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The Case for Manufacturing
Manufacturing Momentum
SCOTT PAUL
President, Alliance for American
Manufacturing
Key Manufacturing Indicators
• Auto/Light Truck Sales strong
• New Single Family Home Sales/Starts/Permits are up
since 2009 but only ~50% of 1990-1999 average
• Real Fixed/Equipment Investment rising
• Balance of International Trade (-China) improving
• Industrial Production Index still below 2007 levels but
rising
• Capacity Utilization at 76.1%, well below average
• ISM PMI is 56.2 (positive all but 1 month since ‘10)
• New Manufacturing Orders at pre-recession levels
• Manufacturing employment is up 4% since 2010, but flat
for past 18 months.
Dayton Area Manufacturing
Key Manufacturing Trends
•
•
•
•
•

Energy Boom
Auto Industry Strength
The “Cloud” and Broadband
Additive Manufacturing
Reshoring
Is It Time to Rethink Your
Manufacturing Strategy?
For the past 10 years, China was the
answer to many manufacturing questions.
That's no longer automatically the case.

MIT Sloan Management Review, Winter 2012
Measuring Costs of Offshoring
60 percent of U.S. manufacturers, when
calculating costs, use rudimentary tools that
ignore 20 percent or more of the total cost

Archstone Consulting, 2009
Economics of Reshoring
• U.S.-made products are 35% more expensive
than Chinese products in the Chinese market
• U.S.-made products have an average 10% total
cost advantage in the U.S. markets (using 2009
Chinese wages)
Strategic Calculations for Reshoring
•Innovation: connection between ability to

innovate and proximity to production
•Mass customization: Additive manufacturing
and other trends require proximity to customer
•Environment: life-cycle cost equation may be a
stronger factor in future. Proximity matters.
•Strengthening supply chains: When OEMs
reshore supply chain proximity can/should
follow.
Is Reshoring Happening?
• 34 percent of companies with $1b+ sales
considering it (MIT Forum for Supply Chain
Innovation, 2012)
• ~50 percent of companies with $10b+ sales
said they were considering it. (Boston
Consulting Group, 2012)
• 40 percent of manufacturers had reshored
some work (MFG.com survey, 2012)
Case studies: reasons for reshoring
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Higher foreign wages and currency values.
Lower foreign quality leading to high warranty costs
and rework.
Delivery times are too long.
Freight costs are rising.
Travel costs, travel time, onsite audits prohibitive
Inventory costs are too high
Total costs are rising.
IP is being stolen or at risk.
Communications are difficult.
Image and brand impact of Made in USA
Top industries reshoring (so far)
1. Electrical Equipment, Appliances, Components
2. Transportation Equipment
3. Machinery
4. Fabricated Metal Parts
5. Plastics & Rubber
6. Computers and Electronics

7. Furniture
High Profile Reshoring Cases
•
•
•
•
•
•
•
•
•
•

General Electric
Apple
Google
(Wal-Mart)
Ford
Airbus
Toshiba
Lenovo
NCR
Flextronics
Reshoring From Where?
1.
2.
3.
4.
5.
6.

China (at least 60% of cases)
Mexico
Japan
India
Taiwan
Philippines
Reshoring to where?
• South and Midwest represent over 50% of
cases.
• Top states: California, Ohio, North
Carolina, Illinois, Texas, Michigan, Tennessee,
Georgia, Kentucky
Reshoring…and exporting?
U.S. manufacturing sector could capture $70 to
$115 billion in annual exports as a result of
significant cost advantages over Western Europe
and Japan
Boston Consulting Group, 2013
Behind the numbers
• Adjusted for productivity, U.S. labor costs
projected to be 15-35% lower than Western
Europe and Japan by 2015 for many products
• Prices for natural gas are projected to be 6070% lower
• Electricity is projected to be 40-70% cheaper
in the U.S.
Industries poised to grow
• Transportation equipment

• Chemicals
• Machinery
• Computers
• (Petroleum and coal products)
• Electrical equipment, appliances, components
• Primary metals
Potential Jobs Impact
• 600,000 to 1.2 million direct manufacturing
jobs by 2020
• 1.9 to 3.5 million indirect jobs
• 2.6 to 4.7 million total jobs
• Lower unemployment rate by 2 to 3 percent
• Diversify export mix
(energy, commodities, food, aerospace, scrap)
The Case for Manufacturing
• Middle Class Jobs: 38% wage premium for
new manufacturing jobs over rest of private
sector
• Innovation: manufacturing contributes
outsized role to R&D and patents
• Exports: manufacturing accounts for >60% of
US exports
• Value added: no sector has manufacturing’s
“ripple effect”
Questions/Discussion
Keep in touch:
americanmanufacturing.org
@ScottPaulAAM on Twitter
spaul@aamfg.org
Manufacturing Momentum
Applied research organization

