ToolingU-SME Works to Close the Skills Gap

August 2nd, 2022

The Deloitte and The Manufacturing Institute 2022 Manufacturing Perception Study reports that “ significantly more respondents believe that manufacturing jobs are innovative and more respondents are likely to encourage their child to pursue a career in the industry” [compared to the 2017 study]…”Further, the pandemic has led to a new awareness of the critical nature of manufacturing in the United States and beyond.”

This corroborates the eBook released last year by American Machinist and IndustryWeek titled, “Closing the Skills Gap – How manufacturers are leveraging new technologies and energizing a new generation to finally close the labor gap,” that was sponsored by Epicor Software Corporation.

The Executive Summary stated: “We are on the cusp of a full-scale digital revolution in the manufacturing industry…[and] on the cusp of an enormous wave of retirements as Baby Boomers exit the job market…we have a perfect storm.”  The result could be that the “500,000 unfilled manufacturing jobs today…[could] balloon to 2.5 million over the next decade.”

The eBook outlined the application of the new tactics that manufacturers are applying across industries: “Over the last few years, manufacturers across the industry have begun systematically attacking the skills gap head-on…”

However, now is the time to be prepared to take advantage of the increased interest in returning manufacturing to America and strengthen our manufacturing base as a result of the weaknesses in the domestic supply chain revealed by the COVID-19 pandemic.

Since 1979, the SME Education Foundation has been inspiring, preparing and supporting the next generation of manufacturing and engineering talent through their Student Summit event series, the SME PRIME® (Partnership Response In Manufacturing Education) initiative, and Student Scholarship program. The Foundation “works directly with the manufacturing community to educate the next-generation workforce through SME PRIME. The partnership provides industry-driven and learner-centered curriculum to high school students at SME PRIME schools across the country. Online learning is a significant component to the tailored curriculum developed for each SME PRIME school.”

I had the pleasure of being connected to Chad Schron, who is the senior director for Tooling U-SME and the Co-founder of Tooling U. I learned that Chad grew up in manufacturing. He started his career working in his grandfather’s machine shop and attended his first IMTS show before he graduated from high school. Chad developed the idea for an online manufacturing training school while working at the shop to combat the manufacturing skills shortage.

I told Chad that I started working as an engineering secretary at age 18 for a small defense contractor that was essentially a machine shop making components such as accelerometers, rate gyros, potentiometers before going to college later.

Chad told me that ToolingU-SME has developed curricula that “one in five community colleges and over half of the Fortune 500 manufacturing companies use to train their workforce and their students.” He added, “During COVID we saw significant growth in our education business as schools needed online programs because students were participating online for virtual classes at home.”

From the SME website, I saw that some of the industry-leading companies that work with Tooling-U are: Aerojet General Corporation, B/E Aerospace, BMW Manufacturing Co, Caterpillar, Chrysler Group, Deere & Company, General Dynamics, General Electric Company, Harley-Davidson, Mazak Corporation, Medtronic, Meggitt Aircraft, Raytheon, Senior Aerospace, Siemens, and United Technologies Corporation.

The website states, “Tooling U-SME’s industry-leading online classes and assessments are developed with input from manufacturers and employ the latest methods in instructional design.  “Turnkey Training is a series of predefined online curriculum packages for core manufacturing job roles” that combines classes for targeted learning with on-the -job training (OJT).  “Turnkey Training quickly creates a learning road map and career path for everyone from new hires to tenured employees. Most job roles can be completed in one year with less than four hours a month spent online.”

In addition, “Turnkey Training is ready for immediate use and delivers instruction in the areas needed most by today’s manufacturers. Unlike many other training programs, Turnkey Training requires minimal preparation. It is efficient, effective training that will deliver ROI quickly.”

I asked Chad about the impact of the COVID pandemic, and he said, “COVID impacted a lot of our onsite Instructor led training programs as companies did not allow for in person/onsite training. Most customers have significantly reduced or removed all of their COVID restrictions, and we are back to pre-COVID training programs.”

Chad told me that the COVID pandemic had no real effect on their Apprenticeship and Certification programs. The SME website describes Tooling U-SME’s Apprenticeship Frameworks as “a series of predefined curriculum for common apprenticeship job functions, that provide related training instruction (RTI) using Tooling U-SME online classes…that support common apprenticeship job functions, and provide a flexible model allowing organizations and educators to offer easily accessible solutions in alignment with business needs.”

He explained, “By pairing Tooling U-SME online classes with on-the-job training, trainees can complete their apprenticeships at their own pace from anywhere. Our online classes also provide trainees with the education and theory to help them increase their success. Our Apprenticeship Frameworks are aligned with nationally recognized Department of Labor apprenticeship programs and easily incorporated into a company’s existing programs or used as a foundation for a new apprenticeship program.”

Chad sad that ToolingU-SME also offers Certification programs that “are built by professionals within the manufacturing industry who guide the development and continuous improvement of the bodies of knowledge and competency models upon which the certifications are based.” Current Certification programs listed on the website are:

  • Certified Manufacturing Associate
  • Certified Manufacturing Technologist
  • Certified Manufacturing Engineer
  • Lean Certification (Bronze, Silver and Gold)
  • Additive Manufacturing
  • Electrical Electronics Technology

Chad said, “We are seeing significant grown in our Industry 4.0 curricula as more companies are adopting SMART/Industry 4.0 technologies. This is particularly important as more companies are reshoring and changing their supply chains. They are leveraging these new technologies.”

Chad added, “We have a new Virtual Reality product that we just launched, and there is a video overview to view at https://www.youtube.com/watch?v=g-2MhC3beBY&t=10s and press release to read at https://www.toolingu.com/About/Press-News/Tooling-U-SME-Debuts-Immersive-Virtual-Labs.

He concluded saying, “ToolingU is constantly adding new and updated classes to our online catalog and our upcoming class release schedule can be viewed here.

I told Chad that the training ToolingU-SME provides is crucial to achieving one of the goals of Industry Reimagined 2030; that is, adding 5 million to the manufacturing-related, middle-income workforce by 2030 (a 40% increase.) I told him that I hoped that the ToolingU-SME curricula will expand to being used by four out of five community colleges instead of one out of five to accelerate that rate of training for manufacturing jobs in the U.S. to fill the over 500,000 manufacturing jobs currently open and prevent us from having an unfilled gap of over two million by 2030.

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ITIF Report Assesses Competitiveness of North American States

July 5th, 2022

On June 21, 2022, the Information Technology & Innovation Foundation conducted a webinar entitled, “Assessing the Competitiveness of North America: The North American Subnational Innovation Competitiveness Index,” based on a report by Luke Dascoli and Stephen Ezel of ITIF, and prepared in collaboration with the Macdonald-Laurier Institute, Fundación IDEA, and the Bay Area Economic Council Institute.

I was unable to attend the webinar, but later read the 49-page report with the goal of identifying examples of the vision of Industry Reimagined 2030 to convert the narrative of American manufacturing from one of “inevitable decline” to “vibrant opportunities.”

The purpose of the report was “to identify economic differences among states and provinces and highlight regions needing more federal attention, identify cross-national innovation performance, and track the continent’s overall competitiveness in the innovation-driven global economy.”

A vibrant opportunity was identified in the first paragraph of the Overview: “North America—Canada, Mexico, and the United States—represents one of the world’s most economically vibrant regions, accounting for 28 percent of global economic output. The region also forms one of the world’s largest free trade zones, with deeply integrated supply chains…the three nations form a high-wage/low-wage partnership, bringing complementary labor forces, infrastructure, innovation capacities, and industry strengths together to create a highly competitive economic region. This relationship is poised to make North American manufacturing value chains globally cost competitive with Asian ones and thus make North America a leading global innovation and manufacturing powerhouse.”

