American Competitiveness in the Global Manufacturing Environment

Introduction

It appears that the U.S. faces new economic challenges every few years. However, the present situation is unique in that it is a matter that looks to a global issue but requiring national solutions. New and old rivals are now more than ever keen on taking up positions previously held by American manufacturing firms on the international market environment (Bonvillian & Singer, 2018). These economies have placed great emphasis in terms of infrastructure and capital investment in scientific education and research that presently rivals that of the U.S. The birth of internet and its subsequent development championed by the digital revolution proceeds onwards in introducing international competiveness for wide ranging manufacturing industries which America once authoritatively commanded (Bonvillian & Singer, 2018). America has always emerged victorious in the wake of massive challenges that erupted in years past. On this note, this paper seeks to present for recommendations trough which it can transform domestic parameters to improves manufacturing industry competitiveness on the global arena.

Background of the Problem

A few decades ago, economies offering low wage rates attracted international manufacturing entities from developed economies to invest in such nations. The unforeseen outcome was that massive foreign direct investments from the huge multinationals stimulated economic growth within the host countries (Brennan et al., 2015). They also benefited from improved trade relations with nations like the U.S as well as trading blocs like the EU resulting in gradual but consistent rise in domestic costs. The primary advantage of low labor costs have thus diminished requiring a rethinking of previous outsourcing strategies in favor of re-shoring (Brennan et al., 2015). Countries like China have benefited greatly from outsourcing (Kotabe & Murray, 2018). This made Chinese manufacturing capacities strong enough to assure quality, delivery and shipping costs, management control, and nearness to customer markets that rival those of major U.S. manufacturing industries.

Recommendations

The U.S. remains one of the largest and most diverse markets for high quality products. Many international firms that once depended on overseas destinations by reason of lower labor costs are coming to terms with this reality (Pearce II, 2014). These massive revelations notable underscore the notion that the issues of America’s competitiveness on the global stage in the wake of increased competition from nations like China for the American consumer are in essence self-inflicted (Pearce II, 2014). They have come to the realization that it is a more informed move relative to longer term sustainability of American competitiveness in the global manufacturing industry. For instance, the high labor costs which they have for a long time cited as the basis for offshore outsourcing are unfounded for a number of reasons (Kotabe & Murray, 2018). For example, domestic outsourcing allows for significant net gains resulting from enhanced time-to-market outcomes, better control over production, competitive non-labor costs relative to manufacturing as well as decreased transportation costs.

Improving Labor Costs in the U.S. Advocate for Increasing Productivity of the American Workforce

Economic growth in most Asian nations which were previously preferred off-shoring destinations has resulted in unprecedented rises in labor costs. According to Pearce II (2014), in 2003, the rate of increases in the cost of labor in the U.S. and China were almost identical. In 2007, there was a tenfold jump in Chinese labor costs in comparison to those registered within the U.S (Pearce II, 2014). It is envisaged that domestic outsourcing is bound to offer American manufacturing a competitive advantage over other manufacturers on the global market.

As the wage gap continues to shrink, the productivity of American workers in comparison to those in other nations is promising competitive gains to U.S. manufacturing players. According to Pearce II (2014), U.S. workers are approximately three times more productive in comparison to those in China. The outcomes are American firms operating within the U.S. becoming more competitive on the global scene from the savings gained by high output of domestic workers (Tita, 2016). This is a significant factor towards upraising the nation’s competitiveness relative to the global manufacturing environment since it is possible to realize longer term and sustainable gains (Wallace, 2017). American manufacturers are awakening to these benefits with firms with over 1 billion dollars annual revenues considering bringing back manufacturing operations to the U.S. Pearce II (2014), provides that a large firm like GE after investing 163 million dollars in Michigan was able to adequately match highly skilled workers available in the locality with its organizational objectives. Statistical figures point at Chinese worker productivity standing at merely 48% of that recorded in the U.S. in 2010 (Pearce II, 2014). It is thus, purposefully recommended that American manufacturing take full advantage of these benefits towards gaining and retaining a competitive advantage in the international manufacturing environment.