Second in the U.S. in funded materials research
Winner of three R&D 100 Awards
Over 450 research staff
Average annual revenues: $90M
Core Technical Areas
Materials & Processes

Mechanical & Structural Technologies
Energy & Environmental Technologies
Sensor Systems & Signatures
Human Performance
Federal R&D Funding
Industry R&D Funding
Future Innovators and Inventers

NSF Science & Engineering Indicators 2012
Source: The Kauffman Foundation
Manufacturing Momentum
October 23, 2013

presented by:

Alan Shaffer
President
DAYTON PROGRESS CORPORATION
Dayton Progress Corporation
We are based in West Carrollton, Ohio
and are the largest manufacturer of
precision tooling for metal stamping &
forming in the world.
67 years old, founded in 1946

10 factories in North America, Europe and Asia employing 1,000 people
13,000 customers in 51 countries
Product Precision of .0002” (1/10th the diameter of a human hair)
We train all employees and pay 100% for college tuition and books
Owned by MISUMI Group, Inc. $1.8 billion sales Japanese company
29
Foreign companies think the U.S. is a great
place to manufacture. You should, too!
• 61% of all American companies acquired by
foreign businesses are manufacturers.
Made in America, Again
• Americans out produce Chinese 4 to 1:
• 17.6% of global manufacturing is by
1.3 billion Chinese.

• 18.2% is by 0.3 billion Americans.
• China labor cost is rising 15% to 20%
per year.

• By 2015 the cost to produce in large
China cities will be only 10% to 15%
below U.S. costs and 25% above Mexico
cost.

• Transportation costs are rising, making
it cheaper to manufacture at home.
31

31
Housing Construction Is Forecast to
Recover Annual U.S. New Housing Starts
2,500,000

2,000,000

1,500,000

1,000,000

500,000

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

16

Forecast by MAPI October 2011

2011

32
Vehicle Sales Are Forecast To Recover
U.S. Light Vehicle Sales
Millions of Units
20
18

Units - millions

16
14
12
10
8
6
4
2
0
78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

16

Forecast by MAPI October 2011

2011

33
A Huge Industrial Stimulus Was Launched 7.29.11
1. Fleet MPG must double by
2024, to 54.5
2. All vehicles require redesign
and weight reduction.

Source: The Whitehouse

New C.A.F.E. standard for MY2025
Announced by President Obama 07.29.11
34
But I heard there are fewer manufacturing
workers now and outsourcing is killing jobs?
• Yes, there has been outsourcing of
manufacturing work since 2000, but productivity
is the biggest reason for fewer jobs.

• 100 years ago 70% of Americans worked on
farms. Now less than 3% do and we feed 300+
million Americans and a significant % of the rest
of the world. Productivity!
Sales per Worker

American Manufacturing Worker Productivity Is
There are 2 reasons
Soaring

1. With the advent of CNC, modern
machinery, tools, tool setting &
fixturing, programming systems and
automation, the American manufacturing
worker has significantly increased their
productivity.
2. Starting around 2000 we
also outsourced the most
manual manufacturing jobs.
If U.S. manufacturing was a country it would be the
10th largest economy in the world.
Opportunities
• Significant demand for manufacturing employees
• Not enough willing candidates with skills or ability to learn
 600,000 open positions in manufacturing in the US*
 And yet we have a 7.5% national unemployment rate**
 In Ohio 869,000 workers ages 16-24 have a 15.7%
unemployment rate**
There is a career awareness
and preparedness gap
*Deloitte / Manufacturing Institute 2012
**Bureau of Labor Statistics

38
Diverse careers in clean
technological workplaces
Working with your brain, not your back

Manufacturing & Engineering
• Controls Engineer
• Machinist
Business & Support
• Maintenance Mechanic
• Accountant
• Press Operator
• Estimator
• Quality Technician
• Human Resources
• Manufacturing Engineer
• Plant Manager
• Tool & Die Maker
• President
• Welder
• Procurement
• Programmer
• Scheduling
• Production Supervisor
• IT
• Process Engineer
• Sales
And many, many more!