“This report assesses how prepared North American states are to compete in today’s increasingly innovation-driven economy. The North American Subnational Innovation Competitiveness Index (NASICI) uses 13 measures across 3 categories to quantify the extent to which each state’s economy is knowledge based, globalized, and innovation ready and form composite scores (between 0 to 100) that identify each state’s level of performance in the innovation economy.”

Knowledge Economy

•Immigration of knowledge workers – number of highly educated foreign-born residents as a share of total state population
•Workforce Education – total workforce finishing postsecondary education (including universities, trade schools, and colleges)
•Professional, scientific, tech – total employment enrolled in professional, scientific,
and technical activities

•Manufacturing Gross Value Added per worker – measures the average GVA per manufacturing worker

Globalization

•Inward foreign direct investment – flow of funds into a state from foreign-based enterprises to purchase that state’s existing facilities or to develop new ones
•High tech exports – (NAICS 333, 334, & 335) as a Share of GDP

Innovation Capacity

•R & D Intensity – Total R&D Investment Relative to GDP
•R & D Personnel – as a Share of Total State Employment
•Patents (per capita) – PCT Patents Issued per Million Persons
•Venture Capital Investment – shows a state’s total VC investment (based on VC-receiving firms located therein) relative to the size of its GDP.
•Broadband telecommunications – Share of all Households Subscribing to Broadband Internet

•Decarbonization (CO2 emissions) – Tons of CO 2 Emissions per Capita

The Composite NASICI scores for the top ten states/provinces are:

RankingState/ProvinceCountryNASICI SCORE
1MassachusettsUnited States91.5
2CaliforniaUnited States83.9
3OntarioCanada75.2
4MarylandUnited States75.0
5WashingtonUnited States74.2
6British ColumbiaCanada70.4
7New JerseyUnited States70.2
8New MexicoUnited States68.3
9QuebecCanada68.1
10OregonUnited States66.0


Notice that Canada has three provinces in the top ten, but Alberta was the only other Canadian province to rank in the top 30. Arkansas, Mississippi, and South Dakota came in last for U. S. states, with South Dakota at number 60.  The ranking of Mexico’s states was “concentrated at the low-scoring end of the subnational index (61–92).”

The report commented that “Massachusetts ranks first due to the state’s massive network of software, hardware, and biotech firms in the Greater Boston area. Boston also holds one of the country’s most densely populated clusters of top-performing research universities, many of which focus on science, technology, engineering, and mathematics (STEM) education. California places second due to its bustling tech economy of Silicon Valley and other southern Californian innovation hubs with access to leading research universities such as Stanford, Caltech, and the University of California, San Diego. Maryland earns its spot due to the state’s abundance of D.C.-commuting knowledge workers employed in scientific, technical, and professional activities, alongside its R&D and innovation activities attributable to a plethora of federal contracts. Washington state ranks fifth because of its high-tech exports, cutting-edge tech businesses bringing in foreign investment, patent generation in areas such as artificial intelligence (AI) and cloud computing, and digitalization of the service sector.”

The report goes into some detail regarding the rankings in the 13 subcategories which are too complex for this article to cover. With regard to high tech exports, it discusses the successful cross-border region of the Pacific Northwest states of Oregon and Washington with the Canadian province of British Columbia, as well as the cross-border regions of California, Arizona, and Texas with the Mexican states of Chihuahua, Baja California, and Tamaulipas…These Mexican “states include the major manufacturing cities of Ciudad Juarez, Tijuana, and Matamoros, which together comprise most of Mexico’s
“maquiladora” manufacturing plants.”

The report makes the following policy recommendations for the United States:

Expand the R&D Tax Credit to Be Competitive with Canada – Canada’s “overall federal subsidy rate of 19.1 percent on business R&D investment” is “above the 16.6 percent median among 34 developed countries observed” and considerably higher than the U.S. “sub-median federal-state subsidy rate of 9.5 percent.”

Build Globally Competitive North American Supply Chains – This recommendation advocates the partnering of companies in the U.S. and Canada with the low-wage states of Mexico to “nearshore their production of innovative goods and the low-tech complementary manufacturing of products in high-tech industries into Mexico….This collaboration of complementary labor forces would help North American supply chains perform as a region that’s globally competitive with the supply chains of Asian low-cost competitors.”

Promote Industry-University Partnerships – “Firms on the cutting edge of new research can benefit from tapping the skills of the next generation of scientists and engineers early on by collaborating with neighboring universities via internships, fellowships, and other resource sharing with academic institutions. As federal funding for intramural research in states/provinces lags behind, industry investment in university research is increasingly important.”

Expand Collaborative Research Between U.S. and Canadian Leaders – “Firms engaging in international research collaboration tend to generate more valuable research than firms not collaborating in research or only collaborating among domestic firms do… Firms of U.S. and Canadian states/provinces should thus pursue greater research collaboration and co-patenting, given the proven benefits in international research collaboration and diversifying with new research partners. Doing so would help expand the network of shared research knowledge to drive more frequent and impactful innovations for both U.S. and Canadian states.”

Fully Embrace USMCA’s Commitments to Create a Free-Flowing North American   Digital Economy – The USMCA provided stronger rules for digital services across industries such as finance, e-
commerce, and software, for cross-border data transfers. The United States, Canada, and Mexico must “utilize the full economic value of data and remain competitive in the global digital economy.”

Expand National Place-Based Development Projects – The report recommends thatnational and regional policymakers should use the NASICI rankings to identify regions or states that are lagging behind in economic development.  The authors note that the efforts of the U. S. Economic Development Agency and regional commissions have “fallen off” and that the EDA’s budget had been reduced over time.  “Federal investment to build up economic attractiveness for underperforming states can improve their competitive edge and reduce economic hardships for the populations of those states.”

Improve Economic Indicator Data Availability Among North American States – “…the NASICI, ITIF and its Canadian and Mexican partners were only able to identify 13 indicators for which data was uniformly and readily available across North America’s 92 subnational regions. Statisticians from Canada, Mexico, and the United States should collaborate to make more such indicators available.”

In conclusion, the report states: “Today’s 21st-century economy has different success markers than the post-war economy experienced in the latter half of the 20th century. There are many more global competitors in the space of advanced technology production, R&D, and digital services.”  For the United States, “NASICI scores are helpful to bring to light regions needing more federal attention to support innovation competitiveness.”

Th9is report confirms that the narrative of the “inevitable decline” of American manufacturing of American manufacturing is no longer true and “vibrant opportunities” already exist.  These “vibrant opportunities” need to be expanded to be achieve the goal of fostering 50,000 more world-class companies and creating five million more manufacturing jobs by 2030.

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The Manufacturing Institute Grows FAME’s Technical Training Program

June 21st, 2022

In late 2019, I interviewed Dennis Dio Parker for an article published in early 2020. At that time, Dennis headed up the Federation for Advanced Manufacturing Education (FAME), founded by Toyota as an outgrowth of training that provided for employees when they built their new manufacturing plant for vehicles in Georgetown, KY in 1987. 

I recently reconnected with Dennis and found out the transfer of the program to The Manufacturing Institute had been completed after our interview. He said, “FAME was moved under the leadership of The Manufacturing Institute to gain the infrastructure and network needed to support and grow the program, but Toyota still participates in FAME and uses the Advanced Manufacturing Technician program (AMT) program in its eight manufacturing locations.”

Dennis connected me with Tony Davis, who is now the National Director for FAME USA for The Manufacturing Institute. When I spoke with Tony, he said, “The Manufacturing Institute is the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. The MI grows and supports the manufacturing industry’s skilled workers for the advancement of modern manufacturing. The MI does this through diverse initiatives including FAME. The MI is a separate legal entity from the NAM and is a 501(c)(3) public charity.”

