbines and nuclear plants are far from sure things.  Meanwhile China and other countries are moving ahead more rapidly.

Who is most to blame for losses over the years in manufacturing – management or unions?  We came to no agreement on this one, other than to conclude that both sides did not always take the long term view.

Last week, we saw some very positive news for US- based manufacturing.  The Tempe, Ariz.-based Institute for Supply Management's (ISM) manufacturing index rose to 59.6 in March from the February reading of 56.5.

The strong number was driven by significant growth in new orders and production, as well as larger inventories, which grew for the first time in 46 months.

The breakeven point for the index is 50, with a reading above that indicating growth in the sector. March's higher score means the manufacturing sector grew at a faster pace than the month before.

The monthly report surveys purchasing managers, and because it's a survey, some analysts say the index is highly subjective and overrated. But others view the report as a valuable indicator of broad trends and the overall health of the economy.  As a former Purchasing Manager who participated in the monthly surveys, I trust the numbers.

Overall, 17 of the 18 manufacturing industries surveyed showed growth. Plastics and rubber products is the only industry that reported contraction.

It will be interesting to see if manufacturers can continue to make progress for the balance of 2010.

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About Herb Shields

Herb Shields

Herb Shields has run Chicago-based HCS Consulting since 2000, helping clients across multiple industries and in higher education improve their supply chain strategy and execution. Shields has more than 30 years as an operations executive for capital equipment, automotive, electrical machinery and consumer products companies. As vice president of materials management at consumer goods company Helene Curtis, Shields led the supply chain organization that helped Helene Curtis win "Vendor of the Year" awards from Wal-Mart Stores and Target Corp. Shields has a B.S. degree in Electrical Engineering from Clarkson University and did graduate work in business at Bowling Green State University.



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