It was once famously said, of politics, that “all politics is local.” Could it be true, too, of manufacturing? A Harvard professor said as much in a 1998 paper, and what he said then is proving true today.
Michael Porter of Harvard wrote in his paper entitled “Clusters and the New Economics of Competition” that “Paradoxically, the enduring competitive advantages in a global economy lie increasingly in local things – knowledge, relationships, and motivation that distant rivals cannot match.”
This may underlie news reported in a recent Wall Street Journal article (Apr. 20th, page B1 by John Bussey) of a recent survey by the Boston Consulting Group of over 100 big U.S. manufacturers that 37% plan to bring production back from China. 70% said sourcing China is more costly than it looks.
Nowadays, corridors of manufacturing success seem to be popping up across the U.S. South Carolina is about to become the biggest manufacturer of tires in the U.S. Then there’s the tech corridor in upstate New York. Chemicals in West Virginia and advanced engineering inVirginia. And of course, Silicon Valley.
The Journal article quotes a Michelin spokesman saying that ten years ago, everybody thought Mexico would be the place for expansion. But Mexico’s instability is driving out potential manufacturing suitors. Meanwhile, wage inflation and labor costs are rising quickly inChina, and more so, there is concern over protection of intellectual property.
Smart cities and counties are teaming up with manufacturers to create symbiosis between schools and companies. From technical schools to smarter workforces, from improved infrastructure to lighter labor and union restrictions… companies are finding their competitive advantage in a return to their American roots. Intellectual talents, and keeping them here at home, are a key factor. Those areas of the country with strong engineering, computer and technical schools from which to cull graduates are gaining a decided advantage in hiring, and in keeping those assets here in the U.S.
The smartest large manufacturing companies (the article mentions GE, BMW) are deepening those ties, and looking out five years down the road to who they’ll need to be hiring then. Students learn hands-on manufacturing. Someone actually teaches them why 1/10,000th of an inch is important – and how to use their knowledge to build things. Educational tie-ups are, by definition, largely local. And graduates often prefer to remain in the U.S. Manufacturers are well positioned today to take advantage of these characteristics, especially with wage equity increasing globally. It’s a time of manufacturing return to U.S. shores.
As the article concludes, “Given where manufacturing… appears to be headed, [these trends are] a smart bet.”