The new website states, “FAME provides global-best workforce development through strong technical training, integration of manufacturing core competencies, intensive professional practices and hands-on experience to build the future of the modern manufacturing industry.”

Tony said, “FAME currently has 37 chapters in the following 13 states:

Tony explained that the chapters denote a collaboration of employers with an Economic Development Corporation or a Chamber of Commerce with a community college or university.  He said, “the Advanced Manufacturing Technician (AMT) program administered under the FAME model leverages a work/learn framework to weave technical knowledge, professional behaviors, and distinct manufacturing core exercises into a focused co-op experience to build global-best, entry-level, multiskilled technicians.”

He said, “FAME is the premier advanced manufacturing workforce education and development program, helping students become highly skilled, globally competitive, well-rounded and sought-after talent that can meet the unique needs and challenges of today’s modern manufacturing workforce.”

I asked what are the requirements for students, and he said “Candidates for FAME should be career-oriented, academically prepared students seeking rewarding work.  All participants must be high school graduates who are ready to participate in a highly regimented, hands-on programs and are aiming to advance quickly in their career. The program consists of five semesters after which the graduates have a debt-free degree as an Advanced Manufacturing technician.  Every year, FAME graduates transition into well-paying, diverse career pathways in critical disciplines across the manufacturing industry and across the country.”

I told Tony that I have written about how important I believe Lean training is critical to rebuilding American manufacturing and is important to enable American companies to become more competitive in the global marketplace.  I asked Tony if the AMT curriculum incorporates Lean training, and if so, how  does it do it?

Tony answered, “There are five core topics in the five-semester curriculum and each core topic incorporates core aspects of Lean:

  1. Safety culture
  2. Visual Management and 5S (housekeeping)
  3. Lean principles and practices
  4. 8-step problem solving
  5. machine reliability

He added, “In the first semester, students make a personal safety commitment that they must always include when giving their personal introduction.  This is part of the learn and live it model of the program. The program uses a mix of lectures, college-level activities, employer activities, and real, added value solutions in project-based exercises. The program also ties in professional behaviors, such as timeliness, dress code, grooming, posture, and working as a team.”

I mentioned that I had noticed the FAME Live event that was held May 24-25 in Louisville, KY. He said, “This was the first live event since 2018.  It is a day-long learning event in which attendees meet and hear from students, instructors, and graduates, as well as employers and community partners to understand how each stakeholder plays a part in making these programs successful. The day allows interested stakeholders to leave with a strong understanding of the model and with solid action items to help them implement this solution to meet the growing demand for skilled workers.”

I asked Tony if FAME is still partnering with Project Lead the Way (PLTW) that I had mentioned in my previous article.  He replied, “We know the vital importance of a pipeline of preparation into programs like FAME AMT, and continue to encourage local partnerships between chapters and programs in their respective schools systems, programs like Project Lead the Way and FIRST Robotics. Industry tours through broad support of initiatives like MFG Day make a huge difference, too, in the awareness of local students relative to opportunities in manufacturing near them.

And of course, we are always exploring new ways to better attract and engage more diverse audiences into manufacturing, whether into programs like FAME AMT or into other manufacturing roles such engineering, technology, management, etc. The MI continues to be a thought leader around DEI in manufacturing and we carry this effort into our chapter training and communications.”

At the end of my interview, Tony said, “We are always looking for industry partners to help expand manufacturing education opportunities to talent across the country. If you are an employer, business leader, city official or industry association interested in learning about the FAME model, joining a FAME chapter, or starting a new FAME chapter, contact our team at FAME@nam.org or schedule an informational session.

I thanked Tony for the information he shared with me and told him that the kind of training FAME provides is crucial to achieving one of the goals of Industry Reimagined 2030; that is, adding 5 million to the manufacturing-related, middle-income workforce by 2030 (a 40% increase.) I told him that I hoped FAME will expand to more states in the West in the near future.

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Becoming a Lean Enterprise is Critical to Rebuilding American Manufacturing

May 24th, 2022

When I wrote the chapter on what manufacturers can do to save themselves for my first book, Can American Manufacturing be Saved? Why we should and how we can, published in 2009, one of my top recommendations was to begin the Lean journey to become a Lean manufacturer.

From 2006 – 2018, I benefited from attending monthly two-hour workshops offered by the Tech San Diego Operations Roundtable. Nearly all of these workshops focused on applying Lean methodologies and tools to manufacturing.  San Diego was blessed with having several Lean experts put on these workshops, such as Steve Ebbing, Ric Van der Linden, Mike Osterling, and Jerry Wright.

In 2014, I met Luis Socconini, Founder and Director of the Lean Six Sigma Institute (LSSI), read his book, Lean Company, and took his Lean Six Sigma Yellow belt class 12 Saturdays in a row to earn my certificate.

Lean methodologies and tools to eliminate waste and improve productivity can enable a company to become a Lean manufacturer, but in his book, Mr. Socconini shows that there are processes in every critical activity within a company that can be made Lean, so that you can become a “Lean company.”

In his training, Mr. Socconini incorporates Lean accounting as “a very simple methodology to make it easy to calculate the real cost every week, every day, and even every hour. This makes it possible to make better decisions in real time and enables all the value stream leaders to understand if they are losing or wining.”

To get started on using Lean accounting, Mr. Socconini recommends that companies “need to select Lean accounting as one of the most important strategies for their business. Second, they need to implement calculating their “box score,” which is a tool to evaluate the financial results every week. Third, by using the box score, they will be able to calculate direct cost of products (normal material) and conversion cost (all the rest of the costs like energy, salaries, utilities, rent, etc. –everything but material or direct cost). With the conversion cost by hour, any company of any size or industry will be able to calculate real cost every day regardless of the mix or complexity. Real cost equals Conversion cost per unit plus material (direct cost).”

Mr. Socconini said, “The benefits of using Lean accounting compared to cost accounting are thata company is able to know what is the real cost and with this knowledge, they really know if the company is making money or losing money in real time. They are able to define correct prices for their products or services, decide which products or services are contributing profits and which of them are losers, prepare quotes with realistic information increasing the possibility of making better deals, and be able to define a target cost and compare it constantly with the real cost to drive the most important kaizen events.”

My appreciation of the importance of Lean accounting greatly increased when I had the pleasure of attending the Lean Accounting Summits five years in a row from 2014 – 2018 as a speaker representing the Reshoring Initiative  on “Returning Manufacturing to American Using Total Cost of Analysis.”
These summits are produced by Lean Frontiers, headed up by founder and President, Jim Huntzinger. Each summit was two days of information-packed presentations and workshops that included case studies showing Lean principles and tools in action. The list of leading experts whom I met is too long to mention, and I would not want to leave someone out.

I share Jim Huntzinger’s belief that it is critical for accountants to be trained in Lean accounting and participate in the company transformation in order to have a sustainable company in the increasingly competitive global marketplace. Each year, Lean Frontiers provides scholarships to a few university and college professors to attend the conference to learn about Lean accounting.

One of the key points emphasized at each summit was “Utilizing Lean tools is not enough to become a Lean company. Lean concepts and principles must become part of the culture. Lean will not be sustainable in the long run unless it does.”

Within the San Diego region, I saw many companies that participated in the Operations Roundtable workshops I attended apply Lean principles and tools to transform into Lean manufacturers, but very few utilize Lean accounting outside of Mr. Socconini’s clients in the region.

The problem is that very few small companies of under 50 employees have begun to adopt Lean principles and tools, and in San Diego, 97% of all manufacturers have less than 50 employees. On a national level, “98.6% of American manufacturing companies are small businesses” (under 500 employees), and “75.3% of those businesses have fewer than 20 employees, according to data gathered by SCORE, mentors to America’s small businesses.”

