Download Summary of Reports on Manufacturing

Summary of Reports on
Manufacturing
January 2012
Daniel Kühner – Intern MIT Washington Office
Issued by: MIT Washington Office <http://web.mit.edu/dc/index.html>
Table of Contents
University of Cambridge – A review of international approaches to Manufacturing Research
(March 2011) ......................................................................................................................... 1
Accenture – A perspective on tomorrow’s high-performance manufacturing firms (October
2010) ..................................................................................................................................... 8
National Association of Manufacturers Report – A Manufacturing Renaissance: Four Goals
for Economic Growth (October 2011) .................................................................................... 9
Jobs Council – Interim Report: Taking action, building confidence. Five Common-Sense
Initiatives to Boost Jobs and Competitiveness (October 2011) .............................................11
Booz & Co – Manufacturing’s Wake-Up Call (October 2011) ................................................13
List of additional recent manufacturing reports not summarized here ...................................18
University of Cambridge – A review of international approaches to
Manufacturing Research (March 2011; goo.gl/qv0tB)
The report by the Cambridge Institute for Manufacturing (IfM) highlights international
approaches to the support of manufacturing research, the prioritization of research domains,
and practices for translating new knowledge into industry. The report also summarizes the
broader national R&D funding and industrial contexts within which the main manufacturing
research organizations and funding agencies operate. Special attention is paid to those
approaches to manufacturing research which contrast most strongly with those in the UK,
and which appear to give international manufacturing research communities (and the
industries they support) significant competitive advantage.
The study is based, primarily, on interviews with leading manufacturing research experts,
international policy makers, research agency program directors and other stakeholders in
selected important manufacturing nations. In particular, the report contains detailed analysis
of approaches to manufacturing research in the USA (pp. 12-29) and Germany (30-41).
There are also overviews of the manufacturing research landscapes, priorities and policies in
other important manufacturing nations (pp. 42-67): Singapore, Sweden, China, and Japan.
USA (pp. 12-29):
Despite the rapidly changing nature of global manufacturing, the U.S. remains the world’s
leading manufacturing research nation. America is home to some of the most important
global manufacturing corporations, many of the leading manufacturing and industrial
engineering research universities, and a diverse set of federal mission agencies with
significant investments in manufacturing-related R&D.
In the chapter covering the U.S. the authors highlight some important aspects of the US
approach to manufacturing research, its manufacturing research system, and other features.



Manufacturing R&D policy discourse:
o The number of US policy documents, initiatives and summits related to
manufacturing research in the past 2–3 years is striking. These reflect
concerns at the highest levels about U.S. manufacturing competitiveness and
jobs, the interdependence of manufacturing and innovation, and the
consequences for US competitiveness in important emerging industries.
•Manufacturing research challenges and priorities:
o Recent policy studies, white papers and workshop reports suggest a high
degree of consensus on priority manufacturing research challenges and
research domains, for example:
 sustainable manufacturing;
 leveraging simulation and modelling capabilities;
 nanomanufacturing;
 biotech-related manufacturing challenges/biomanufacturing;
 advanced robotics
 and ‘cyberphysical manufacturing systems’.
•Manufacturing research institutions:
o The US is home to many of the world’s leading manufacturing research
universities, but has relatively few intermediate research institutions
addressing manufacturing R&D challenges (like Germany’s Fraunhofer
Institutes). University-based research centers (with close industry
1



partnerships) play an important translational role in connecting academic and
industrial efforts to address manufacturing research challenges.
Manufacturing research funders:
o The US has a diverse range of mission agencies, which support
manufacturing-related research. Key funders of manufacturing research
include not only the National Science Foundation, but also the hugely
important Department of Defense (DOD), as well as the National Institute for
Standards and Technology (NIST) and the Department of Energy (DOE),
which runs the US National Laboratories.
Emerging industries:
o Many US manufacturing research stakeholders place relatively greater
emphasis on translational research, the importance of manufacturing research
in supporting emerging technologies, and multidisciplinary manufacturingrelated ‘grand challenges’ associated with growing new technology-based
industries.
Systems approaches to manufacturing R&D:
o There is a growing recognition among many US manufacturing research
stakeholders of the importance of systems approaches (and engineering
system capabilities and skills) in addressing many of the most important
manufacturing research challenges.
Germany (pp. 30-41):
Germany is one of the leading manufacturing and manufacturing research nations. German
manufacturing companies generate over a quarter of EU manufacturing turnover, and
manufacturing industry makes up approximately a fifth of Germany’s value added.
Furthermore, an increasing focus of Germany’s manufacturing policy is on attracting
international manufacturing firms to locate high value production operations in Germany. The
quality of the German manufacturing research base is an important attraction in this regard.



