Have we lost manufacturing in the US, or have we lost management

[MacGyver]

Here's an interesting series of articles by Steve Denning at Forbes of all places:

The premise of the articles is that we've lost a lot of our manufacturing base by focusing on cost accounting, which as implemented in most companies constantly tries to drive down costs. As we've transferred manufacturing skills overseas, a lot of knowledge transfer has taken place as well. And, since the engineers aren't working daily with production anymore, they quit innovating. Thus, once a skill is lost, it's really hard to get back.

This guy basically says that management has failed by only looking at "cutting costs" and neglecting "adding value". He makes a convincing point.

Since loss of "US jobs" is a major concern, I'd love to have a discussion on ways to approach this problem. Basically the thinking that got us here, won't get us out of here.

Here are the articles:

Why Amazon Can't Make A Kindle In the USA - Forbes

Does It Really Matter That Amazon Can't Manufacture A Kindle In the USA? - Forbes

Amazon & Kindle Part 3: It's Not Just Manufacturing! - Forbes

Amazon & Kindle Part 4: Some Good News (Finally)! - Forbes

I would ask that anyone who wants to comment in the thread read the articles before commenting. Basically, this is to try to avoid the jingoistic commentary that seem to be voiced whenever this issue is discussed. That's not helping get us out of this problem we find ourselves in.

[Smith]

Technically we manufacture more now in the US than ever before. However, the nature of US manufacturing has changed. It is true that traditional maufacturing (auto, electronics, etc.) have moved but medical, pharmaceutical, etc has greatly increased. It is true that a lot of the manufacturing we do in the US now takes far less personal than the more traditional jobs of the past for the reasons in the article. So while productivity is up, the jobs are down or specialized.

All that to say, it's not exactly apples to apples to cry the decline of US manufacturing.

[Guest justluck]

I have to agree to a large extent that management (and bottom line thinking) is the the bigger problem. But, some years ago when the North American Free Trade Agreement was being discussed, then ratified, Ross Perot said that you would hear a big sucking sound - Mexico sucking up our manufacturing business/jobs. He was right and the world trade agreements had the same effect - all we did was set up China, India and others and they will cut us no breaks. These trade agreements certainly provide us with no competitive edge.

[Smith]

I have to agree to a large extent that management (and bottom line thinking) is the the bigger problem..

If we aren't using "bottom line thinking" what should we be using? Bottom line thinking is the only thing bailing the water out of our sinking boat. It's hard for US buisness to compete with China AND the US government. Highest tax rate in the world ..... Good ole USA.

[MacGyver]

You're correct, Nate. We do manufacture a lot here in the US, with a lot less manpower than it required historically.

Any solution to the problem has to account for the fact that when you've got a CEO of a public company trying to make money for their shareholders - essentially walking a tightrope over a pool of angry sharks, capital is going to flow to where it's cheapest, whether that's Bangalore or Greenville, SC.

You've got to respect CEOs who realize the difference between short term tricks to make quarterly numbers and those who deliver value over the long term.

[MacGyver]

You have to use "bottom line thinking" to an extent. A business that doesn't make money goes out of business. That's the difference between a business and our government.

The problem with "bottom line thinking" as it's practiced in so many companies today is that it only looks at one side of the equation. It focuses solely on "cutting costs" while so many accountants and managers don't understand that you can also "add value". Being able to cut costs is an essential skill. We need it to be efficient.

But, cutting costs alone will not make you a leader.

[mikegideon]

I don't think the problem is "bottom line thinking". It's Wall Street thinking. Companies aren't worth anything to them unless there's constant growth. Even if a company is making money, it's not good to the stock market unless they can buy and sell later for a profit. No growth, and they don't get to suck off the money.

So... if a market for a given company is flat, the only way to show growth is to cut costs. Nothing ever goes in the other direction, because any real growth gets sucked off. I know there are exceptions, but that's the mechanism.

Of course, automation has killed off a lot of factory jobs too.

[Guest justluck]

Since "bottom line thinking" seems to be a common notion 'mongst posts, let me clatify: "Short term bottom line thinking" would better express what I had in mind.

[UncleJak]

Corporations always want to make the most money they can while paying out the least that they can. I guess that is just simple business, but the consumers also drive that logic. Consumers want the best product and only want to pay the cheapest price. Thus the cycle is born...

[Guest Lester Weevils]

Been too busy to read the articles. Apologies posting without reading them, will try to read them later today.

Some people have businesses to make money and others have businesses so they can afford to do what they do. Bees make honey because it is what they do. Not because of a paycheck.

The success of NASA management during the moon shot era cemented the idea that "scientific management" can manage anything using about the same principles.

There have been critics ever since that managers should know deep details of what they manage.

Long ago almost took a low pay job in a dingy shed of a factory making welded wire milk crates. I didn't "get it" at the time. Why would anyone start that kind of dirty and obscure biz to make money? May be wrong but am guessing that there was at least one feller there whose ambition was to make the best welded wire milk crates that people can afford to buy. Some guy really into the concept most likely started up that little factory. Not some edumacated MBA who decided to get rich by filling the crying need for welded wire milk crates.

