WASHINGTON, D.C., January 11, 2013 — In March 2012, the Information Technology & Innovation Foundation reported that from 2000-10, the United States lost 33.1 percent of its manufacturing jobs — more than during the Great Depression. The report also noted that 66,486 U.S. manufacturing establishments closed during that decade. The tally dropped from 404,758 in 2000 to 338,273 in 2011 — an average of 17 establishments closing, per day, during the period.
Fortunately, new statistics indicate that the environment is ripe for U.S. manufacturers to recapture some of that lost opportunity. In 2012, a report by Archstone Consulting found that rising ocean freight costs and Chinese manufacturing wages, paired with reduced quality, flexibility, cycle time and other factors, were making overseas manufacturing less attractive. Per Archstone, nearly 90 percent of companies surveyed already were, or were willing to consider, changing their manufacturing and supply strategy.
This shift presents an extraordinary opportunity for U.S. firms. However, there is good reason for U.S. manufacturers and fabricators not to merely capitalize on external events. Rather, those who also focus on quality and sustainability will be poised to recapture the greatest share of business from foreign competitors.
The Role of Corporate Responsibility
Today, an increasing number of customers are focused on both quality and environmental initiatives. Corporate responsibility is an incredibly timely pursuit right now, and statistics prove it. According to the March 2012 Neilsen report, “The Global, Socially Conscious Customer,” 66 percent of customers, worldwide, say they prefer to buy products and services from firms that give back to society. (In North America, that percentage is 64.)
Most importantly for commercial concerns, 46 percent are willing to pay more for such products and services (35 percent in North America). Among those under 40, who are a big component of the world’s buying power, 60 percent are willing to pay more.
Companies see this trend, and they are scrambling to capitalize on it. They want customers to perceive them as being socially and environmentally responsible, which in turn will encourage them to reward them with business. However, achieving these goals can be a complex and time-consuming process, which creates an opportunity that savvy U.S. manufacturing and fabricating firms will leverage.
Capitalizing on Sustainability
In the Nielsen survey mentioned earlier, the most important area of social responsibility respondents cited, by far, was environmental sustainability (66 percent). An environmentally sustainable company is one which continually works to identify aspects of their operation that can impact the environment — and then finds ways to reduce that impact — all the while ensuring the long-term financial viability of these efforts.
Environmental sustainability is being increasingly linked to initiatives in “lean manufacturing,” an area in which U.S. manufacturers have excelled for years. The focus of lean manufacturing is to reduce waste — wasted materials, motion, time, effort, inventory, transportation expense and other expenses involved in the manufacturing process.
Since the recession began, even more firms have focused on tightening up production lines, ordering processes, inventory warehousing and other operating functions. Those that have done so are increasingly realizing that environmental sustainability and lean operations go hand in hand. For example, if you reduce the amount of waste going to recycling, you have helped the environment while improving your bottom line.
Sustainability — lean manufacturing — doesn’t just save companies money; it also helps the environment and gratifies that 66 percent of concerned consumers. It also gives U.S. firms a pitch they are using to win back business from Mexico or China. The manufacturer’s efforts become a success story that their customers can in turn tout to their own clients.
While sustainability may bring customers to the table, it won’t persuade them to eat. That’s the role of quality, which is the yin to the yang of sustainability. In the past few years, the media have reported numerous incidents where poor quality control in overseas operations has caused problems for U.S. consumers (especially their children and pets).
Companies recognize and are ready to address this problem — in the Archstone Consulting report mentioned above, 50 percent of the senior executives queried cited quality concerns as a reason to consider reducing or eliminating offshore manufacturing. Firms that work to achieve sustainability while retaining a high threshold for quality are poised to take best advantage of the interest in U.S. production resources.
Already, companies that produce complex or custom products are repatriating business to the U.S. Converse Shoe’s “distressed shoe” line in the United States, for example, because the manufacturer here can better manage quality control on a shoe designed to have ragged holes in it. Other companies, such as New Balance, American Apparel and Timbuktu are also manufacturing some of their products — mainly high-margin, lower-volume items — in the United States.
For environmental advocates, the reshoring of manufacturing brings additional benefits. One is better environmental control — the United States has tighter environmental regulations than top offshoring destinations. A second benefit is reduced energy consumption for transport fuel — when products made here are also consumed here, the energy savings can be considerable. Added to these factors the sustainability benefits U.S. manufacturers are achieving through lean manufacturing, the net result is a big boon for the environment.
Lest critics discount these initiatives as purely self-serving, they should consider this: lean manufacturing and environmental sustainability is the same thing, even if their impetus doesn’t always come from the same perspective.
However, motive has no bearing on outcome. If customer good will, profit or quality control leads a manufacturer to become competitive, create U.S. jobs, and help save the planet at the same time, isn’t that a win for everyone?
Source: eponline.com, © 2013, 1105 Media Inc.
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