USA 2011: The Rise of The Manufacturing Machines

To answer your question: Yes, the title is a play on the Terminator series.  In the past decades machines have been getting faster, smarter, and more efficient. Many fear they are taking over many aspects of our lives, most importantly our jobs; however, many of those manufacturing jobs have instead been shipped overseas. Now the overwhelming sense is that we are losing jobs not to machines, but to cheap labor, benefiting other countries.  The question is, are the same machines we feared going to be what saves our manufacturing industries and the economy?

The trend of moving jobs to the countries where labor is cheap, has been going on for a long time now; however, we have recently seen a few issues raised especially with manufacturing in China, which is no doubt our largest threat.  With the advancement of skilled laborers in China has come higher wages. Skilled workers are demanding better pay and benefits as they begin to see the value in their work. The number of workers not returning from their homes in rural parts of China after their new year’s holiday vacations has also been on the rise, forcing employers to increase  pay as a way to entice some to return. These workers are also facing inflation at very high rates with double digit percentage growth in food prices seen in China in the last couple of years.

Aside from rising labor cost, we also have the issue of quality. While China is great at producing many products cheaply, it hasn’t come without some concern over the quality of those products. We have seen alarming issues arise regarding the quality of Chinese goods especially in areas where it matters most, such as the toys our children play with. Many of us will often compromise quality when it affects us, but find it more alarming when it affects our children and family members.  Or, in the manufacturing world, the quality of components that go into our products.  Many business owners are not willing to risk their company’s name and reputation over quality issues from poorly made components for the sake of saving a few dollars.

While the issue of rising labor cost could be reduced in the short term by moving production to other countries, the quality issue is harder to solve without raising prices. Furthermore, we are beginning to see the value of “Made in the U.S.A.” and many are beginning to seek out American made products for quality and the long term cost savings associated with higher quality. Value is the key word.  The educated consumers don’t want the cheapest products or the most expensive; they simply want the products with the best overall value.

Productivity in the manufacturing sector has seen great advancements in the last few years and is cited as a contributing factor towards turning the economy around. We are seeing companies such as Toyota, Hyundai, and recently BMW increase their production capabilities in the U.S. thanks to the advances in technology which help reduce cost.  Did you know that the top two cars made in the US with the highest percentage of domestically made parts are the Toyota Camry and the Honda Accord? (Reference: “American Made Index”) What we are learning from these companies, as well as the hundreds of thousands of US based manufacturers, is that you can bring manufacturing back to the US and still thrive. While labor costs may be a weakness, manufacturers in the US can prosper through their strength in innovation, productivity increases, and focus on producing higher quality products. These factors are what lead us to believe that the evil machines, once thought to be taking jobs away, are what will actually help  bring back jobs to the US.

Posted by Francisco Pena, Sales Engineer, ProfitKey International
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