[mikegideon]

MBA's... don't get me started.

[Guest Lester Weevils]

I got to read the articles and they are interesting. Had links to interesting things to read about such as Agile and Scrum.

It discusses matters somewhat alien because I've never gotten along with or had recent experience working within large bureacracies. Worked for the gov and a couple of big corporations long ago but not recently.

In smaller businesses I've been involved with, the admin has seemed more horizontal communication though not tied to any official management philosophy. The "consulting" situation for the last 15 years is with a company having total personnel around 20 or 30. It seems to rely on one guy-- The owner who has great instincts for what is marketable and who is smart enough to keep a surprisingly large amount of company details in his noggin.

He doesn't know every detail of accounting, work schedules, or every tiny detail of the products, but he knows a surprising lot of details about everything. He works nearly every waking hour and if he ever loses interest in the day-to-day trivia then most likely the company will crash and burn.

After a company gets so big that one guy can't comprehend the whole thing, wonder if any management philosophy would be dramatically superior? Though the "radical management" techniques are interesting to read. Humanity spent much of its evolution in small groups. Though the last few thousand years of city-states, fiefdoms, empires and giant corporations may have been at least partially working its natural selection to mold modern humanity into "corporate man"? Trimming the edges so that square pegs will better fit into the round holes?

I wonder if "radical management" has much to do with whether a big corp decides not to outsource in order to ensure long-term survival? A smart involved man at the top who is interested in long-term survival might avoid outsourcing even if running an old-fashioned bureacracy? If his company gets big enough to need an army of yes-men, vice-presidents, division managers and bean counters-- Unless the man at the top can closely supervise all those people, and the man at the top can steer them engendering respect but not paralyzing fear, then the train would tend to eventually jump the tracks.

The subordinates should have high quality and not be afraid to tell the boss when he is wrong. The boss ain't always right but then again the subordinate ain't always right either. The boss requires enough respect that after he makes a decision the subordinates should shut up and make the best of "the plan". Constant bickering is paralyzing and some kind of action is often better than none. But too much of an "off with their heads" management style engenders too much paralyzing fear and passive-aggression sabotage.

There is short-term survival AND long-term survival. You can't survive long-term if you fail short-term survival.

At least since the 1980's corporate raider era there have been criticisms that the pressure to keep stock prices high prevents long-term R&D and long-term planning. Perhaps that is just a fatal problem with a corporate stock market system where if you temporarily lose favor with investors your capitalization disappears and you die from immediate cash crunch? I don't know enough to talk bad about the system. It is just a point that has been repeatedly made, often from mid-level engineer types.

In 2005 Henry C K Liu wrote a series of articles at Asia Times with a perspective "from the other side of the pond"--

Asia Times Online :: Trade Wars - Henry C K Liu

The link for the first article is dead but the text has been duplicated several places, such as here--

The coming trade war and global depression - CSS Forums

As written in 2005 at the height of a bubble, discussing international trade, monetary policy and global depression might seem a bit prophetic.

The articles are useful for alternate perspective. The man contradicts himself on some points and maybe he drifts into too many areas leaving his work "unfocused" with dangling ends. He seems to have an overall socialist perspective but offers interesting insights. It isn't a sin to be confused and contradict oneself if one doesn't know the answer but is thinking seriously about the problem.

[MacGyver]

That's an interesting perspective, Lester. You know, I think that sometimes we all just buy into the assumption that globalization is just going to happen, when in fact there may be some other models that emerge.

Certainly some globalization is going to happen. Fast planes and the internet make that inevitable. But, I think in the next 20 years we are going to see our use patterns evolve drastically. We simply aren't going to be able to afford to continue our consumption at currentl levels. In fact, I think we may actually see some contraction in our communities as opposed to global expansion. As we reach the end of cheap oil, and other emerging markets consume more, I think we'll see more New Urbanist type communities where people spend time in their communities as opposed to the suburban model that most of America has today.

Here's a really interesting article from Wired a couple of months ago. It highlights an emerging trend of bringing manufacturing back to the US. As it turns out, shipping costs are really high, product lead times are really long, and quality is mediocre unless you're someone like Apple or Toshiba and can command attention. A lot of small and midsized companies are bringing their manufacturing back home.

Made in America: Small Businesses Buck the Offshoring Trend | Magazine

This is one of those interesting things like happened in the publishing industry a couple of years ago where a long existing model (printed media) was almost killed off entirely by something that hadn't even fully evolved yet (digital publishing/online media). We may see something similar at the global level. One of the interesting things to me is just how dependent the Chinese economy is on American buying junk. When we quit buying, their factories go out of business.

Of course, these are all just thoughts to stimulate discussion. Nonetheless, I'm going to be paying attention as we move forward.