Manufacturing R&D policy discourse:
o Recognition for manufacturing and manufacturing-related research
underpinning it are well established, visible and important parts of German
economic and innovation strategies. By contrast with their counterparts in
some other leading economies, German manufacturing stakeholders did not
highlight any ‘rediscovery’ of manufacturing by national policy makers.
Production technologies (and related manufacturing research) are an
important and established focus area within the German ‘High Tech Strategy’
and other research-related strategies.
Manufacturing research challenges and priorities:
o These include: energy, environmental and sustainability manufacturing
challenges; market orientation and strategic product planning; digital
manufacturing and advanced automation; production systems and processes
for emerging technologies (and non-traditional ‘manufacturing’ sectors);
people in flexible and responsive manufacturing firms (including the
demographically-balanced factory, adaptation of working methods for older
demographics); flexible production networks and systems for customized
manufacturing; protection of production know-how and products in global
manufacturing systems.
Manufacturing research leadership:
2
Many professors of ‘production technology’ have had significant industrial
career experience. Indeed, for several German universities, this is the most
common career path route for senior engineering research academics.
Manufacturing leaders of the future:
o Great importance is also placed on giving production engineering doctoral
candidates significant and varied industry problem-solving experiences.
Consequently, Germany produces very large numbers of manufacturingrelated postgraduate engineers with a doctoral experience somewhat
analogous to (a longer and typically more varied version of) the UK EngD.
Manufacturing research institutions:
o Germany has a diverse collection of research-performing organizations
addressing manufacturing-related R&D challenges, including: universities,
technical universities, universities of applied sciences, intermediate research
and technology organizations (e.g. Fraunhofer Institutes), corporate R&D
laboratories and research institutes of the Industrial Research Associations
(AiF), as well as Federal and State (Länder)-level institutions.
Manufacturing research funders
o There is a variety of federal funding sources for manufacturing-related R&D.
The Federal Ministry of Research and Education (BMBF) is an important
investor in manufacturing research, either through the German Research
Foundation (DFG), perhaps the closest analogue to the UK’s EPSRC, or
through core funding provided to independent research institutes (most
notably production-related Fraunhofer Institutes), or directly through its
Division for Production Systems and Technology. The Federal Ministry for
Business and Technology (BMWi) also funds manufacturing-related research
(e.g. through programs run by the German Federation of Industrial Research
Associations, AiF).
Manufacturing research foresight and strategies:
o Germany has developed highly systematic approaches to identifying future
manufacturing innovation needs, emerging S&T developments, and
associated research funding priorities. These exercises often involve
extensive stakeholder consultation, competitor analysis and scenario planning
exercises. Such exercises are also believed to enhance industry-academic
awareness and stimulate healthy debate.
Production technology strengths:
o International manufacturing research stakeholders highlighted particular
strengths of the German manufacturing research system associated with
production technologies and engagement in industry-responsive problemsolving.
o





Singapore (pp. 42-47):
Manufacturing continues to be a major and important part of the Singapore economy.
Stakeholders in Singapore credit the success of manufacturing on a strong technology base
and emphasize a ‘strong nexus’ with increasing R&D activity. Some of the main issues,
actors and features related to the manufacturing research landscape in Singapore are
summarized in this chapter.

Challenges and drivers facing Singapore manufacturing which are shaping the
manufacturing research agenda include:
3
o
o





climate change and sustainability
emerging industries, in particular biotech- and nanotech-enabled productivity
of Singapore-based manufacturing relative to competing economies
o competition from China.
Priority and emerging manufacturing research themes identified by policy makers and
leading manufacturing research (and manufacturing) experts include:
o material science and engineering, e.g. nano-technology and robotics
o green and sustainable manufacturing
o precision engineering for innovation.
SIMTech (the Singapore Institute of Manufacturing Technology) is a dominant actor in
the Singapore manufacturing research landscape. Key SIMTech characteristics
include:
o the extent of its global connectedness (to industry and academia)
o its role in supporting manufacturing industry, both MNCs and SMEs
o emphasis and strengths related to physical production processes and
technologies
o increasing coordination with other institutes on manufacturing challenges
related to emerging S&T.
Joint initiatives between A*STAR (the Singapore Agency for Technology and
Research) and universities are an increasingly important part of the manufacturing
research ecosystem. There is strong engagement and leveraging between the
intermediate RTOs (including SIMTech) and university-based research, e.g. via joint
programs and shared equipment.
Support for SMEs is an increasing focus within manufacturing-related initiatives,
including the A*STAR program GET-UP (Grow Enterprise Through Technology
Upgrading) and other engagements.
The Economic Development Board plays a key role in setting the agenda and is an
important funder of manufacturing research in its own right.
Sweden (pp. 48-52):
Manufacturing industries are of critical importance to the Swedish economy, generating 50%
of Sweden’s total export of goods. Swedish industry is made up of large global corporations
and many small firms. Almost 350,000 people work in Swedish engineering companies with
a further 700,000 employed in companies dependent on the success of engineering firms.
Some important features of the Swedish manufacturing research landscape which supports
these industries are outlined below.