The sad fact is that in recent conversations with over 20 Lean consultants around the country, there was a consensus that only about 5-7% of all manufacturers have transformed into Lean enterprises. These consultants agree that we need to find a way to make becoming a Lean enterprise less expensive, less time consuming, and easier to do to cross the chasm to the mainstream of small to medium companies

It’s a shame because small companies have the advantage of not having much of a hierarchy to flatten.  However, in a small company, the president has to be fully committed to the Lean journey to initiate the training much less transform into a Lean enterprise.

Only two of the small manufacturers I have represented in the past 20 years have gone through Lean training. The first was a metal stamping company with less than 40 employees. They obtained the training through the College of the Canyons, one of the California Centers for Applied Competitive Technologies the offsets the cost with funding from California’s Employment Training Panel. As a result of the training, average throughput was reduced from five weeks to five days, on-time delivery improved by 70% and work-in-process was reduced by 40%. They did not adopt Lean Accounting and still had a problem with prices being higher than competition.

The other was Century Rubber Company with only 15 employees, and they received their training through the California Manufacturing Extension Partnership, California Manufacturing Technology Consulting. Their biggest benefit was eliminating wasted movement and time by implementing 5S, rearranging equipment, and reducing time to change molds. The cost of their training was also reduced by Employment Training Panel funding.  Century utilizes a modified version of calculating conversion costs like Lean Accounting does, and their pricing became more competitive.

The companies I represent have sometimes lost orders for being two to four times higher than their Chinese competition, so I have a very good reason for encouraging a transition from standard cost accounting to Lean accounting. I firmly believe that if more companies would make this transition, we would be losing less business to China and other offshore suppliers.

Thirteen years and two books later, I have come to believe that any company that becomes a Lean enterprise will not need to offshore manufacturing to be globally competitive.

Therefore, I can’t stress enough the importance of your company beginning the Lean journey. I am certain that becoming a Lean Enterprise is one of the most important actions American manufacturers can take to be globally competitive and is one of the keys to rebuilding American manufacturing to create jobs and prosperity.

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How to Have a Secure Supply Chain

May 10th, 2022

For more than the first 150 years of its history, the United States was a protectionist country in order to protect its fledgling manufacturing industries and then gain preeminence as an industrial nation in the 20th century.  We had secure supply chain until after WWII because we imported very little and were pretty much self-sufficient for consumer goods as well as good for our national defense.

After World War II, the U.S. switched from protectionism to free trade in order to rebuild the economies of Europe and Japan through the Marshall Plan and bind the economies of the non-Communist world to the United States for geopolitical reasons.

To accomplish these objectives, the General Agreement on Tariffs and Trade (GATT) was negotiated during the UN Conference on Trade and Employment. Originally signed by 23 countries at Geneva in 1947, GATT became the most effective instrument in the massive expansion of world trade in the second half of the 20th century.

GATT’s most important principle was trade without discrimination, in which member nations opened their markets equally to one another. Once a country and one of its trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members. GATT also established uniform customs regulations and sought to eliminate import quotas.

Unfortunately, our government leaders didn’t pay attention to the effect this was having on American businesses, and we started having a trade deficit in 1980 because of greater imports from Japan, Germany, South Korea, Taiwan, and the Philippines. 

When NAFTA went into effect in 1994, it started the trend of moving manufacturing outside the U.S.  When the World Trade Organization was formed in 1995, tariffs were reduced between all member countries.  However, after President Clinton granted China Most Favored Nation status in the year 2000 and China was allowed to become a member of the WTO, the great exodus to setting up manufacturing in China began, and the trade deficit sky rocketed. According to Alan Uke’s book, Buying Back America, the United States has a trade deficit with 88 countries—some deficits are small, but some are enormous, such as China. 

As a result, over 70,000 manufacturing sites closed in the past 25 years, and at the low point in 2010, we had lost 5.8 million lost middle-income manufacturing jobs.

Globalization of U.S. Supply Chains Failed

When the COVID pandemic hit, it sent shock waves throughout the world of manufacturing. Too late, we realized that we had become 70 to 95% import dependent, primarily on China.  It was impossible to scale up our domestic supply chain fast enough for PPE goods and pharmaceuticals.  

In an article, “It’s About Time to Build Regional Supply Chains,” on March 30, 2022 on Industry Week, Christopher S. Tang wrote, “I do believe most global supply chains are going to end. They had a good run over the last few decades, enabling Western companies to grow profitably and helping developing countries alleviate poverty. But concurrent and unprecedented events have blown apart their cost efficiency…Decades of outsourcing and offshoring have hollowed out the U.S. manufacturing sector. Building domestic supply chains in the U.S. can be time-consuming and cost-ineffective…Small and medium-sized manufacturers are facing the reality that there will inevitably be more disruptions in the future and they must prepare themselves now by strategically evaluating and mitigating their supply chain risks.”

This crisis could have been prevented if more American Manufacturers had utilized Total Cost of Ownership Estimator™ that Harry Moser made available for free in 2010 when he founded the Reshoring Initiative. Mr. Moser’s TCO Estimator has been the right tool to facilitate returning manufacturing to America. It actually includes calculations for the “hidden costs of doing business offshore,” such as Intellectual Property risk, political instability risk, effect on innovation, product liability risk, annual wage inflation, and currency appreciation.

In my experience as a sales rep, most companies only consider the quoted piece price or landed cost, at best. Because of inaccurate data, many companies make the decision to offshore on the basis of faulty assumptions. Some faulty assumptions are:  Overseas laws will protect IP, longer lead times won’t affect costs much, travel costs won’t be significant, communication won’t be a problem, and quality will be just as good as USA. The reality is that many companies are saving less than they expected, and in some cases, the hidden costs exceed the anticipated cost savings.

We need to change the main considerations for selecting suppliers from one based on the lowest price to other considerations, such as

  • Location
  • Transportation alternatives
  • Inventory costs and control
  • Quality controls
  • Reserve capacity of supplier
  • Responsiveness of supplier
  • Technological depth of supplier

Choosing the right location is the most critical choice. The choices are: Made in USA, “Offshoring” to China or another location in Asia, or nearsourcing to Mexico or Canada. The location of your customers influences the choice of manufacturing location.  Here are some variables to consider:

  • Where are your customers? USA, Asia, Europe, Latin America
  • How high is your labor content?
  • Is your annual production volume forecast low, medium, or high?
  • Do you have low vs. high product mix?
  • What certifications are required?  Example:  FDA, U/L, Mil Spec, ISO 9100, AS9100, etc.  

There are current manufacturing trends that are also influencing supplier choice.  Some of these are:

  • Wages rising in China
  • Increased “Made in USA” demand by government agencies and American consumers
  • Additive Manufacturing
  • Use of Industry 4.0 by suppliers (Automation, Robotics, Industrial Internet of Things (IIOT)

Some of the advantages of sourcing in the USA are:

  • No Intellectual Property infringement
  • Ease of communication
  • Flexible delivery by means of reliable transportation
  • Smoother design changes
  • Lower cost of inventory
  • Higher quality parts
  • Lower travel expenses
  • Favorable Purchase Order and Credit Terms

In today’s manufacturing supply chain, Reshoring helps companies have:

  • Faster lead times: 49-50% reduction
  • Delivery accuracy: 30-40% improved
  • Ability to respond swiftly to unforeseen disruptions
  • Handle volatile demand as closer proximity to customers drives agility 
  • Increased competitiveness
  • Better serving local markets while maintaining low costs

I strongly believe that if more companies would learn to understand and utilize the Reshoring Initiative’s TCO estimator (free at www.reshorenow.org), they would realize that the best value for their company is to source their parts, assemblies, and products in America.

America is at a crossroads. We can either continue down the path of increasing trade deficits, increasing national debt, and loss of manufacturing jobs by allowing anything mined, manufactured, grown, or serviced to be outsourced to countries with predatory trade policies.  Or, we can forge a new path by developing and implementing a national strategy to win the international competition for good jobs, sustained economic growth, and create a strong, secure domestic supply chain.