39
The #1 Issue in American
Manufacturing is the Next Generation
Workforce: How to Hire, Train &
Retain?
2,500 manufacturers / Average 40 employees each
100,000 workers – 14.1% of region workforce
$4.5 billion payroll – 17.4% of total region
$32 billion annual revenues

41
Workforce development is needed now
•

By 2016…
o

•

…30% of Ohio’s manufacturing workers eligible for retirement

Tomorrow’s manufacturing workers…
o

…Are currently in 6th through 12th grades

• Among 18-24 year olds…
o

…Manufacturing ranks last among industries for careers*
o

Low career awareness + wrong career image

*Deloitte, Manufacturing Institute
Public’s view of manufacturing today

42
Manufacturing careers meet a need
Outcome of U.S. Students Entering High School*:
~ 10% will drop out (could later earn a GED)

~ 10% will enter Vocational Technical Training (they’ll be fine)
~ 30% will graduate into the workforce with no career training
~ 50% will go to college
~ Half will drop out
~ Half will graduate with a degree
What happens
to these 78%?

~ Only half will earn a degree that can
merit a job with an income that can pay
off student loans. Half will not.

* Approximate national figures from National Center for Educational Statistics

43
Student debt is crushing the next generation
of adults: $25,000 average per student
$800 billion credit card debt
Most Americans

$900 billion student debt
<30% of Americans
This is the 1st generation to have student debt

Delaying starting families

Making fun things in life
like vacations difficult

Delaying buying a house
and shrinks the size of
house you can buy.
The death of U.S. manufacturing is a myth
12 million Americans produce nearly 20% of the
world’s goods used by 6.5 billion people.
These 12 million Americans enjoy some of the
highest levels of income and benefits in America.
Why don’t students know this until it is too late to
for them to consider and prepare?

46
Compensation in manufacturing is superior
2011 Average Incomes - All Ages / All Jobs*
$66,756

Ohio Manufacturing Jobs

$54,700

All Americans with 4-Year Degrees

All Other Ohioans

$41,921
$33,500

U.S. High School Graduates

$23,400

U.S. High School Drop Outs
$0

$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000

The highest-paying, high benefit jobs
not requiring a college degree are a national secret!
*Ohio Department of Labor, US Department of Labor

47
Questions?

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Manufacturing Momentum: The Dayton Region and Beyond