‘Production science’ is one of the identified strategic research priority themes of the
most recent research and innovation bill of the Ministry of Education and Research.
Globalization and sustainability: the manufacturing research agenda and policies are
strongly influenced by drivers of change in the manufacturing base.
Small and medium-sized enterprises play an important role within the structure of
Swedish industry. Swedish manufacturing industrial systems are highly distributed,
made up of extended value chains of small Swedish companies (typically smaller
than the average European SME) working with much larger Swedish manufacturing
corporations. Value chain and logistics research in support of this SME base is,
consequently, an important priority in Sweden.
Swedish Production 2020: Industry, academia, learned societies and RTOs work
together on national strategy for production research.
4



Challenges facing Swedish manufacturing (identified by industrial and academic
groups) include: sustainable production; flexible production; the role of humans in
production systems; digital and knowledge-based production; production of innovative
products; parallel product realization.
Collaborative and systems approaches to manufacturing are considered strengths of
production research, and feature prominently in policies and programs.
Priority and emerging manufacturing research themes include:
o production systems including topics such as adaptive production systems,
virtual factory, role of humans in production systems, production logistics and
enterprise networks
o integrated production and product development including topics such as
production requirements in early stages of product development, methods for
virtual production and product development, analysis and optimization of
production and product development
o manufacturing processes including topics such as: processing of novel
materials and compounds, virtual development methods for material
processing and forming, manufacturing technology for micro- and nanostructures, management of measurement data, and materials characterization
(from a process perspective).
China (pp. 53-59):
China is now one of the world’s most important manufacturing nations. It is the greatest
global exporter, and the largest producer of steel, automobiles and televisions and a growing
number of other products. Growth has been around 10% per annum and manufacturing
accounts for around 45% of GDP. High priority has been given to higher education and
university-based research in recent years and there is now increasing pressure to facilitate
innovation and the creation of indigenous products. There are some concerns among policy
makers about the economy’s heavy reliance on manufacturing and efforts are being made to
stimulate the service sector while continuing to encourage production industries. The study
identified the following as key factors in policy and practice:




Manufacturing industrial efficiency: China has a strong policy focus on upgrading its
national manufacturing industries using high technologies to enhance industrial
efficiency, competitiveness and sustainability of resources. The Chinese
manufacturing research base is considered a critical part of this endeavor.
‘Independent innovation’: This is the name given to an important policy emphasis on
reducing reliance on overseas firms for advanced technologies. Manufacturingrelated research is seen as playing an important role in ensuring that applied science
and engineering ideas developed within the national research base are translated into
China’s manufacturing industries. This is a key driver behind China’s effort to build its
R&D and industrial-innovation infrastructure.
Public investment in research funding is relatively ‘top down’ in comparison to the UK
and other Western economies. High-level research priorities are identified in national
strategies. The majority of public R&D funding is allocated based on targeted calls or
direct investment in institutions, rather than in response to ‘bottom up’ proposals from
the research community (although the National Natural Science Foundation does
invest in this way; and the State Key Laboratories have growing levels of autonomy).
Emerging and priority themes for manufacturing research reflect the industrial
upgrading priorities outlined above and include domains such as: high value materials
and components; ‘green’ resource-efficient and eco-friendly manufacturing; digital
and intelligent design and manufacturing; design, production and testing technologies
5