Doing this will help us achieve the vision of Industry Reimagined 2030 to change the national narrative of American manufacturing from a prevailing worldview of “inevitable decline” to one of “vibrant opportunity.”

If enough manufacturing is “reshored” from China, we would drastically reduce our national average annual trade deficit of more than $700 billion.  By 2030, we could also add five million middle-income manufacturing workers to the American workforce. 

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Imperial Capital Conference Highlights Vibrant Opportunity for Advanced Manufacturing Sector

April 26th, 2022

The non-profit Industry Reimagined 2030 was pleased to speak at the second annual Imperial Capital Advanced Manufacturing & Supply Chain Conference, held on April 13-14 in Santa Monica, CA and sponsored by Moss Adams, The Association for Manufacturing Technology, Smart Room, and Marsh.

On April 14th, presentations during breakfast were given by Kevin Frisch, Managing Director and Head of Industrial Investment Banking, Imperial Capital, Brian Ruttenbur, Institutional Research Managing Director, Imperial Capital, and Guy Knuf, Partner, Moss Adams.

Mr. Frisch explained that Imperial Capital, LLC is a full-service investment bank offering a uniquely integrated platform of comprehensive services to middle market companies and institutional investor. He said,” We have approximately 150 employees worldwide, across 10 offices throughout the United States and Europe. Our comprehensive and integrated service platform, expertise across the global capital structure, and deep industry sector knowledge enable us to provide clients with research driven ideas, superior advisory services, and trade execution. We have a dedicated focus in Advanced Manufacturing, including additive manufacturing, robotics, automation, laser components, specialty metals, specialty chemicals, semi-conductor equipment, optics/photonics, industrial software, and subtractive manufacturing.”

He provided a brief overview of the $26.3 trillion global Advanced Manufacturing market.

The trending Industry Segments

  • Specialty Materials – new light-weight materials, nanotechnology and carbon fibers and new applications are reducing waste and increasing efficiency
  • Aerospace & Defense – Light-weighting demand for planes, rockets, spacecraft will continue to drive demand for superior materials, AM production and other break-throughs
  • Medical – This industry drives demand for superior material advances and new technologies like AM, advanced laser manufacturing as well as design software etc.
  • Optics & Photonics – This industry cuts across the Advanced Manufacturing landscape
  • MR&O demand
  • Increased Reshoring/near shoring in all sectors

Trending Manufacturing Processes

  • Faster product development and shorter product life
  • Internet of Things – data acquisition and AI-enabled features
  • Digital Factory – data integration and overall productivity increasing
  • Reshoring/next shoring
  • Mass customization in production
  • Faster product development and shorter product life
  • New technologies – 3D printing, software, robotics
  • Light-weighting material demand
  • Internet of Things
  • Reshoring/next shoring
  • New Materials – nanotechnology, carbon fibers, powders
  • Mass customization in production
  • MR&O demand

Sector Valuation and Vibrancy

Deal volume for capital markets and M&A activity hit a record high at the end of 2021, the dramatic increase in deal flow was driven by optimistic executives, cheap financing and a stock market rebound from the 2020 COVID-19 pandemic. “U.S. Private Equity deal making is expected to continue at high levels. Mega-funds are predicted to raise $250 billion in 2022, including some of the largest ever buyout funds.”

Brian Ruttenbur, Managing Director of the Institutional Research Group of Imperial Capital covered macro trends in Advanced Manufacturing that influence their security and industrial research coverage.

Demand for manufactured products is up across most end-markets and private and public valuations have remained solid. The challenge to meet demand is inflation and material price increases, a tight and expensive labor market, and overall supply chain disruption. Industry is adapting through:

  • Automation to alleviate labor shortage issues
  • Niche players filling gaps
  • Rethinking Onshoring or Nearshoring driven by advanced manufacturing technologies, logistics complexity and national health and security sourcing.
  • On-time delivery and just-in-case supply chain resilience are commanding a premium

Guy Knuf, Partner, Transaction Services, Moss Adams was the third speaker covering “The Modern Quality of Earnings (QoE).  He said the “drivers of change are:

  • More intense buy-side process
  • Increased multiples
  • Drive for efficiency
  • RWI [Reps and Warrants Insurance]
  • Credibility”

The benefits of working with a QoE provider are: “maximize value, mitigate surprises, speed (more efficient & effective), prepare management team for buy-side diligence, and credibility.”

After breakfast, the period from 9:00 – 11:50 was divided into Sector Focused Panel Discussions. The presenters in advanced manufacturing technology were:

3DEO Inc. – one of the highest volume metal 3D printing companies in the world

ADDMAN Engineering LLC – metal and polymer 3D printed parts, precision machining to make parts for aerospace and defense, space, medical, and automotive, including niobium parts for hypersonics

Humtown Products – manufacturer of conventional and 3D printed sand cores and molds for the foundry industry

Optomec, Inc. – offers a full range of Additive Manufacturing systems, including their patented Aerosol Jet Systems for printed electronics

Clinkenbeard – specialized expertise in engineering, advanced machining, fabrication and foundry tooling capabilities come together to form a unique mix of services to serve Aerospace, Defense, Heavy Truck, Power Gen and Automotive applications

HB Aerospace Holdings, LLC – provides high quality, specialized aerospace products and value-added services that includes hardware, shims, spacers, handles, brackets, and rubber products such as grommets, seals and gaskets

Tribus Aerospace Corporation – provides precision machining of complex components and assemblies primarily, but not exclusively, for “Power, Propel, Control” applications for turbine engines, auxiliary power units, motion control and flow control

Valence Surface Technologies – provides a comprehensive set of metal processing capabilities and approvals for high-value, mission-critical parts, including NDT, sot peen and blast, chemical processing, plating, painting, and spray coatings

FormAlloy Technologies, Inc. – provides 3D metal additive manufacturing using the Directed Energy Deposition process for making parts, repairing parts, and cladding existing parts

Optomec, Inc. – provides a full range of Additive Manufacturing systems, including their patented Aerosol Jet Systems for printed electronics

pureLiFi – LiFi is high speed bi-directional and fully networked light communications and pureLiFi is the world leader in Light Fidelity (LiFi) innovation

Syntec Optics – offers injection molding, diamond turning, precision machining, optical assembly and coating services for optics and photonics

I was especially delighted to be reunited with Melanie Lang, CEO of FormAlloy as I had the pleasure of being one of her company’s mentors in the CONNECT Springboard program for startup companies in 2017.  I was very proud to hear of the progress the company had made, going from a startup with only two customers in 2017 to doing over $4 million in sales last year.

Tim Shinbara Jr, Vice President & Chief Technology Officer, The Association for Manufacturing Technology, delivered the lunch keynote on “The State of U.S Manufacturing –A Macro Analysis.” He reported that manufacturing technology orders were the highest in two decades for first two months of 2022. The key market trends are higher automation, increased reshoring, and Made in America supply chain focus. The industry segments for 2022 growth are: motor vehicles, agriculture implements, metal valves, and medical equipment and supplies. AMT is predicting increasing demand for commercial aerospace and decreasing demand for defense aerospace. Deliveries are improving with suppliers at 70% capacity.

The afternoon sessions were devoted to single company presentations in two tracks. Each presentation was 25 minutes long, starting at 1:15 PM and ending at 4:15 PM

I gave my own presentation on Industry Reimagined 2030: transforming the prevailing worldview of American manufacturing from ‘inevitable decline’ to one of ‘vibrant opportunity’ brought the theme of the conference home.  The U.S. has a window of opportunity to recognize the importance of manufacturing and to revitalize our investment in plant, equipment and workforce. The common thread of all companies participating in the panels and individual company presentations was one of vibrant opportunity. We can feasibly imagine having 50,000 world class manufacturers by 2030 if the adoption of these trends and technologies crosses the chasm from early adopters to the mainstream of manufacturers.

