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Posts Tagged ‘Wall Street Journal article’

3-D Printer baxter robotThere’s a humble sense of ‘validation’ that comes from seeing your opinions and prognostications confirmed by no less an icon of business thought than the Wall Street Journal.  We’ve devoted past articles to two tech topics in particular that have recently been validated in the Journal and which support our thesis that technology is the future of manufacturing.  The two topics in question are how the advent of technologies including (1) 3-D printing and (2) today’s new robots can be the progenitors of not less, but more employment in the U.S. economy.

In the August 8th Journal (page A13) author and former hedge fund manager Andy Kessler opined that the “Luddites are wrong” when The Economist magazine suggested that “technology may destroy more jobs than it creates.”  As Kessler writes:

“The road to wealth does indeed pass through the graveyard of today’s jobs.  But history shows that better, higher paying jobs are always created by technology – even if no one seems to remember this during periods of creative destruction.

The trick is to lower the cost of new machines and inventions that can do things never before possible, making them available for wide use.”

Kessler then goes on to illustrate by examples including blood markers, gene therapy, funding platforms and two more we’ve espoused in the past: 3-D printers – which work almost like laser printers to create actual objects—and which we first wrote about here; and today’s newer robots, like “Baxter” from Rethink Robotics in Boston, which we first wrote about here.  And actually, we wrote about both of these new trends in a single post on 21st century manufacturing here.

He reminds us how 3-D printing is changing how things are made, and can be bought today for between $1,000 and $10,000.  Recall that today’s $200 laser printers were once $10,000 (I remember selling them then) and as much as $17,000 before that.  Already, 50,000 3-D printers have been sold, and with a key patent expiring next year, sales are expected to soar in an industry of hard-to-find auto parts, industrial designs and jewelry.  The printing of human tissue is even now being discussed.

Meanwhile, the $22,000 Baxter robot is as we’ve noted before, easy to train and human-friendly.  It’s destined not to replace people, but to augment them.  They’re especially effective in performing repetitive and/or dangerous tasks.  But best of all, as Kessler notes, “they can do things that haven’t been done before.”  Robots will change the way SMB manufacturers operate, lower costs and “create a hiring binge for those savvy enough to use them.”

So while some politicians and policy makers blast technology for destroying jobs, the truth is, the upside potential to create even more, better jobs is the place to bet.

Fortunately, those same pundits, politicians and policy makers will be there to take the credit when the time indeed comes.

 

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Apropos of some of our recent posts (like this one and this one) about the increasing need for access to current financial data, quickly, in volatile times, comes a recent article from the “CFO Journal” section of the July 24th Wall Street Journal.  In the article, The Journal’s Senior Editor Emily Chasan [pictured at left] points up the dilemma facing many large company CFOs that we, in our practice, find confronting financial execs at much smaller companies today: namely, the need for more timely and uniform financial information to help them react quickly to fast-changing conditions.

They face a tough choice, as Chasan notes.  Either spend “serious time and money to unify their financial systems in one fell swoop, which can entail consolidating… general ledgers, processes and legal entities, or take a piecemeal approach that will address specific needs but may not bring major benefits.”

Some opt to do nothing.  But increasingly, experts say, companies are taking action to get better financial data.  According to the International Data Corp., businesses spent nearly $16 billion on financial-accounting applications worldwide in 2011, up 10% from 2010, and about double the growth rate from a year earlier. 

While the pain of these changes is always a major factor, businesses are finding benefits from eliminating costly consolidation processes, and “getting more real-time business information that can help identify areas of stress.”  The recent recession has taught businesses that “too often they didn’t have the information they needed and they didn’t have an ability to get that information,” said one leader of a business intelligence team at KPMG, LLP.

Compounding the problem, acquisitions can often complicate reporting problems.  As one corporate accountant reported, “we don’t replace systems immediately unless the business needs it right away.”  But eventually, companies want divisions “speaking the same language.”  And since investment in financial and accounting systems has long been considered a cost center, Chasan says, “companies have been led to budget for upgrades and maintenance each year rather than tackling major overhauls.”

So, when it comes time for an overhaul, as the North American CFO of BASF said, “If you are making a change, you cannot go big enough.”  His firm had made a number of acquisitions that left them with disjointed systems, so it aligned its accounting, payroll and benefit systems during an upgrade to its ERP system.  Today, the company reports that it can now produce more comparable data and spend more time on activities that support the company’s growth strategy.

And in the end, that ‘ability to support a firm’s growth’ is typically found to be the number one underlying reason for the investment in ERP.  And that’s a fact whether you’re a very large company like BASF, or you run a smaller firm like, say… yours.

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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.”

 

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Continuing on a theme we broached in our previous post about jobs, unemployment and rising productivity in the U.S., we’ll look today at some comments put forth by David Wessel in a recent article for the Wall Street Journal (January 12th, p. A6, “The Factory Floor Has a Ceiling on Job Creation”).

Wessel points out that despite the recent good news about upticks in manufacturing employment (a third of a million more people on factory payrolls in the past two years), that increase follows a decline of 2.3 million jobs the two years before that.  In other words, only two million more jobs to go…

That’s not likely to happen.  Even if manufacturing doubled its current national headcount, it still wouldn’t put all the unemployed back to work.

Manufacturing payrolls today account for about 9% of allU.S.jobs.  As we noted in our prior post, in the course of a century, agriculture went from employing 41% of our population, to 2% today.  Manufacturing payrolls are on a similar decline, and have been for the past 30 years.  The long term trends toward technological improvements are not going to end.  If anything, I think they’re likely to accelerate.

It’s not that manufacturing itself is withering though.  Factory output continues, in fits and starts, to climb, while payrolls decline.  Output per worker is generally up by extraordinary measures.  The increase in productivity ironically portends a decrease in jobs as American factories are able to produce more goods with fewer people.

On the upside for those employed there, this productivity increase does allow companies to “boost wages while enjoying rising profits at the same time,” according to Wessel.

Good news is heralded by the fact that U.S. manufacturing may do pretty well in the decade ahead, particularly as the Chinese cost advantage over the U.S. narrows.  Even as companies expand production abroad, most report that they will “maintain production in highly efficient U.S. plants to meet domestic demand.”

Ron Bloom, the recent U.S. manufacturing czar points out a compelling observation: “If you get an auto-assembly plant [here in the U.S.], Wal-Mart follows.  If you get a Wal-Mart, an auto-assembly plant doesn’t follow.”

Finally, today’s manufacturing jobs require more brain power than ever before, and more computer know-how.  They often pay well as a result, and tend to be more secure jobs.  When production migrates abroad, R&D and the brain trust often do as well (as we’ve pointed out in earlier blog posts).  Manufacturing employment growth in the U.S. helps to stem that tide.  But given the demands of the modern factory, this kind of work will no longer be “the ticket” for masses of unskilled, middle-class shop floor workers.  Tomorrow’s factory job will require levels of intelligence and training beyond anything before. 

As Wessel concludes in his article: “Pretending otherwise is foolish.”

 

 

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