Competitiveness of Production Costs

  The U.S. is increasing emerging as a premium provided of production for manufacturing entities across different industries. As a result, films in the food and beverage, minerals, chemicals, coal, paper, primary metal manufacturing, petroleum, wood, and stone production are investing more capital resources towards keeping operations in the country (Ford, 2014). Similarly, companies that previously outsourced internationally are now looking forward to bringing back manufacturing operations into the country (Tita, 2016). It is home to an exceptional abundance of natural resources which are coupled with capital intensive infrastructure that is highly attractive to manufacturers seeking manufacturing support (Wallace, 2017). It is energy sufficient to the extent that it is not dependent of external sources for oil. Conversion of oil into natural gas enables firms to run leaner which other economies are unable to offer. As Pearce II (2014) provides, natural gas prices are 16% lower in the U.S. in comparison to those witnessed in Japan. As a result, manufacturers in the country are well positioned to lower productions costs in a way that will upraise competitiveness in the international markets.

Incentives from Different Levels of Government    

When the political environment in a particular region translates it gains from which manufacturers are able to benefit from greater investments, it encourages not only the growth of such a locality but also that of a given manufacturing industry. It is imperative that all levels of governments within the U.S. work towards availing support to manufacturing entities. For instance, Pearce II (2014) provides that the state of Indiana availed tax credits of neatly 50% to companies approved for relocation within its boundaries. The outcome was over 200 firms relocating to the state between 2005 and 2012 (Pearce II, 2014). The federal government also offers grants that stand at 500 billion dollars annually (Pearce II, 2014). Together, these incentives availed at different levels of government place firms in a position to be sustainable competitive in the global manufacturing environment.

Synchronizing Manufacturing with Peripheral Business Functions

American manufacturers are keen on research and development. In an effort to take on advantages that ultimately improve competitiveness on the global stage, it is preferable to improve productivity within the U.S. rather than in other nations (Ford, 2014). It is a great benefit to have R&D departments and manufacturing plants in close proximity as this eliminates the lag time between innovation and execution. There are other numerous advantages that are available to U.S. firms such as its very large consumer market. Transportation, IT, energy costs are becoming increasingly lower (Pearce II, 2014). This is indicative that the recommendation to synchronize manufacturing business functions with manufacturing translates to huge gains that ensure stronger American competitiveness on the global manufacturing environment.

Conclusion

As provided, the U.S. is well placed to combine its various benefits available to its manufacturing industry and shore up its level of competitiveness against other international players. It is recommended that it pulls back off shore operations and bring them back to the country in an effort to reap from the numerous advantages. These include higher productivity and skillsets owned by the U.S. labor market as well as the decreasing wage gap in comparison to other countries. Firms are also encouraged to leverage the comparatively lower production costs, synchronize other business functions as well as take up incentives availed by different levels of government. The synergy emerging from these benefits are vital to the sustainable competitiveness of American manufacturing in the global environments.

References

Bonvillian, W. B., & Singer, P. L. (2018). Advanced Manufacturing: The New American Innovation Policies. Cambridge, MA: MIT Press.

Brennan, L., Ferdows, K., Godsell, J., Golini, R., Keegan, R., Kinkel, S., … & Taylor, M. (2015). Manufacturing in the world: where next?. International Journal of Operations & Production Management, 35(9), 1253-1274.

Ford, S. L. (2014). Additive manufacturing technology: potential implications for US manufacturing competitiveness. J. Int’l Com. & Econ., 6, 40.

Kotabe, M., & Murray, J. Y. (2018). Global Sourcing Strategy: An Evolution in Global Production and Sourcing Rationalization. In Advances in Global Marketing (pp. 365-384). Springer, Cham.

Pearce II, J. A. (2014). Why domestic outsourcing is leading America’s reemergence in global manufacturing. Business Horizons, 57(1), 27-36.

Tita, B. (2016). How to revitalize U.S. manufacturing. Wall Street journal. Retrieved on 19 April, 2018 from https://www.wsj.com/articles/how-to-revitalize-u-s-manufacturing-1465351501

Wallace, D. (2017). Environmental policy and industrial innovation: Strategies in Europe, the USA and Japan. New York, NY: Routledge.