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How to create more manufacturing jobs

Joined
Jan 28, 2006
Location
Cleveland
Unemployment is down to 4.7% according to this morning's paper. That's a low number -- right in the ballpark of where it was during the internet bubble years of the late '90s.

But we all know that manufacturing jobs seem to be disappearing right and left.

Here's some food for thought:
An interesting piece in BusinessWeek last week put it all in perspective. It's by David Huether, who is chief economist at the National Association of Manufacturers (NAM).

Huether says US manufacturing output is up 13% since 2001. that's only half the level of recovery that we experienced after the previous 4 recessions.

But productivity is up 24% in the same period -- 72% higher than after the previous 4 recessions.

In other words, demand for our products is growing slower and our ability to make them quicker/cheaper is growing faster.

The result: we don't need as many manufacturing workers.

This is happening worldwide. He claims China has lost 4.5 million manufacturing jobs since 2000, compared to 3.1 million in the US during the same time. And for the same reason.

In fact, 9 of the top 10 industrialized economies
(US, Japan, Germany, China, Britain, France, Italy, Korea, Canada, Mexico) have lost manufacturing jobs even as their output grows.

Only Italy hasn't lost manufacturing jobs, but Italy is very depressed with unemployment in the 14.5% range and little capital investment going on. So it would seem to be falling behind everyone else right now.

What does it mean? Growth in manufacturing employment is going to depend on 1 thing: increasing demand around the world for American products.

Lately, Huether writes, increasing demand and increasing productivity are closely matched -- so employment is stable. If demand for US goods increases more, we might actually begin to see job growth in the US manufacturing sector.

What does that growth depend on? Huether doesn't say. That's where his column ends.

But to me, the answer seems pretty straight-foward: For us to see new jobs in the manufacturing sector:
1: the value of the US dollar needs to be on the low side -- making it easier for people using other currencies to buy our goods;
2: the quality of US goods must remain high, so people WANT to buy them, even at a slight premium;
3: the opinion of the United States by people in other parts of the world needs to get better, not worse. In other words, if we're going to have an economy that is actually based on making stuff, it really does matter if people in other parts of the world like us.
 
But is growth in manufacturing employment in and of itself itself inherently good? I don't think anyone here would argue that the US needs to keep a strong manufacturing capacity. But is it really that critical that its staffed by huge numbers of bodies?

The farm sector is much healthier now that a handful of guys can work a thousand acres, and a reasonable living can be made, compared to 1850 when everyone worked their 40 acre farm and most people were essentially starving while doing it.

If we can grow productivity faster than the rest of the world, we can keep our higher standard of living.
 
Bob - I agree substantially with the conclusions of the article as well as your comments - although your item #3 is really out of our control in so far as their response to us whether we do everything right or screw everything up.

My business applies automation and motion technology to manufacturing equipment in a huge variety of applications.

We are getting ready to start engineering on a new small log sawmill control system that will process up to 25 pieces a minute with fiber recovery higher than it has ever been. All this will be run by a crew of guys that numbers fewer than 6 . . . i.e. average shift of 8 hours processing over 10,000 8-16 foot logs into dimensional lumber. 15 years ago this same piece count would have required 2 shifts of 20 - 30 guys.

The new carbon filiment wound composite aircraft fuselage designs will be made on spinning mandrels that require at most a handful of people to operate - what once took hundreds of machinists, assembly technicians and educated grunts to do will now be done by perhaps as little as 15% of the same workforce.

Same thing in consumable products - one robot attends an automated bladder cutting, welding, testing, stripping machine where 5 laborers once worked at minimum wage to make the air cushions that are prevalent in sports shoes and napsack shoulder straps these days. The same robot works all 3 shifts effectively relieving 15 people of a job for each production line.

This is true even for small companies . . . We are working on a robotic grinding / polishing system now to finish high end bicyle parts now so that the end product is more uniform, higher quality and requires less labor to produce. Only one person will lose a job here, but the throughput will increase 100% as well making the parts manufacturer more competitive and more profitable in the face of asian competition.

I have been involved in these kinds of projects going on 15 years now and I can say without hesitation that the number of people involved in both low and high volume manufacturing related to any of the projects that I have been involved in has easily been cut in half while the output from these same manufacturing operations has doubled along with dramatic increases in quality and significant reductions in scrap.

Any way you slice it - we make a lot more today wtih a lot less in the way of resources. . . it is the company that refuses to embrace changes in technology that will die - and those that embrace change and implement new technologies are surviving and thriving right here in the US.
 