  • 1. The Case for Manufacturing Manufacturing Momentum SCOTT PAUL President, Alliance for American Manufacturing
  • 2.
  • 3. Key Manufacturing Indicators • Auto/Light Truck Sales strong • New Single Family Home Sales/Starts/Permits are up since 2009 but only ~50% of 1990-1999 average • Real Fixed/Equipment Investment rising • Balance of International Trade (-China) improving • Industrial Production Index still below 2007 levels but rising • Capacity Utilization at 76.1%, well below average • ISM PMI is 56.2 (positive all but 1 month since ‘10) • New Manufacturing Orders at pre-recession levels • Manufacturing employment is up 4% since 2010, but flat for past 18 months.
  • 5. Key Manufacturing Trends • • • • • Energy Boom Auto Industry Strength The “Cloud” and Broadband Additive Manufacturing Reshoring
  • 6. Is It Time to Rethink Your Manufacturing Strategy? For the past 10 years, China was the answer to many manufacturing questions. That's no longer automatically the case. MIT Sloan Management Review, Winter 2012
  • 7. Measuring Costs of Offshoring 60 percent of U.S. manufacturers, when calculating costs, use rudimentary tools that ignore 20 percent or more of the total cost Archstone Consulting, 2009
  • 8. Economics of Reshoring • U.S.-made products are 35% more expensive than Chinese products in the Chinese market • U.S.-made products have an average 10% total cost advantage in the U.S. markets (using 2009 Chinese wages)
  • 9. Strategic Calculations for Reshoring •Innovation: connection between ability to innovate and proximity to production •Mass customization: Additive manufacturing and other trends require proximity to customer •Environment: life-cycle cost equation may be a stronger factor in future. Proximity matters. •Strengthening supply chains: When OEMs reshore supply chain proximity can/should follow.
  • 10. Is Reshoring Happening? • 34 percent of companies with $1b+ sales considering it (MIT Forum for Supply Chain Innovation, 2012) • ~50 percent of companies with $10b+ sales said they were considering it. (Boston Consulting Group, 2012) • 40 percent of manufacturers had reshored some work (MFG.com survey, 2012)
  • 11. Case studies: reasons for reshoring 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Higher foreign wages and currency values. Lower foreign quality leading to high warranty costs and rework. Delivery times are too long. Freight costs are rising. Travel costs, travel time, onsite audits prohibitive Inventory costs are too high Total costs are rising. IP is being stolen or at risk. Communications are difficult. Image and brand impact of Made in USA
  • 12. Top industries reshoring (so far) 1. Electrical Equipment, Appliances, Components 2. Transportation Equipment 3. Machinery 4. Fabricated Metal Parts 5. Plastics & Rubber 6. Computers and Electronics 7. Furniture
  • 13. High Profile Reshoring Cases • • • • • • • • • • General Electric Apple Google (Wal-Mart) Ford Airbus Toshiba Lenovo NCR Flextronics
  • 14. Reshoring From Where? 1. 2. 3. 4. 5. 6. China (at least 60% of cases) Mexico Japan India Taiwan Philippines
  • 15. Reshoring to where? • South and Midwest represent over 50% of cases. • Top states: California, Ohio, North Carolina, Illinois, Texas, Michigan, Tennessee, Georgia, Kentucky
  • 16. Reshoring…and exporting? U.S. manufacturing sector could capture $70 to $115 billion in annual exports as a result of significant cost advantages over Western Europe and Japan Boston Consulting Group, 2013
  • 17. Behind the numbers • Adjusted for productivity, U.S. labor costs projected to be 15-35% lower than Western Europe and Japan by 2015 for many products • Prices for natural gas are projected to be 6070% lower • Electricity is projected to be 40-70% cheaper in the U.S.
  • 18. Industries poised to grow • Transportation equipment • Chemicals • Machinery • Computers • (Petroleum and coal products) • Electrical equipment, appliances, components • Primary metals
  • 19. Potential Jobs Impact • 600,000 to 1.2 million direct manufacturing jobs by 2020 • 1.9 to 3.5 million indirect jobs • 2.6 to 4.7 million total jobs • Lower unemployment rate by 2 to 3 percent • Diversify export mix (energy, commodities, food, aerospace, scrap)
  • 20. The Case for Manufacturing • Middle Class Jobs: 38% wage premium for new manufacturing jobs over rest of private sector • Innovation: manufacturing contributes outsized role to R&D and patents • Exports: manufacturing accounts for >60% of US exports • Value added: no sector has manufacturing’s “ripple effect”
  • 22. Manufacturing Momentum Applied research organization Second in the U.S. in funded materials research Winner of three R&D 100 Awards Over 450 research staff Average annual revenues: $90M
  • 23. Core Technical Areas Materials & Processes Mechanical & Structural Technologies Energy & Environmental Technologies Sensor Systems & Signatures Human Performance
  • 26. Future Innovators and Inventers NSF Science & Engineering Indicators 2012
  • 27. Source: The Kauffman Foundation
  • 28. Manufacturing Momentum October 23, 2013 presented by: Alan Shaffer President DAYTON PROGRESS CORPORATION
  • 29. Dayton Progress Corporation We are based in West Carrollton, Ohio and are the largest manufacturer of precision tooling for metal stamping & forming in the world. 67 years old, founded in 1946 10 factories in North America, Europe and Asia employing 1,000 people 13,000 customers in 51 countries Product Precision of .0002” (1/10th the diameter of a human hair) We train all employees and pay 100% for college tuition and books Owned by MISUMI Group, Inc. $1.8 billion sales Japanese company 29
  • 30. Foreign companies think the U.S. is a great place to manufacture. You should, too! • 61% of all American companies acquired by foreign businesses are manufacturers.