for manufacturing at the micro- and nano-scale; and advanced automation and
intelligent service robots.
China has a complex manufacturing research and innovation system involving
universities, Institutes of the Chinese Academy of Sciences, a variety of government
ministries, key laboratories, national engineering research centers, and national
university science parks. There are also a variety of regional institutes and initiatives,
with significant variation between provinces in quality and quantity of R&D activities.
Manufacturing research capabilities and structures are in a state of transition. There
is significant policy effort to, for example: strengthen the connections between leading
universities and business enterprises; enhance links and cooperation between
research institutes; modernize many of the traditional institutes; enhance the
innovation and enterprise of R&D centers and institutes; raise the levels of enterprise
investment in research institutes; accelerate the translation of S&T research findings
into industry.
Chinese policy makers (and the research base) have typically used a relatively
narrow definition and emphases in manufacturing research focusing on physical
process and production engineering (associated with high volume, low cost sectors).
These emphases reflect the historical remits of key institutes, which have tended to
reinforce the primacy of traditional manufacturing-related research domains. There is,
however, an increasing broadening of manufacturing research, addressing the
manufacturability of novel materials, nano- and biotechnologies, and other new
challenges.
China has particular strengths in the development end of the manufacturing R&D
spectrum. In particular, there is growing competency in prototyping, test beds, and
linkages to ‘shop floor’. Furthermore, even within the science and technology portion
of the Chinese research portfolio, there is significant emphasis on the
‘industrialization of S&T’, which often addresses manufacturing-related engineering
challenges.
The Chinese research base is rapidly becoming more globally connected. This is due
to a range of factors, not least: the return to China of Western educated engineers
and scientists; proactive international networking initiatives of Chinese and
International research agencies. The importance of Chinese manufacturing industries
has led several important international manufacturing research centers to make
significant efforts to connect with Chinese partners.
Japan (pp. 60-67):
Japan is one the world’s most sophisticated manufacturing nations with world-leading
products in a range of industries, notably automotive and electronics. Japanese
manufacturing firms also excel in managing complex global industrial network and in
sophisticated integration engineering. There is also a strong cultural association with
manufacturing, reflected in the recognition of, and admiration for, ‘monozukuri’ – roughly
speaking, a celebration of high quality craft and production skills. Compared with many
Western countries, Japan’s manufacturing R&D investment is more strongly focused within
companies than universities. Japanese policy makers and industry are also making
significant efforts to address environmental and sustainability challenges, with policies and
advanced practices in ‘green’ manufacturing. Some of these emphases, strengths, and
priorities are reflected in the public manufacturing research themes, priorities and
approaches described below.

Japanese strengths in manufacturing include a high quality technician skills base;
advanced technologies to save energy and resources; a high concentration of
advanced component industries; a high quality sophisticated SME base. Other
advantages identified by some Japanese and international manufacturing leaders
included: a very high level of inter-firm collaboration; a demanding customer base
6







(with very high expectations regarding the quality of products); and a sophisticated
global approach to analyzing value chains.
Aspects of Japanese manufacturing capabilities which policy makers are looking to
strengthen include marketing and planning competencies, the basic S&T research
base (and associated opportunities to gain an early leadership position in the
manufacturing of emerging science-based technologies), environmental technology
regulation, and management of human and knowledge resources within large
complex manufacturing projects.
Barriers to coordination and translation of manufacturing research knowledge: There
are relatively low levels of interaction between universities and national institutes and
industry – universities are primarily funded via the ‘basic’ research category of the
government’s S&T Plan, whereas National Institutes are primarily funded via the
category for policy-oriented R&D.
Relatively little interaction between ‘softer’ operational and management research
disciplines and physical production technologies or process research was noted in
comparison with other leading manufacturing countries (in particular the US).
Researcher mobility: There is relatively little mobility between university or public
institute researchers and industry. However, there are a growing number of initiatives
to facilitate individual manufacturing firm staff members to spend time on university
campuses. New institutional structures (e.g. graduate schools or research centers)
are also enabling universities to hire staff with manufacturing industry practice
experience.
Manufacturing research strengths: Japan’s university-based manufacturing research
community has particular strengths in areas such as: materials processing, coatings
and films; mechanical engineering and robotics.
Green innovation and manufacturing research: Sustainable manufacturing is
highlighted as an important manufacturing research priority, in particular research
activities addressing energy conservation in the manufacturing process, and ecofriendly, resource-efficient manufacturing technologies. ‘Green Innovation ’ is one of
the two high level priority themes in the new 4th Basic S&T plan, with manufacturing
research playing an important role in addressing green innovation challenges.
Other priority manufacturing research areas highlighted by stakeholders included:
enhancement of production technologies with IT; manufacturing technologies for
biomanufacturing/biotechnology; robotics and other manufacturing technologies
appropriate to changing demographics (especially an aging manufacturing
workforce); and advanced measurement and analysis technologies for
manufacturing.
7
Accenture – A perspective on tomorrow’s high-performance
manufacturing firms (October 2010; goo.gl/mb80n)
Accenture’s Innovation Center for Manufacturing outlines challenges and identifies five
dimensions in which manufacturing functions must excel if they want to turn today’s cost
center into a source of competitive advantage.
According to Accenture, Manufacturers will face many challenges over the next 15 years:





Volatility in many different variables:
o Energy prices
o Input material prices
o Foreign exchange rates
o Political instability
More demanding customers, who want more tailored products and supporting
services and expect higher quality and faster product launches
Managing global supply chains is more complicated than some companies predicted.
As multiple stakeholders scrutinize companies’ sustainability practices, organizations
will need to revisit sourcing, production and distribution resources.
The rate of change as to which country has the comparative advantage will likely
continue to accelerate over the next 15 years, therefore manufacturers need to be
orientated toward short-term trends.
To meet these and other upcoming challenges, manufacturers will need to excel along the
following five dimensions:
1. Customer priorities
o Customize products (and ancillary services) to serve customer’s
o unique, specific needs and priorities – both spoken and implicit.
o Differentiate by integrating the product with a compelling customer
experience.
2. Globally local operations
o Design the network footprint according to total “landed” value chain costs and
customer service needs.
o Balance regional demand with regional supply.
o Learn to migrate modular components of the operation to the next new lowcost, appropriate-quality country or countries.
o Ensure that the global network has excellent visibility and high service levels.
3. Supply network flexibility
o Adopt differentiated models and processes to support increasingly diverse
channel and customer needs.
o Shift fixed costs to variable costs, in order to accommodate market changes.
4. Agility on the shop floor and beyond
o Use reliable, efficient equipment that is highly configurable and easily
transportable.
o Leverage advanced analytical capabilities to build predictive business
knowledge.
o Determine and obtain the right mix of skills and resources.
5. Sustainability and partnering for scarce resources
o Give customers visibility into the complete product lifecycle, from design
through disposal.
o Learn to negotiate and ‘partner’ with governments and regulators in nations
that control key materials and commodities.
8
National Association of Manufacturers Report – A Manufacturing
Renaissance: Four Goals for Economic Growth (October 2011;
goo.gl/iYKcL)
The National Association of Manufacturers (NAM) thinks that American competitiveness is
endangered and proposes a four-point plan for economic growth and jobs, which is expected
to enable the U.S. to compete and succeed in a global economy. Several locational
disadvantages – including but not limited to a high wage level, high non-wage labor costs,
and high corporate tax rates – and other factors like inaction on free trade agreements call
for reforms. NAM’s four-point plan includes the following goals:
1. The U.S. will be the best place in the world to manufacture and attract foreign direct
investment.
2. The U.S. will expand access to global markets to enable manufacturers to reach the
95% of consumers who live outside our borders.
3. Manufacturers in the U.S. will have the workforce that the 21st-century economy
requires.
4. Manufacturers in the U.S. will be the world’s leading innovators.
NAM proposes several measures to achieve each of the above-mentioned goals.
Goal 1: The U.S. will be the best place in the world to manufacture and attract foreign
direct investment (pp. 2-5).
According to NAM, U.S. policymakers too often choose policies that disadvantage
manufacturers in America. Among other things, they urge policymakers to








authorize research, development and deployment of technologies that improve
efficiency, reduce emissions and support domestic energy production;
allow greater access to oil and gas reserves;
stop unachievable proposals by the Environmental Protection Agency (EPA);
reduce the corporate tax rate to 25% or lower;
reduce taxation on foreign income of U.S.-based businesses;
invest in infrastructure;
implement legal reform;
reduce health care costs.
Goal 2: The U.S. will expand access to global markets to enable manufacturers to
reach the 95 percent of consumers who live outside our borders (pp. 6-7).
According to NAM, foreign market access of the U.S. manufacturing sector is not as good as
it should be. NAM wants



a global trade policy to be promoted that opens international markets and reduces
regulatory and tariff barriers;
the export control system to be modernized;
export promotion programs and export credit assistance to be improved.
Goal 3: Manufacturers in the U.S. will have the workforce that the 21st-century
economy requires. (pp. 8-9).
NAM argues that the U.S. workforce must be proficient in science, technology, engineering
and mathematics (STEM) and requests – among other things – the following measures:


Address regulations that undermine employer flexibility and discourage the hiring of
new employees;
improve and reform education;
9

increase the number of employer-sponsored visas and simplify procedures for
temporary or non-immigrant visas, and green-cards for high-skilled workers.
Goal 4: Manufacturers in the U.S. will be the world’s leading innovators. (pp. 10-11).
NAM wants the U.S. to adopt policies that will attract and retain research and development
(R&D) activities and promote and protect manufacturers’ intellectual property (IP). NAM’s
recommendations include but are not limited to:



Increase the R&D credit to 20 percent and make it a permanent part of the tax code;
support federal research agencies and public and private-sector research;
modernize and strengthen the IP system.
10
Jobs Council – Interim Report: Taking action, building confidence. Five
Common-Sense Initiatives to Boost Jobs and Competitiveness
(October 2011; goo.gl/43zOJ)
President Obama convened the Council on Jobs and Competitiveness earlier this year to
bring fresh perspective and momentum to the questions of job growth and America’s ability
to compete in the global economy, asking leaders from business, labor and academia to
develop ideas that will improve the country’s long-term position. The Council’s aim has been
to identify and unlock pockets of growth that can build on a stable macroeconomic context
and speed job creation over a two- to five-year period. This Interim Report offers a series of
practical proposals grouped into five initiatives: Investments in Infrastructure and Energy,
Nurture the High-Growth Enterprises, A National Investment Initiative, Simplify Regulatory
Review and, Streamline Project Approvals, Develop Talent. Many of the proposals can be
private-sector led, or require only modest government funding; others fit within existing
programs.
Initiative 1: Invest Aggressively and Efficiently in Cutting-Edge Infrastructure and
Energy (pp. 10-16)
Repairing and modernizing roads, bridges, railways, ports, schools, airports, transit, electric
grids, water and wastewater systems, the broadband networks, etc. will create jobs in the
near-term and they promote long-term competitiveness by building a more productive
economy. According to various studies, the American investment shortfall is massive. But
Studies also indicate that each additional $1 billion of government infrastructure spending
creates between 4,000 and 18,000 jobs. In addition, government spending on infrastructure
has a bigger multiplier impact on GDP than even a payroll tax holiday (a $1.59 versus a
$1.29 rise in GDP for every dollar invested, respectively, according to Moody’s). The council
recommends the following actions: Reauthorize the main surface transportation programs;
leverage and expand existing public-private financing mechanisms; create a national
infrastructure financing organization that complements existing programs and attracts private
capital; protect and preserve user-based funding of the Highway Trust Fund; speed
implementation of the Next Generation Air Traffic Control System; promote construction of
broadband networks; streamline permitting and approval processes for jobs rich
infrastructure projects. In addition, getting America’s energy infrastructure right is important.
Three areas require immediate action: energy investment projects; electric transmission
siting; and innovative public/private methods of financing advanced energy technologies.
Initiative 2: Nurture the High-Growth Enterprises That Create New Jobs (pp. 17-22)
Young firms are the most powerful engine of jobs growth. Companies less than five years old
have created 40 million new jobs, according to a series of recent studies of U.S. labor data.
Those 40 million jobs actually account for all net new jobs created in the United States over
that period. But in the past three years the number of new businesses launched each year
has fallen by an unprecedented 23% and there were fewer venture-backed Initial Public
Offerings (IPOs) in 2008 and 2009 than in any year since 1985. Government must therefore
foster an environment in which entrepreneurs can create high-growth companies that
succeed in a global economy. The key components of a solution include: ensuring America
wins the global battle for talent; expediting the process of high-growth companies going
public; expanding investment capital for early stage start-ups as well as later stage growth
companies; and lowering regulatory burdens on small businesses.
Initiative 3: A National Investment Initiative (pp. 23-25)
The U.S. has lost substantial market share in global investment in recent years. In the late
1990s, the United States attracted nearly 26% of global foreign direct investment (FDI), but
that figure has dropped roughly a third, to about 18%, today. But recent studies have found
that, as wage rates and other costs rise abroad, companies are seeing new the advantages
of locating in the United States. A new report from the Boston Consulting Group suggests
11
that up to 3 million jobs could be created by this trend of locating operations in the United
States by 2020. The Council recommends the following measures to lure investors: Leverage
Local Advantages through Innovation Investment Zones; set up partnerships between U.S.
companies and the federal government; dramatically upgrade the capabilities of SelectUSA;
improve coordination between a supercharged SelectUSA and individual states; improve visa
policies; explore tax reforms.
Initiative 4: Simplify Regulatory Review and Streamline Project Approvals (pp. 26-30)
Intelligent regulations are essential to protect Americans and set a level playing field for
competition. Yet sensible rules should never morph into bureaucratic nightmares of delay,
duplication and complexity. To make the United States competitive and to speed the creation
of jobs, global best practices to streamline approval processes need to be adopted. The
Council believes job creation can be accelerated if the following broad areas of regulatory
reform are made a priority: Reform permitting processes; take action on a Council
recommendation to review regulations that were initiated by Independent Regulatory
Commissions (IRCs). In addition, immediate impact can be created through the following
initiatives: reforming the visa process; improve the Food and Drug Administration (FDA)
approval process; streamline patent office processes; speed payments to small federal
suppliers.
Initiative 5: Develop Talent to Fill Today’s Jobs and Fuel Growth (pp. 31-35)
In key sectors, a growing mismatch has emerged between worker preparation and business
needs. The McKinsey Global Institute estimates that the United States could be short as
many as 1.5 million college graduates by 2020. Other studies are even more alarming. The
Council believes there is an urgent near-term agenda on talent that can help ease today’s
jobs woes, and a broader long-term talent agenda to renew America’s competitiveness. To
help alleviate the near-term skills gap, the Council has organized consortiums of privatesector leaders to launch nationally replicable programs to train workers in high-opportunity
sectors quickly. In addition, to further plug the near-term skills gap, the Council has already
unveiled a business-led effort to boost the supply of engineers in the United States. Nearly
the entire Council agrees on calling on Congress to open shores to high-skilled immigrants
who help build businesses that create jobs.
Early in 2012, the Council will deliver a year-end report addressing the broader factors that
underpin national competitiveness.
12
Booz & Co – Manufacturing’s Wake-Up Call (October 2011;
goo.gl/96KO6)
U.S. manufacturing is at a moment of truth. Currently, U.S. factories competitively produce
about 75 percent of the products that the nation consumes. A series of identifiable smart
actions and choices by business leaders, educators, and policymakers could lead to a
robust, manufacturing-driven economic future and push that figure up to 95 percent.
Alternatively, if the U.S. manufacturing sector remains neglected, its output could fall by half,
meeting less than 40 percent of the nation’s demand, and U.S. manufacturing capabilities
could then erode past the point of no return.
Those findings emerge from a recent sector-by-sector analysis of U.S. industrial
competitiveness, along with a survey of 200 manufacturing executives and experts,
conducted by Booz & Company and the University of Michigan’s Tauber Institute for Global
Operations.
Factory labor costs and currency rates play a smaller part in manufacturing decisions. Four
other considerations, all more complex, drive manufacturers’ choices about where to place
and expand factories:




The skill level and quality of factory employees, especially for high-tech facilities.
The presence of high-impact clusters, in which many companies can learn from one
another and innovate more readily.
Access to nearby countries with emerging consumer markets and lower-cost labor
(for the U.S., this means building a future with Mexico).
A reasonably competitive regulatory and tax environment (for the U.S., this means
simplifying and streamlining the current tax and regulatory structure).
Why Manufacturing Matters:




In the United States, manufacturing directly accounts for 11 percent of the nation’s
GDP: an absolute figure of US$1.47 trillion.
One in seven U.S. private-sector jobs, or 13.5 percent, are directly linked to
manufacturing.
In 2008, 67 percent of all private-sector R&D was conducted by manufacturing
companies, according to the National Science Foundation.
Between 1987 and 2008, productivity grew in the U.S. manufacturing sector 65
percent faster than in business as a whole (see Exhibit 1).
13
America’s lost decade of the 2000s:



In the 2000s, U.S. manufacturing output as a percentage of global production fell
dramatically.
The number of manufacturing jobs dropped as well, by 4.3 percent per year, and 3.4
percent of non-production jobs were eliminated annually.
Many factors contributed to this troubling decade for U.S. manufacturing:
o Capital investment plants slowed.
o Innovation lagged in some industries.
o Some U.S. companies faced a shortage of critical skills.
Four Kinds of Industries and their performance in Manufacturing:


With unit labor costs playing a smaller part in manufacturing decisions, other factors
increasingly drive decisions about where to place and expand factories:
o talent availability
o market accessibility
o innovation
o regulations
o intellectual property protections
o barriers to entry and exit
o scale of operations
Booz & Co charted which U.S. industries can compete as exporters, which can be
dominant in the regional North American market, which can survive but are
threatened by foreign competitors, and which are already mostly overseas but can
still manufacture in the U.S. to serve niche markets (see Exhibits 4 and 5).
14





Global leaders: aerospace, chemicals, machinery, medical equipment, and
semiconductors.
o Worldwide advantages: high investment scale, established intellectual
property, skilled workforces, and close ties with customers.
Regional powers: food, beverages and tobacco, nonmetallic mineral products, wood
products, and petroleum/coal.
o Focusing on North American demand will continue to be a lucrative strategy
for those manufacturers as the United States is the world’s largest market and
still growing.
o The incremental disadvantages of importing outweigh pro-offshoring factors
such as the higher cost of U.S. production.
Sectors on the edge: paper, plastics, electrical equipment and components,
fabricated metal products, pharmaceuticals, automotive vehicle parts, other
transportation equipment, final assembly of motor vehicles, printing, and electronics.
o These segments feel the presence of low-cost overseas rivals.
o They need simplified government regulations and permitting processes.
o Many companies in these sectors must rethink their strategies.
Niche players: textiles, apparel, furniture, computer equipment, and appliances.
o Most companies in these sectors have moved production outside the U.S.
o The remaining activity generally serves small-scale, highly specialized niche
markets.
Nearly 50 percent of the value added by U.S. manufacturing and more than 50
percent of U.S. manufacturing jobs are at risk (see Exhibit 6).
15
Recommendations for improving the competitiveness of U.S. manufacturing



