America’s Coming Manufacturing Revolution

(via Moises Naim of The Atlantic)

According to Moises Naim’s article, despite the many stories predicting, lamenting, or celebrating the country’s decline, there are still ways in which America is gaining global influence, namely the manufacturing sector. According to the author, “The combination of lower energy prices, innovative information technologies, and advances in robotics and materials science are powering a manufacturing revolution that will reinvigorate the U.S. economy and make many of its industrial sectors the most competitive in the world.”

Information from Martin Baily and Barry Bosworth of the Brookings Institution suggests that U.S. industrial production has grown at the same rate, if not faster, than the overall economy for the past 50 years, and manufacturing has not lost importance in this growth. Naim believes there is a perceived industry decline due to great strides that have been made in productivity and efficiency not generating a proportional job increase in return.

“Most of the expansion of U.S. manufacturing has taken place in one specific sector: computers and electronics, while the 90 percent of manufacturing outside this branch -automobiles, aviation, appliances or chemicals, for example- is showing slower growth,” said Naim. While it is true that not everything is going as smoothly as desired in the United States economy and other areas, it is also true the country is not in a complete decline in the global realm.

To read the entire article from The Atlantic, please click here

 

Real Options Valuation Model Vs. Discounted Cash Flow

In an article posted on hbr.org, “It May Be Cheaper to Manufacture at Home,” Suzanne de Treville and Lenos Trigeorgis delve into the discussion of the real options valuation model when sourcing locally.  Many manufacturers prefer to use discounted cash flow (DCF) to help in supply chain decisions, especially where to locate a new plant.  However, DCF ultimately undervalues flexibility. Therefore, if something unexpected occurs, the expenses can amount quickly.  The best way to avoid this is to pair DCF with a real options valuation.  This gives flexibility in the supply chain by putting a dollar amount on it.

The article looks at how Flexcell, a Swiss company that produces various lightweight solar panels, was looking to expand operations.  The CEO came to the conclusion to build a new factory on Swiss soil, rather than offshoring, by looking beyond the DCF model.

“If the plant were in Switzerland, he could delay production commitments and investments for several months, during which he could gather critical information about demand. This decision allowed him to use the real options valuation framework, which in turn let him put a dollar figure on flexibility.”

For the full article, please visit hbr.org.

Energy Efficiency: A Compelling Global Resource

McKinsey & Company, a management consulting firm, released a report that addresses how companies can capture the energy-efficiency opportunities in the coming years.  They have ongoing research involving opportunities for greater efficiency of energy use in the United States, what barriers exist, and possible solutions.

“In the nation’s pursuit of energy affordability, climate change mitigation, and energy security, energy efficiency stands out as perhaps the single most promising resource. In the course of this work, we have highlighted the significant barriers to overcome, but have also provided evidence that none are insurmountable.  We hope the information in this report further enriches the national debate and gives policy makers and business executives the added confidence and courage needed to take bold steps to formulate constructive ways to unlock the full potential of energy efficiency.”

Energy efficiency is the key to a competitive advantage.  This is not only true in how the company operates, but also in the products it makes.

“To take advantage of these opportunities, companies will need deep insight into customer preference.  Enhancing the economic value of energy-efficient products for industrial customers and consumers—and making this value transparent to them—will require expertise in design-to-value and value selling, as well as innovative financing solutions and new operating models.”

Research finds that investing in current technologies now would pay for themselves in future energy savings and could save consumers and businesses around $600 billion a year by 2020.

To read the full publication click here.

Missouri Manufacturers Find Contracts on MFG.com

In July of 2012, MFG.com reported that several manufacturers located in Missouri now have access to their marketplace.  This means more channels and potential customers for these suppliers. MFG.com is the world’s leading marketplace for collaboration among manufacturers worldwide.

The article states that LMC Industries located in Arnold, MO; Magliacano Metal Worx in Cleveland, MO; Aspire Machine & Tool in Union, MO; and Dry Fork Steel & Supply located in Belle, MO all now have access to MFG.com’s marketplace.  The platform allows the formation of lasting relationships among manufacturers globally.

To read more about what MFG.com has to offer and the manufacturers in Missouri, please visit MFG.com.

Moser: “You can bring anything back to Kansas”

In an article (paywall) in Crain’s Cleveland Business, Harry Moser from the Reshoring Initiative discusses what what one company’s surprising reshoring success experience indicates for others in the manufacturing industry.  Rising labor costs in China and higher energy costs are causing many to reconsider their sourcing decisions.  With the advantages of shorter supply chains, minimizing disruption, and the benefits design and engineering being proximate to the manufacturing process, many companies are choosing to manufacture their products in the U.S.

Moser states “There’s nothing much simpler to make than a Frisbee and there’s no place in the U.S. more expensive than California or Michigan, so if you can bring Frisbees back from China to California and Michigan, you can bring anything back to Kansas.”

Also, discussed in the article is the multiplier effect that reshored jobs can have.  Because manufacturing firms are ubiquitous in the supply chain, a company that makes the decision to reshore can set off a chain reaction to add jobs at shops both up- and down-stream in the production process.