Manufacturing, says market research firm McKinsey, is essential to a nation or region and its presence or absence can have some significant impact on an economic area.
If this was a volte-face by a major consultancy as some folks have alleged, it's being skillfully done and with some strong reasoning behind it. Manufacturing, says market research firm McKinsey, is essential to a nation or region and its presence or absence can have some significant impact on an economic area. Until I read the McKinsey report, I had been wondering if I wasn't mistaken in disagreeing with the massive, decades-long transfer -- or outsourcing, if you prefer -- of Western production activities to the Far East and Easter Europe.
McKinsey gave me back my faith in the efficacy of manufacturing as a critical element of economic development, growth, and sustainability. Yet, it doesn't blindly advocate that manufacturing should be conducted by all economic regions. It, in fact, outlines the critical factors that companies and political leaders should consider before voting on whether or not to establish plants in their locality.
You may be similarly convinced if you download the 184-page document and spend as much time poring through its findings, analysis, and conclusions. I am happy, though, to share some of these with you here, peppered with my own assessment of why manufacturing matters, no matter the economic region or nation under focus.
First, some bullet points from the McKinsey report highlighting the role manufacturing plays in both developed and developing economic settings.
Wealth creator: Manufacturing continues to provide a path to middle-income and wealthy-nation status for developing economies
Driver of productivity growth and innovation: Manufacturing continues to make outsize contributions to research and development, accounting for up to 90 percent of private R&D spending in major manufacturing nations.
Job creator: Manufacturing remains a significant contributor to employment across economies. But its role varies between economies and changes over time. Even when manufacturing's relative size in the economy is diminished, it continues to make outsized contributions in exports, productivity growth, R&D, and broader innovation.
As important as manufacturing is to all economies, however, it must be emphasized that its significance varies depending on several factors, including the size of the economy, its composition, development level, and future growth strategy. It cannot and shouldn't be assumed that all nations must be involved in all manufacturing activities in order to grow. The reality, according to McKinsey, is that each manufacturing sector has its own requirements, and a nation or region may lack the essential ingredients for achieving success in making a specific set of products. In such instances, being involved in making such products would be counter-productive for the specific economy.
Hi Bolaji - not quite sure that Mckinsey would agree with your characterization in the lead-in sentence to your article (see below) that they are a market research firm!
Manufacturing, says "market research firm" McKinsey, is essential to a nation or region and its presence or absence can have some significant impact on an economic area.
In reality they "bill" themselves as - "McKinsey & Company is a global management consulting firm. We are the trusted advisor to the world's leading businesses, governments, and institutions."
Regards, Mike Cowan
It is much more complicated than just "bringing manufacturing back." We need to take a hard look at restructuring society so that we have people do things that they can reasonably do with their skill set and intelligence. Then we can establish tiers of occupations that better suit human temperment and true needs rather than try to rush everyone into the 21st century against their will/desires or capabilities.
In many ways, we have allowed progress to race ahead before we are prepared to assimilate the changes. That speed leaves almost everyone lost and confused, hence the difficulties we have in finding a balance.
Just my opinion.
What a well put point. Something that I often have had difficulty properly communicating. This started with the push away from trades (what a mistake) and continues today with the overwhelming desire to have things at less than their societal value.
"rather than try to rush everyone into the 21st century against their will/desires or capabilities."
That is the problem, isn't it---we already are in the 21st century, and we can't pretend otherwise. Real knowledge and skills on all levels, from trades, through engineering, to R&D and science are essential--and education has to step up to it. I agree with you that it has to be a tiered system, but we better get on it or we'll be left behind.
Look at the successful countries like Germany: they put resources in their educational system and demand participation and results. Their reward is competence at all tiers, and a resilient economy that may grow a little slower during boom but keeps chugging in the downturns.
So now the economy of the US has to dance to the perodic mood shifts of the arrogant MBAs at McKinsey and their ilk ? For the snake of sourcin that they peddled for 2 decades and caused such havoc, these white collar CRIMINALS deserve to be flogged in public.
And while at it, shut down Harvard and other top B schools too - they are the leading breeding ground for these sociopaths with College degrees ( the MBAs ) who have been busy outdoing even "Gordon Gecko".
History always repeats itself - countries which neglected production of real goods in the past in favor of financialization and speculation (Holland, Spain, UK) paid for it once their self-created bubbles burst.
Very interesting article. I am glad the need for keeping manufacturing in US and Europe is gaining more attention in recent times. Take a look at a case of Germany - this country has a strong tradition of manufacturing and it's really helping them right now.
The link to the McKinsey report is broken, it should be updated to:
For many many years, mainstream American business "experts" and pundits have intoned that manufacturing belonged to the 20th century (not the 21st), that it didn't comport with the so-called information economy, and that -- in any event -- the US can't compete and catch up with low-cost producers abroad. Even President Obama has parroted his variation on this theme -- that jobs that are lost aren't going to come back.
Well, Japan was once "behind" the US. So were Korea, Taiwan, China, and others. Evidently, their business leaders didn't moan that they couldn't catch up with the leaders. They started essentially from scratch, and more than caught up.
American business and opinion "leaders" have been made of different stuff. Why? And why should they not lose their halos as people before whose opinions we should genuflect?
But, by most acounts, even if manufacturing comes back (and in fact many reports I read say the manufacturing sector is healthier than most people think) "those jobs" are not coming back. Meaning most of the middle class jobs that manufacturing used to have are gone forever. Replaced by automation, and better IT, along with more efficient and smarter business practices.
Nearly 70 % of the US economy is for consumer items. Even after discounting for 10 - 15 % savings to the Consumer, every dollar of trade deficit with China due to Outsourced Mfg. ends up costing the US economy $ 3 ! At $ 350 billion per year for the last 15 years thats simply too much. So Outsourcing mfg. of consumer items to China and Low Cost Mfr. regions is bound to impact the economy sooner than later - actually it has already happened. The answer is Robotic assembly of high end items ( appliances, consumer electronics,.. ) that had been outsourced. Won't increase employment much but would stop the loss of tax revenue and technology. Even in China they are investing in robots to assemble consumer electronics. To care of surges in demand, Hon Hai / Fox Conn the co. that assembles for Apple has been installing robots that cost just $ 35 k per unit.
Chipmonk, what's your source for your last few senances? I ask because it conflict with what we were told by Steve Jobs and the like is so great about FoxConn and other human intensive Chinese manufacturing plants like them - that the real value is incredible flexibility (paraphrasing). That's somthing a line of robots can't compete with. Curious.
Manufacturing is really a very important part of any business. A great example can be http://bocaratonurologydoc.com of this issue. They are doing great business as a result of their manufacturing process.