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Manufacturing Renaissance: Recommendations to Bolster National Security & Economic Prosperity 

April 5th, 2022

In November 2021, the Ronald Reagan Institute released a Report of the Task Force on National Security and U.S. Manufacturing Competitiveness titled “A Manufacturing Renaissance: Bolstering U.S. Production for National Security and Economic Prosperity.”

I came across this article last week, having missed it when it was released because many reports similar to this are ignored by the mainstream news outlets focused on the daily news and don’t reach the large national audience they deserve.

The Task Force was co-chaired by Ms. Marillyn Hewson, Former Chairman, President, & CEO, Lockheed Martin Corporation and Dr. David McCormick, CEO, Bridgewater Associates, and former Undersecretary for International Affairs, U.S. Department of Treasury. The Task Force members represented a cross section of business, government, and elected representatives.

I recently joined the board of the non-profit Industry Reimagined 2030, which is transforming the myriad of well-intentioned efforts to revitalize U.S. manufacturing into coherent, aligned action. Our strategic aim is to shift the implicit national narrative from manufacturing in ‘inevitable decline’ to one of ‘vibrant opportunity.’

What the Manufacturing Renaissance report has to say about ‘inevitable decline.’

In the Introduction, the Task Force “considered the causes and implications of the continued erosion of American industrial and manufacturing capabilities in sectors critical to national security, such as defense equipment, semiconductors, telecom supplies, and pharmaceuticals.”  They acknowledge that the U. S. is at a “dangerous status quo” and as a result, “at the highest ranks of the U.S. federal government, consensus is emerging that the continued degradation of America’s industrial base is creating domestic vulnerabilities and weakening our ability to compete.” 

As I have pointed out in previous articles, the Task Force admitted that “As America moves slowly, China is accelerating ahead. In 2019, China led the world in global manufacturing output at a level 12 percent higher than the United States.” In addition, “China’s push for self-reliance starkly contrasts with America’s increasing dependence on imports…”

To usher in a new era, it is essential that we wake up to the consequences of this prevailing worldview. I participate on the Buy American committee for the Coalition for a Prosperous America, and the members of Congress who have spoken at our virtual committee meetings recently have emphasized the realization that we have become too dependent on imports from China and other nations and urgently need to rebuild the supply chain of American manufacturing to produce critical products in the U.S.

The Executive Summary emphasized the following key points:

  • “The COVID-19 pandemic underscored manufacturing’s essential role in ensuring our national health, safety, security, and economic vitality. It also revealed how vulnerable the global supply chains are to shocks and disruptions.”
  • “Chinese leadership is leveraging state industrial and technological planning to achieve global economic and military power. In doing so, it has made substantial progress in achieving its stated goals of supplanting America as the world’s foremost economy and recasting the rules-based international system.”

What the Manufacturing Renaissance report has to say about ‘vibrant opportunity.’

The Task Force commented that “The daunting challenge before America also brings with it an opportunity to usher in a new era of productivity and economic growth through new technologies, human capital, managerial innovation, and updated business models.” 

  1. Build unprecedented collaboration at the local level to scale the skilling and placement of workers in high demand, high skill jobs. Let’s encourage U.S.-headquartered manufacturers to fund 500,000 apprenticeships over the next decade.  Let’s write policy allowing employers and high school graduates to use federal education grants for credential programs, apprenticeships, and internships.
  • Modernize the Defense Production Act (DPA) for the 21st Century. There are specific “industries that require the establishment of new, enhanced policy measures to support supplier ecosystems and strengthen government coordination.” They recommend updating the DPA to “enable holistic solutions for critical manufacturing facilities.”
  • Stand up a public-private capability to finance investments in domestic manufacturing sectors critical to national security. It could be done by “a new government-sponsored investment entity like the proposed Industrial Finance Corporation, changes to existing institutions such as the U.S. International Development Finance Corporation, direct bond buying programs, a sovereign fund, or private capital funds focused on the on-shore manufacturing ecosystem.”

The Task Force recommends setting the following goals to use as metrics to measure progress over the coming decade:

  • “Bring 2 million new or retrained workers into strategic manufacturing sectors by 2030”
  • “Improve American productivity growth in critical industries to 3.9 percent, which would represent a return to the historic average for manufacturing growth.”
  • Widely deploy and couple modern technology and management practices
  • “Add 35,000 new small- and medium-sized enterprise (SME) manufacturers in critical subsectors by 2030 to strengthen the core of the American supplier base and replace half of the small business capacity lost since the late 1990s.”

It’s amazing how close three of the above five goals are to the goals our board has established for the new non-profit, Industry Reimagined 2030, that I wrote about in my last blog article. It’s also coincidental that the Task Force also chose 2030 as the date for achieving their goals.

We have two distinct futures … It is up to each of us to make a choice and take a stand

The report states that “America stands at a fork in the road, facing a choice between two distinct futures” — “Mounting National Security Risk and Economic Vulnerability” or a “A Better Way Forward: Strength, Renewal, and Prosperity.” The Task Force “is confident that a renaissance of American manufacturing is possible if policy makers and business leaders make the necessary choices for our economy and our long-term security.”

As I wrote last time, we have a choice of continuing “inevitable decline” or choosing “vibrant opportunity” for American manufacturing. As a country, we have the choice of becoming subservient to China or remaining a free, independent nation. The future of our country rests on which choice we make.

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Clarifying Misperceptions about American Manufacturing

March 22nd, 2022

There are several misperceptions about American manufacturing that I will clarify in this article.

The first misperception is Manufacturing is in inevitable decline.

Evidence that this is not true is provided by the latest U.S. Manufacturing Technology Orders Report published by the Association For Manufacturing Technology AMT on March 14, 2022. It states, “Manufacturing technology orders totaled $436.6 million in January 2022…January orders were also the strongest on record since USMTO began tracking orders.

The United States still maintains its second position as the world’s largest manufacturing country by a substantial lead over Japan at third place.

U.S. can’t compete with China

First, rising wages in China are helping U.S. manufacturers be more competitive in the global marketplace.

Second,the Total Cost of Ownership Worksheet calculator developed by Harry Moser’s Reshoring Initiative is helping more and more American manufacturers be competitive domestically so they can reshore manufacturing from overseas back to America. The TCO worksheet is available for free at www.reshorenow.org., According to data provided by the Reshoring Initiative, we regained one million jobs through reshoring and foreign direct investment between 2010 to 2021.

Manufacturing doesn’t pay wages for a middle-class family life

According to the National Association for Manufacturers, “average hourly earnings of production and nonsupervisory workers in manufacturing rose 0.5% from $24.37 in December to $24.48 in January, up from $23.27 in January 2021.” While these wages for production workers may be as low as some retail and service jobs, the wages for skilled workers range from $60,000 to $80,000/year. Salary and supervisory workers in manufacturing “earned $92,832 on average, including pay and benefits.”

The reality is that skilled trade jobs provide an excellent career opportunity for those looking for a stable, high-demand, high-paying job. Workers with the skills needed by manufacturers are in high demand. There were 856,000 manufacturing job openings in December. It was the ninth straight month with openings that have exceeded 800,000, with job postings remaining well above pre-pandemic levels.” The manufacturing industry has forecasted to have 2.1 million unfilled jobs by 2030.

According the 4th quarter 2021 Manufacturer Outlook Survey, “85.2% had unfilled positions within their companies for which they were struggling to find qualified applicants. Companies were addressing the skills shortage by creating or expanding internal training programs (62.7%), utilizing temporary staffing services (50.4%), collaborating with educational institutions on skills certification programs (41.2%) and encouraging possible retirees to stay longer in their roles (39.9%) …”

Manufacturing jobs are boring, dirty, and dangerous

While one picture is worth a thousand words, I can’t include enough pictures in this article to disprove this misperception. I will, however, explain why manufacturing jobs are not as boring, dirty, and dangerous as they previously were.