But is growth in manufacturing employment in and of itself itself inherently good? I don't think anyone here would argue that the US needs to keep a strong manufacturing capacity. But is it really that critical that its staffed by huge numbers of bodies?
I talk on a daily basis with executives from the large machine tool companies. Every one of them has expressed the same sentiment: We have to watch that we don't become so productive that we put all of our customers out of work.

In other words, if we trade manufacturing jobs for lower-paying service jobs, who is going to be able to buy the goods we manufacture?

It's like everything else in economics: a conundrum.

If, as you put it, we had factories staffed by huge numbers of people, the goods we produce would be expensive and, if complex, of a lower quality than goods produced with high levels of automation. So they wouldn't sell and the workers would lose their jobs anyway.

But when we automate, one of the great gains is an increase in productivity with a reduction in wages. But wages are the critical factor when it comes to how much stuff we buy.
 
Bob:

I said a couple of days ago that the USA has to have shops that make complete machines.

You mentioned that US industry has the tendency to depreciate machines and then continue to run them.

We have to work something out there. That's the demand side. If we can't sell into the home market we won't sell anywhere else.

Small and medium sized manufacturing plants need capital to start. If one knows what they are doing, one can start on the cheap with rented quarters and used machinery, but the going-in will still be a tough nut to crack, capital wise.

At one time I wanted to make small offset printing presses. I would start with an upgrade of a proven design. To this day, any machine that I buy for this shop has to be able to make a part for a printing press.

My plan was to get a machine built and rent or give it to a local shop in the D.C. area for test and evaluation. Pressmen are like women in the way that they gossip. The story of a new press will get around fast. If it is any good, then, all the girls will at least want to see it.

My market would be the D.C. and suburban area and Baltimore. Then I would expand north to maybe Philadelphia and South to Richmond.

Here's the philosophy. Start on a shoestring in an area that needs the machine. Do whatever possible to keep costs down while keeping acceptable quality. No lavish engineering, no super complex parts. Think AK 47, not F 16.

Market at home and slowly expand but not to the point that customer relations and mecanical service becomes a problem.

Get on and stay on a first name basis with customers and their pressmen. Pressmen start printing shops of their own, you want to be the first one they call.

Get good craftsmen to work for you, Keep them happy by not being a demanding and difficult person to work for. At all times nuture trust. Your top men will come from these ranks! Once a core has been established all further hires will be apprentices or trainees. You want your craftsmen to work together and in the style of the shop.

Don't underestimate the style of the shop. It is the cohesive set of circumstances that allows people to work together naturally, as a matter of reflex or a matter of course. People must work together, departments must work together. You don't have a job shop, you have a machine factory. If the factors don't work together how are the parts of the machines going to fit together.

Outsource! Hire out as much accounting, payroll preparation and other clerical work that you can. Ordinary people with some nice skills will do a lot on their computers at home.

When you pay them, you have an outright expense. Keep as much FICA, Workman's Comp and Unemployment Insurance off your payroll as you can.

Whatever you do, keep the amount of computers in your shop to a bare minimum. I like the idea of computers in a computer room with computer operators doing computer work. Otherwise the things are inefficient time wasters, such as this one is here. :(

I favor the direct approach. If you have an idea for a machine that is used and needed in your area, screw the market research, it's already done. Make the damn machine and if you can't sell it at first, then give it to the guy. Make up some cockamamie story about beta testing. The computer guys do it all the time. If it is any good, you'll soon sell all you can make.

Is this all some wonderful idea cooked up in the intellect of old Jimmy K?

No, This is how all the printing press and maachine tool and tractor and pumping machinery guys started. Want to find out who? Look at the name cast in the iron.

Hah! I can just see Messr's. Warner and Swasey or the O'Brien brothers of South Bend screwing around with a business plan and marketing strategy and focus groups. The only way that they put a spin on their products was with a falt belt.

Look, this is do-able.

Pick a machine. Make one or two. Get it into someone's shop.

While you are doing that. recruit your eilte corps. Select them carefully and weed out the ones that don't fit. Put in the face time in order to establish the style of your shop.

Just Friggin' Do It!
 
Jim,
Or, there is the "modern" way: do the business plan, the marketing analysis and the investment banking tour.
Raise a gazillion dollars, lease three manufacturing plants and 14 distribution centers, fill your regional sales offices is Aeron chairs and high-end workstations, pay your CEO $2 million in the first year, go public in the second, hit a cash-flow problem in the third and liquidate in the fourth.

Jus' kidding.
 
fill your regional sales offices is Aeron chairs
Penton doesn't furnish you guys with Aeron chairs ??