  • 31. Made in America, Again • Americans out produce Chinese 4 to 1: • 17.6% of global manufacturing is by 1.3 billion Chinese. • 18.2% is by 0.3 billion Americans. • China labor cost is rising 15% to 20% per year. • By 2015 the cost to produce in large China cities will be only 10% to 15% below U.S. costs and 25% above Mexico cost. • Transportation costs are rising, making it cheaper to manufacture at home. 31 31
  • 32. Housing Construction Is Forecast to Recover Annual U.S. New Housing Starts 2,500,000 2,000,000 1,500,000 1,000,000 500,000 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Forecast by MAPI October 2011 2011 32
  • 33. Vehicle Sales Are Forecast To Recover U.S. Light Vehicle Sales Millions of Units 20 18 Units - millions 16 14 12 10 8 6 4 2 0 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Forecast by MAPI October 2011 2011 33
  • 34. A Huge Industrial Stimulus Was Launched 7.29.11 1. Fleet MPG must double by 2024, to 54.5 2. All vehicles require redesign and weight reduction. Source: The Whitehouse New C.A.F.E. standard for MY2025 Announced by President Obama 07.29.11 34
  • 35. But I heard there are fewer manufacturing workers now and outsourcing is killing jobs? • Yes, there has been outsourcing of manufacturing work since 2000, but productivity is the biggest reason for fewer jobs. • 100 years ago 70% of Americans worked on farms. Now less than 3% do and we feed 300+ million Americans and a significant % of the rest of the world. Productivity!
  • 36. Sales per Worker American Manufacturing Worker Productivity Is There are 2 reasons Soaring 1. With the advent of CNC, modern machinery, tools, tool setting & fixturing, programming systems and automation, the American manufacturing worker has significantly increased their productivity. 2. Starting around 2000 we also outsourced the most manual manufacturing jobs.
  • 37. If U.S. manufacturing was a country it would be the 10th largest economy in the world.
  • 38. Opportunities • Significant demand for manufacturing employees • Not enough willing candidates with skills or ability to learn  600,000 open positions in manufacturing in the US*  And yet we have a 7.5% national unemployment rate**  In Ohio 869,000 workers ages 16-24 have a 15.7% unemployment rate** There is a career awareness and preparedness gap *Deloitte / Manufacturing Institute 2012 **Bureau of Labor Statistics 38
  • 39. Diverse careers in clean technological workplaces Working with your brain, not your back Manufacturing & Engineering • Controls Engineer • Machinist Business & Support • Maintenance Mechanic • Accountant • Press Operator • Estimator • Quality Technician • Human Resources • Manufacturing Engineer • Plant Manager • Tool & Die Maker • President • Welder • Procurement • Programmer • Scheduling • Production Supervisor • IT • Process Engineer • Sales And many, many more! 39
  • 40. The #1 Issue in American Manufacturing is the Next Generation Workforce: How to Hire, Train & Retain?
  • 41. 2,500 manufacturers / Average 40 employees each 100,000 workers – 14.1% of region workforce $4.5 billion payroll – 17.4% of total region $32 billion annual revenues 41
  • 42. Workforce development is needed now • By 2016… o • …30% of Ohio’s manufacturing workers eligible for retirement Tomorrow’s manufacturing workers… o …Are currently in 6th through 12th grades • Among 18-24 year olds… o …Manufacturing ranks last among industries for careers* o Low career awareness + wrong career image *Deloitte, Manufacturing Institute Public’s view of manufacturing today 42
  • 43. Manufacturing careers meet a need Outcome of U.S. Students Entering High School*: ~ 10% will drop out (could later earn a GED) ~ 10% will enter Vocational Technical Training (they’ll be fine) ~ 30% will graduate into the workforce with no career training ~ 50% will go to college ~ Half will drop out ~ Half will graduate with a degree What happens to these 78%? ~ Only half will earn a degree that can merit a job with an income that can pay off student loans. Half will not. * Approximate national figures from National Center for Educational Statistics 43
  • 44. Student debt is crushing the next generation of adults: $25,000 average per student $800 billion credit card debt Most Americans $900 billion student debt <30% of Americans
  • 45. This is the 1st generation to have student debt Delaying starting families Making fun things in life like vacations difficult Delaying buying a house and shrinks the size of house you can buy.
  • 46. The death of U.S. manufacturing is a myth 12 million Americans produce nearly 20% of the world’s goods used by 6.5 billion people. These 12 million Americans enjoy some of the highest levels of income and benefits in America. Why don’t students know this until it is too late to for them to consider and prepare? 46
  • 47. Compensation in manufacturing is superior 2011 Average Incomes - All Ages / All Jobs* $66,756 Ohio Manufacturing Jobs $54,700 All Americans with 4-Year Degrees All Other Ohioans $41,921 $33,500 U.S. High School Graduates $23,400 U.S. High School Drop Outs $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 The highest-paying, high benefit jobs not requiring a college degree are a national secret! *Ohio Department of Labor, US Department of Labor 47

Editor's Notes

  1. Noted macro trends:Localization of manufacturing close to suppliers and customersIncreased cost of labor in China and IndiaIncreased cost of transportationAll of above resulting in reshoringGave local example of Whirlpool (Greenville) sending jobs for manufacturing of hand mixers to China and then bringing them back.Also talked about the economic impact to the community:Every 1 manufacturing job yields 2-3 more jobs locally
  2. Emphasized the primary need is in machining and engineering
  3. Encouraged discussion about how and when students make career and/or education decisions