First, Congress created the Occupational Safety and Health Administration (OSHA) as part of the Department of Labor to ensure safe and healthful working conditions for workers by setting and enforcing standards and by providing training, outreach, education and assistance. “Under the provisions of the Occupational Safety and Health Act of 1970 (OSH Act), employers must provide a workplace free from recognized hazards that are causing, or are likely to cause, death or serious physical harm to employees regardless of the size of business.” OSHA standards cover hazardous chemicals and materials, machine operation, machine guarding, electrical hazards, fall protection, sanitation, indoor air quality, drinking water, ergonomic guidelines, temperature & weather, personal protective equipment, etc.

Second, in the past 20 years, there have been standards established by the International Organization for Standardization (ISO) that cover quality Management, Information Security, Occupational Health and Safety, Medical Devices, among many others. It has become common for companies to be required to get certified that they meet these standards in order to become a vendor or service provider.  Aircraft companies and their supply chain are required to be certified to AS9100, and automobile manufacturers are required to meet TS 16949 standards.

Third, the use of automation, robots, cobots, and sensors are reducing dangerous and physically difficult tasks in manufacturing.  The difference between robots and cobots is that robots are programmed to perform a standalone function and cobots are design to partner with a person to perform a function.

For example, a robot can pick up a slab of hot glass off the production line in making sheet glass and place the sheet in a stack.  Robots have taken over dipping and swirling a sprue loaded with wax parts into the ceramic slurry to make an investment casting. A cobot can rotate a part to allow a person to perform a task, such as assembly of a transmission on an automobile production line. Sensors can detect whether a person’s hand or other body part is in the way of a machine operation and stop the machine.  All stamping machines have such sensors to make sure a person’s hand is out of the way before the punch press stamps out the metal part.

Fourth, processes that would be very boring for a person to do repetitively have been automated.  Some examples are cutting wire to be inserted into a plastic molding part, filling or sealing a plastic bag or bottle, placing labels on bottles, containers, and boxes, as well as placing components on a printed circuit board.   

Although many businesses have labeled these standards as too onerous and expensive, there is no doubt that they have dramatically enhanced the health and safety of American manufacturing workers.

Shifting the Narrative from ‘Inevitable Decline” to ‘Vibrant Opportunity.”

Now that we’ve clarified the common misperceptions about manufacturing, let me introduce you to a vision for the future.  I am now a founding member with Doug Berger of a new non-profit organization, Industry Reimagined 2030. The vision of Industry Reimagined 2030 is to bring about a generational sea-change in U.S. Industry from a prevailing worldview of “inevitable decline” to one of “‘vibrant opportunity.”

Thinking at a national scale is different than thinking at a national level.  Policy is at the national level.  Scaling successful initiatives at a local level to thousands of communities is thinking at a national scale.  In this regard, there are many local successes that I have written about previously that aren’t being scaled.

We are thinking from the future-back for these bold outcomes … standing in the gap to today and asking “What is missing?”  “What needs to happen?”  In this regard, we are advancing the idea of Reimagine Dialogues to engage people to be imaginative first and then develop practical action steps to close the gap.

By 2030 U.S. manufacturing will be revitalized, globally competitive and advancing societal interests.  There will be:

  • 50,000 world-class domestic manufacturers (10x increase)
  • Additional 5 million to the manufacturing-related, middle-income workforce (40%)
  • Environmental footprint to supply U.S. goods reduced by 30%
  • Consumer purchases of US made goods increased by $500 million

It will take unprecedented collaboration between ourselves and other organizations to achieve this vision. If you support the concept of these Reimagine Dialogues, please contact me at michele@savingusmanufacturing.com.

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What is the State of America’s Manufacturing Supply Chain?

March 8th, 2022

It is crucial for American companies to make the right decision on where to outsource manufacturing to have a secure supply chain.  Choosing the wrong company or a company in the wrong location as a supplier can mean the difference between success and failure as a company.  Companies need to learn how important it is to carefully consider all of the factors that impact the decision of where to source manufacturing to be able to handle risks and disruptions in the supply chain to maintain operations in the event of natural disasters or unforeseen events such as the COVID-19 pandemic, as well as prepare for the future.

The Association of Manufacturing Excellence (AME) and Lean DNA “conducted market research to explore the specific areas in which manufacturers are looking to digitally invest, the top challenges inhibiting transformation, and the biggest opportunities on the table for 2022 and beyond.”  On February 18, 2022, they released a report titled, “State of Supply Chain in the New Shortage Economy” that presented the results of their research on the supply chain shortages manufacturers have been experiencing as a result of the COVID-19 pandemic.

The research revealed that new market dynamics are making it evident that existing processes are no longer sufficient.  Some of these new dynamics are: 

  • Supply chains have become progressively more complex
  • Manufacturers are dealing with increasingly customized orders from customers
  • Complex sub-assemblies and parts coming from increasingly global suppliers
  • Burdened planning and procurement teams
  • Volatile demand
  • Global materials shortages

The report states that because of the COVID-19 pandemic, “a majority of manufacturers feel increased pressure to digitally transform” [75%] and “more than three-fourths, also recognize the opportunity to improve customer satisfaction and reduce the number of operational issues through digital transformation. They anticipate that digitization, advanced analytics, and predictive intelligence are their best opportunities to achieve that.”

The report explained that digital transformation means:

  • Deploying advanced analytics and predictive intelligence (54.5%)
  • Ditching manual spreadsheets (19.5%)
  • Deploying data analytics and/or Business Intelligence (BI) (10.4%)
  • Automating and integrating supply chain functions (10.4%)
  • Inventing in ERP/IBP planning and scheduling tools (5.2%)

The results of the survey showed “glaring technology and process gaps that need to be addressed

first before the majority of manufacturers can truly adopt advanced and modern digital technologies. Overall, survey participants responded that they were still very early in their digital transformation journeys…” The biggest technology gaps in technology were identified as:

  • Reliance on spreadsheets and manual processes (32.5%)
  • Lack of connectedness between ERP, MRP, and more (19.5%)
  • Visibility into real-time supply and demand shifts (14.5%)
  • Inability to predict future shifts and make proactive decisions to counter issues (13%)
  • Inability to understand which inventory actions have biggest impact (11.5%)
  • Lack of skilled personnel (9%)

Manufacturers experienced the following challenges caused by the COVID-19 pandemic:

  • 86% Supply chain Disruptions
  • 52% Demand Forecasting Difficulties
  • 49% Working Remotely
  • 42% Demand Increases/Part and Inventory Shortages
  • 27% Demand Increases/Excess Inventory
  • 26% Visibility into Inventory and Shortage Data across sites and ERPs

Key findings of the survey were:

  • 65% of manufacturers are increasing visibility into factory inventory levels and requirements because of COVID-19, with an eye towards managing shortages.
  • 95% of manufacturers are investing in factory automation, but most haven’t automated the factory’s critical data and intelligence aspects.

The top hurdles to factory transformation were identified as:

  • lack of expertise (60%)
  • lack of resources (46%)
  • limited budget (43%)
  • ineffective change management (42%).

The survey identified the following top priorities for the manufacturers surveyed:  “Shortages (47%) and improving inventory turnover (43%), yet procurement and supply chain teams

don’t have the information they need to increase factory efficiency.”

The authors recommended that manufacturers “address this problem by having planning and procurement teams, and even suppliers, work together more efficiently…Digital transformation doesn’t mean rebuilding the technology stack from scratch, rather it can mean leveraging data and harnessing insights from existing systems and investments.”