Kinda prefer the Leap chair myself ;)

leap2_180.jpg
 
Bob:

Now I know where I've gone wrong.

I want a high end workstation.

I simply have to have it to trim up the design of a 14 X 20 press that John Webendorfer brought to market in the late 1930's.
 
This all sounds good on paper but you have to have a demand first, selling one machine to some plant in hopes that others may buy one isn't a very sound idea, I also don't think you are going to attract many "skilled craftsman" with dirt wages and no benefits, although one should go overboard in this area either.
Quality is also a double edged sword, build something that lasts forever an you will go out of business, when building product these days you should plan for a 10 year life cycle, you won't stay in business selling spare parts.
If you outsource, outsource to a professional,
If have outsourced work to people doing as a sideline and sooner or later you end up short or late (not theft) but material not being delivered or the inability to maintain the production schedule. When I sourced to professional I had not problems but the moonlighter gave me the "my kid was sick" " I need an advance to purchase material" stories, it wasn't worth the effort.
And like Jim said you have to tell employees exactly what is expected of them and hold them to it.
 
motion guru...when you used the automated sawmill illustration you said:

"We are getting ready to start engineering on a new small log sawmill control system that will process up to 25 pieces a minute with fiber recovery higher than it has ever been. All this will be run by a crew of guys that numbers fewer than 6 . . . i.e. average shift of 8 hours processing over 10,000 8-16 foot logs into dimensional lumber. 15 years ago this same piece count would have required 2 shifts of 20 - 30 guys."

Would that be two shifts of 20 - 30 guys per shift or two shifts totalling 20 - 30 guys?

Charles
 
Bob -- AM Publisher

But to me, the answer seems pretty straight-foward: For us to see new jobs in the manufacturing sector:
1: the value of the US dollar needs to be on the low side -- making it easier for people using other currencies to buy our goods;
2: the quality of US goods must remain high, so people WANT to buy them, even at a slight premium;
3: the opinion of the United States by people in other parts of the world needs to get better, not worse. In other words, if we're going to have an economy that is actually based on making stuff, it really does matter if people in other parts of the world like us.
Keep on dreaming, but untill you understand why and how it happens, and why it will not change, the US will continue to loose jobs in all industries, your job may be next.

Learn why here....
http://www.opic.gov/

Read how the US Government HELPS put you and your company, no matter what that industry is, out of biz, and YOU PAY FOR IT and why you will never stop it.
 
JimK,

There's a lot of truth to what you say, but what if you're developing something which flat out has never existed before? Thats where some level of business planning and market research becomes crucial, wouldn't you agree?

A business plan done correctly is a great sanity check. If you end up having to say "Damn, I'm going to have to be selling 3000 widgets a month before I'm making any money" then its probably not wise to invest in production methods where they take 30 man-minutes each. Likewise if according to your business plan you'll be profitable in 18 months after burning through $90,000, then you'd better have three years worth of time and $200,000 at least to invest into the thing, not $2000 and the morgage is due in two weeks.


A business plan is nothing but a print for a business. Just like we've all seen pretty prints drawn up by idiots that can't be made in the real world (but looked so shiny in CAD) there are plenty of business plans that look pretty but were drawn up by idiots and will never work in the real world. That doesn't make the tool less valuable when used corectly.
 
Bob---AM Publisher

I am a retired Manufacturing Engineer.
My Perspective is,and was Manufacturing.
I know many folks preach Zero Defects as a solution to survival , but I believe in a simpler approach, that I followed during my working career.
The companies that go the farthest,do so by "learning from their mistakes,AND also from the mistakes of others"
When we look at the Macro manufacturing envirionment, and history,this is what I beleive we need to be cognizant of.
England was the greatest production force on planet Earth until 1850 ~~
They lost it and were supplanted by the USA for primarily these five issues.
1.Freely developed Innovations
2.Cheap Energy sources
3.Cheap and educated labor
4.Low taxes
5.Raw materials easily available

1,We need to overhaul our Patent System. Today litigation stifles creativity, enormously.
2.We need to focus on nuclear energy to keep costs down. Windmills are nice but do not support low energy costs
3.A good work force without Union "Productivity" restrictions. ( GM Collapse is result of them turning management functions over to the bargaining agent)
4. Low taxes are essential to keep jobs.It is the "impetus" to want to go into business, and that means "employment" !
5.Restricting the further development of our Mining Industry,relegates the demand to foriegn sources. One needs only to look at the Foundry Industry to see this !