Attract the best workers.
o Lack of appeal to students: A recent Booz & Company survey of more than
200 engineering, science, and math undergraduates found that although 80
percent of the engineering students had some exposure to manufacturing only
50 percent regarded it as an attractive career.
o Educational initiatives that promote engineering can increase the talent pool.
o Federal immigration regulations for trained knowledge workers should be
relaxed.
o Manufacturing companies must offer a more collaborative workplace
experience, engaging workers and giving them opportunities to continuously
improve and seek productivity gains.
o Companies can also attract workers by showcasing their latest technology at
campus recruitment events and industry job fairs, increasing college
internships, and forming partnerships with local colleges and universities to
identify and sponsor talent.
Invest in high-impact clusters.
o Clusters are essentially geographic concentrations of interconnected
companies, suppliers, service providers, and associated institutions.
o Clusters increase productivity and efficiency by bringing together suppliers
with customers, designers with engineers, and university researchers with
corporate production managers.
o Companies located in manufacturing clusters tend to have lower turnover and
attract better talent than non-clustered companies.
o State and local governments can encourage clusters by investing in
infrastructure and providing up-front tax incentives.
Build a future with Mexico.
o Mexico offers a cost-conscious and attractive alternative to China and other
distant offshoring sites.
16
o
o

Manufacturers can tap a relatively low-cost labor pool and maintain tight links
with R&D talent and facilities in the U.S.
Shifting less-demanding, high-labor products or components with relatively
stable designs to Mexico while keeping highly skilled work or rapidly evolving
technology in the U.S.
Simplify and streamline the tax and regulatory structure.
o The official U.S. statutory corporate tax rate is the second-highest of all
countries in the Organisation for Economic Co-operation and Development.
o The federal government collects only about 28 percent. But manufacturers
spend much of the difference on compliance costs and sophisticated tax
minimization strategies.
o Many companies use the 39 percent figure for evaluating investment options,
because it is too risky otherwise. This often dissuades them from opening or
expanding factories in the U.S.
o Reducing taxation levels and tax code complexity would be a revenue-neutral
way to put U.S. manufacturing on a more level playing field with other leading
economies.
o Another step would be changing tax rules to allow manufacturers to move
dollars from overseas back without a tax penalty.
Booz & Company’s “ISSR” framework

The capabilities that manufacturers need to stay in business are captured in the
“ISSR” framework developed by Booz & Company (see Exhibit 7).
o Inherent capabilities involve technological excellence and market
understanding.
o Structural capabilities cover the makeup of a company’s manufacturing
footprint, the structure of its supply chain, and the efficiency of its distribution
network.
o Systemic capabilities address manufacturing and cross-functional processes,
including lean production systems.
o Realized capabilities focus primarily on aligning employees with the overall
strategic thrust of the organization and driving efficiency improvements.
17
List of additional recent manufacturing reports not summarized here
AFL-CIO, Industrial Union Council – Manufacturing Insecurity (by Joel Yudken)
AFL-CIO – Manufacturing Renewal is Central to U.S. Economic Recovery (Organization’s
Official Manufacturing Statement)
AFL-CIO – Manufacturing Our Way to a Stronger Economy (Testimony of Leo Gerard to
Senate Commerce)
Athena Alliance – Intellectual Capital and Revitalizing Manufacturing - [a critique of White
House’s A Framework for Revitalizing American Manufacturing]
Boston Consulting Group – Made in America, Again – Why Manufacturing Will Return to the
U.S.
Council on Competitiveness – Make: An American Manufacturing Movement (Dec. 2011)
Council on Competitiveness – Ignite 3.0 – Voices of American Labor Leaders on
Manufacturing Competitiveness (Dec. 2011)
IDA Science & Technology Policy Institute (STPI) – White Papers on Advanced
Manufacturing Questions
Manufacturing Institute – The Facts about Modern Manufacturing (2009)
McKinsey – Translating innovation into US growth: An advanced-industries perspective.
McKinsey – Growth and Competitiveness in the U.S.–The Role of Multinational Companies
NDIA – Maintaining a Viable Defense Industrial Base
Third Way – Nothing Ventured: The Crisis in Clean Tech Investment
18