We are doing the same thing today that England did in the 1800's...that spells failure to me for us in the USA. We are a giant version of GM

Bob, your comment
"3:........, it really does matter if people in other parts of the world like us. "

True in many respects, but I am appauled at the apathy "We" have towards the image Hollywood portrays. For example, I have both visited and worked (4 years)in a Foriegn country. You would not believe the identity we have with foreigners due to our TV and film industry.
I have repeatedly been told, that we have nothing but gangsters and drug addicts. All they see is the filth and crime that hollywood glorifies.
No longer do we have 'Mr Smith goes to Washington" or "Born Yesterday" and stories that idealise life or virtues in the USA.
it is the constant beat of gangster rap. Can you imagine a teenager in India watching "Pulp Fiction" and feeling good about Los Angeles?

Why people feel that our image is only related to our political issues is beyound me.
We still have the Largest backlog of Immigration applications of any country in the world. Show me another country with the same level of requests?
The image of our "not being liked" is a fabrication of the news media.

Yes, there will be those who dislike us due to the war on Terror, but did we survey the Berliners in 1944? No, we did not,because the results are shaded by political bias, something our news folks do not consider.

Interesting note. While living abroad, the news people always talked about what political party a President of a Country was during the news report. Our foriegn friends have a definite opinon of various parties. Do we Americans have any idea of the French political or Italian political arena?..I doubt it, so when the News Media reports a comment by a Italian Communist parlimentary person, they leave out the Communist part..seems to me that it is important, in order to truely value the comment
Rich
 
I feel that I may get beat up here for my Union comments, so let me expand a bit.
First I believe there is nothing wrong with being a Union Member. I was a shop stewart for the United Steel Workers and also a member of the IAM at one time .
I believe that negotiating for wages is a right they have explicitly. When the discussion gets into the area of managing, I resent the intrusion.
Would you go to work and tell a Hamburger shop how to cook the hamburgers they sold. Well when it reaches that point, look out. When you have men sitting on their hands, and paying them, you have in effect strapped the employer with a burden beyond survival. No amount of manufacturing expertise will overcome the overhead, as it becomes infectous.
rich
 
olddude:

Notice that I said accepptable quality. A printing press can run 60 to 100 million impressions in ten years. You design with the aim of controlling wear and restricting the wear to easily replaceable parts.

Presses are somewhat crude and simple and they are forgiving, they don't crash when worn, they just don't print right. That's repairable.

Quality isn't the exact adherance to extremely precise dimensions, it is manufacturing to uniform dimensions within practical tolerances.

The repair parts business is a real profit center in machinery made in small lots. The first cost of a machine is always much higher than the sum of the small repair parts needed to keep the machine going for a long life. There is a good mark-up on the parts, printing presses, especially, don't change models very often and they are production machines, they cost the most when they are down for repairs.

Not that I want to exploit anyone, but traditionally, machinists don't see wages as the most important issue. They want to be payed reasonably well, but if they find a shop that they like to work in and one that they are appreciated in they will be very slow to leave it.

On the subject of outsourcing, payroll preparation and accounting must be sent to professionals who are competant and insured. Other miscellaneous office tasks can be sent out to at home workers.

Comatose:

I chose a project that wasn't a never-been-done job specfically because I don't want to re invent the wheel and go out of business doing it. I know printers and I know printing presses. I also know the type and size machine I think will sell and not require a locomotive shop to build.

I also snapped off a working design of machine that needs modernizing but otherwise is very good. ATF Webendorfer didn't go out of business because their 14 X 20 offset press was lousy, they went out because their company got lousy.

The 14 X 20 "Little Chief" press was in continuous production from the mid 1930's to the mid 1970's. They were in school shops, on Navy ships and even in places like The World Bank. All they need is a redesign of the feeder and the impression cylinder gripper mechanism and they will beat any of the modern Japanese designs I see out there.

I can handle such things from my experience and general knowledge. If I was asked to manufacture soomething that hasn't been manufactured before, I couldn't do it because I couldn't afford the staff required to do the planning and the engineering, let alone the market research and the sales effort.

I used my personal desires as an esample to show that getting a shop started in the USA could be done on the cheap, comparatively.

Start with a machine that is simple and already well known - no freaky development issues. Nip up the design to meet the modern practices, speeds and codes. Stay away from high degrees of sophistication so that the machine can be made on decent but not overly expensive machinery. That's what I meant when I said "Think AK 47."

I believe that machinery that is made in small lots is anybody's market. Japanese machinery hasn't got the price advantage any more. They are vulnerable to competition from good quality domestic manufacture. The Japanese didn't kill the printing press factories here, American press manufacturers committed suicide.

If a machine sells 400 or 500 units a year the Chinese can't touch it. They will go the cheap route and the machine will get a bad reputation. If they go the quality route, the volume is too low to get any price advantage.

The object of this exercise is to get the making of complete machines back into the USA. My overall suggestion is to start with small fresh companies who aren't set in their ways or who don't have the excess baggage that most of our older companies have.
 
With respect to machine tools, I always thought that one could make a buck by selling upgraded chinese machines.
Take a 12x36 grizzly, install a baldor motor, precision bearings,better dials and handwheels, and install bearings or bushings where they just bore into the cast iron.
It would have been worth it to me to spend an extra couple hundred bucks and have this done upfront instead of me having had to do it myself, I bought the machine to machine not spend the first six months getting it in acceptable shape.
 
olddude:

What you just described is an American nip-up and knock off of a South Bend.

Read my above posts and insert South Bend Lathe wherever I mentioned Webenedorfer printing press.

I used the printing press because I didn't want everybody to come down on me with the "Chinese will kill your market" thing.

Thanks for your last sentence, I couldn't have said it better.
 
1,We need to overhaul our Patent System. Today litigation stifles creativity, enormously.
2.We need to focus on nuclear energy to keep costs down. Windmills are nice but do not support low energy costs
3.A good work force without Union "Productivity" restrictions. ( GM Collapse is result of them turning management functions over to the bargaining agent)
4. Low taxes are essential to keep jobs.It is the "impetus" to want to go into business, and that means "employment" !
5.Restricting the further development of our Mining Industry,relegates the demand to foriegn sources. One needs only to look at the Foundry Industry to see this !
Rich:
So what are you going to do on Tuesday? ;)
Seriously, I agree with much of what you say. But not necessarily all of it.
At all costs, let's not oversimplify the issue. For example, GM's problem is not solely due to its union agreements.
And people who spend most of their time trying to solve our energy problems tend to feel that there is no silver bullet out there. There isn't one single technology that has potential to solve our problems; the answer is in the aggressive and appropriate use of multiple technologies to chip away at it. Solar where it's sunny; wind where it's windy; nuclear where it's neither; all of them wherever it's feasible; etc.

And my comment about people in other parts of the world liking us is not intended to be a Pollyanna view of the world, nor is it intended to take a particular political position. Our problems began well before the War on Terror, and are not limited, as you noted, to foreign policy.

Consider it a global, big-picture view. The way we carry ourselves around the world -- whether at war, in the movies or even as tourists in Rome -- has a real impact on our manufacturing output.
 
railfancwb - I spent some time talking to the mill operator who is buying this machine and while the numbers are closer to 20 (per shift) 15 years ago, he said his hopes are to be able to staff this machine with fewer than 5.

He also said that the comparison on the actual output of the line is valid, but the comparison on the input of the line is not. Today's mills run almost exclusively small logs (less than 18 inches in diameter). This machine takes the log in one end and 75 feet later it spits out dimensional lumber. All in line - no separate machine centers.

Apparently a mill owner in Australia recently commissioned this exact same line with the goal of having one operator.

15 years ago there would have been 3 - 4 machine centers covering 4 times the real estate with a minimum of 20 operators / tenders to produce lumber at about 50 - 75 percent the same speed.
 
Bob
yes,I agree with you in many respects, and yours is a broader view. Sorry ,Tuesdays are booked ! haha
My perspectives are narrower, because I was on the front lines, thats why I prefaced the comments.
Your comment in the first note
Quote:"The result: we don't need as many manufacturing workers."
This is exactly RIGHT. You hit the nail on the head so to speak.
I have had this discussion with my friends.
A good CNC shop will produce more accurate parts in a shorter time with only 1/4 the people.
The result is lower priced parts, which will expand the market and make these parts available to more buyers. IF the market grows four fold, then the number of employees never changes.Many folks do not realise this is why we need to expand to a global economy, in order to GET the four fold increase (as used in this example )
In the mean time, our foriegn competitors are also getting into CNC, and because of tax benefits, and can do it quicker than we do.Thats why taxes are so important to business developement, and to our economy. So many folks have no idea what "Investment tax credit" means to our future. Of course, if your union contract says that a man can only run one machine at a time, you might as well forget updating the shop floor, you will never make it in this day and age (GM)..sort of reminds me of the farmer that had a one horse plow. His neighbor had a 60 horse Ford, and when he was asked why he didn't do that, he said " I can only watch one horse at a time, my gracious, how can I watch 60 of them !"

Rich
 








 
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