Specifically, they recommended the follow three steps:

Understand – “collating data from ERP, MRP, and MPS systems, manufacturers can gain visibility across their material inventory levels and see the impact across their factory operations processes from planning to purchasing to manufacturing.”

Prioritize – sift through data “to isolate the most impactful insights and actions that will most

affect business results…identify and resolve critical shortages that prevent production from moving forward…identifying SKUs and component parts that have the highest monetary impact helps buyers to prioritize their time.”

Collaborate – Having a single, up-to-date view of materials inventory and demand is key to having

teams work efficiently together…planning and procurement can work in unison to optimize production, improve cash flow, reduce costs, and mitigate risk in delivering on-time. Collaboration is not only necessary internally within manufacturing organizations, but also with suppliers.”

What was missing from this survey was where their suppliers were located – in the U. S. or another country.  The survey would have been a good opportunity to learn how many manufacturers had suppliers in China and/or whether or not manufacturers had reshored manufacturing to the U.S. from China or another country.  We know that there were many more supply chain disruptions occurring from goods being shipped by container ships from China, especially last fall. In fact, the Reshoring Initiative lists long lead times and supply chain disruptions in the top ten reasons for reshoring manufacturing.

It is important to consider the geographical location of suppliers when a company seeks to establish a secure supply chain and mitigate disruptions as conditions change due to unexpected crises such as COVID-19, natural disasters, and transportation bottlenecks. Some of the advantages of prioritizing “Buy American” and “Buy Local” as a guideline in selection of suppliers are:

  • Faster lead times: 49-50% reduction
  • Delivery accuracy: 30-40% improved
  • Smoother Design Changes
  • Lower Cost of Inventory
  • Higher Quality
  • No Intellectual Property Infringement

It is also important to consider the technological depth, reserve capacity, and responsiveness of suppliers. These capabilities are more readily available from American companies. When demand is volatile, the ability of a supplier to either ramp up or slow down production will affect inventory costs and delivery performance to customers.  Since many Chinese companies require high volume orders to meet target prices, this is difficult to obtain from Chinese suppliers.

I highly recommend that American manufacturers carefully consider these factors in selecting suppliers in the future if they want to have a more secure supply chain.   

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What are Some Ways to Reduce the Trade Deficit

February 20th, 2022

The trade deficit for 2021 with China grew 14.5% for the full year to $355.3 billion, as imports increased sharply because businesses were restocking shelves to meet robust domestic demand. This ended the decline that followed then-President Donald Trump’s policies aimed at reducing the deficit with tariffs and purchase targets.

Reuters reported that “The sharp widening in the trade gap reported by the Commerce Department on Tuesday mostly reflected a shift in spending toward goods from services during the COVID-19 pandemic. With businesses eager to rebuild depleted inventories against the backdrop of stretched global supply chains, the deficit is unlikely to shrink much this year, cutting into economic growth.”

The New York Times commented, “Americans, sheltering at home from the coronavirus and many with savings swelled by government relief packages, slashed their spending on travel, restaurants and movies and splurged on furniture, electronics, food and other goods instead. The trade deficit numbers are also the latest sign of how dependent the United States remains on other countries, particularly China, for the things that consumers want to buy.”

If consumers had the ability to determine the County of Origin for their online purchases and choose to buy Made in USA, this would help reduce the trade deficit with China.  Unfortunately, S. 3707, the COOL Online Act, introduced in the 116th Congress (2019-2020) by Sen. Tammy Baldwin (D-WI) and co-sponsored by Sen. Rick Scott (R-FL), Sen. Christopher Murphy ([D-CT0, and Sen. Kelly Loeffler ([R-GA) didn’t get out of committee to be voted on by the Senate. It hoped that this bill will be reintroduced into the Senate and a companion bill will be introduced in the house this year. 

We could also reduce the deficit if Federal procurement agencies focused on buying goods from American suppliers in compliance with the Buy American Act of 1933, which states “The Buy American Act applies to all U.S. federal government agency purchases of goods (articles, materials, or supplies) valued over the U.S. micro-purchase threshold (currently set at US$10,000). When purchased by federal entities for public use, the Act requires that these goods be produced in the U.S.”

However, on January 29, 2022, The Epoch Times article, “Chinese-Made COVID-19 Test Kits Are Coming to Millions of US Households via White House Initiative” reported that “As the White House’s free at-home COVID-19 test kits are reaching millions of U.S. households, the “made in China” label on some of those kits is stirring concerns.” This distribution is being done due to the “Biden administration initiative to give away 1 billion self-test kits to Americans for free. A sizable portion of these kits will be sourced from iHealth Labs, a California subsidiary of Chinese medical gear manufacturer Andon Health.”

The article explained that “Since December 2021, the company has won contracts worth more than $2.1 billion with the U.S. federal government and some state governments, according to Andon’s filings and federal contract records.”

The Epoch Times stated that Andon was “Established in 1995 in the Chinese megacity of Tianjin” and “had been known as a producer of blood pressure monitors…Andon owns a 70 percent stake in iHealth Labs, which was founded in 2010, the year that Andon went public in Shenzhen, China. Chinese smartphone maker Xiaomi, which invested $25 million in iHealth in 2014, holds 20 percent ownership in the company.”

It is outrageous that “Roughly $1.8 billion of the amount for the White House rollout came from the Department of Defense (DOD). The department awarded two contracts to the lab on Jan. 13 and Jan. 26, respectively, which would bring more than 354 million Chinese-made kits—or about a third of the total—to U.S. homes.”

Most importantly, the deficit would have been lower if China had complied with the U.S.-China trade agreement signed in 2020. On February 8, 2022, Chad P. Brown  of the Peterson Institute of International Economics (PIIE) wrote:  “Two years ago, President Donald Trump signed what he called a “historical trade deal” with China that committed China to purchase $200 billion of additional US exports before December 31, 2021. Today the only undisputed “historical” aspect of that agreement is its failure…In the end, China bought only 57 percent of the US exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war. Put differently, China bought none of the additional $200 billion of exports Trump’s deal had promised.”

As a result of the violation of this trade agreement, on February 10, 2022, the Coalition for a Prosperous America (CPA) “called on the Biden administration to fully implement all tariffs the U.S. government imposed on China pursuant to Section 301 of the 1974 Trade Act in light of China’s violation of the Phase One deal. As part of this enforceable agreement, China pledged to increase its purchases of U.S. agricultural, manufactured, and energy goods. However, China was more than one-third short of its pledges—purchasing just 63 percent of what was promised under the Phase One deal. In exchange for China’s commitments under the Phase One deal, the United States agreed to lower or suspend implementation of the final tranche of Section 301 tariffs in December 2019, known formally as Lists 4A and 4B. “

The press release stated that “Last October, U.S. Trade Representative (USTR) Katherine Tai announced that China violated the Phase One deal. This week, U.S. Secretary of Commerce Gina Raimondo said that the Biden administration would hold China accountable for failing to meet its commitments under the Phase One deal.

CPA made the following statement: “CPA strongly believes the Biden administration should immediately and fully impose all 301 tariffs to hold China accountable for, once again, violating an international agreement,” said Zach Mottl, Chairman of CPA. “For decades, China has engaged in massive state-subsidization of its industries, stolen Intellectual Property, used forced labor, shown little regard for environmental laws, and consistently violated international agreements. The goals of the Phase One deal required structural reforms and other changes to China’s economic and trade regime, however it is now clear that China has no interest in complying. Now that the Biden administration has confirmed China is violating the agreement, the 301 tariffs for products covered under Lists 4A and 4B should snap back to their original levels.”

According to the Congressional Research Service, Section 301 tariffs of the Trade Act of 1974 began to be imposed in 2018 after an investigation by the U. S. Trade Representative into several allegedly unreasonable or discriminatory trade practices carried out by China.  These tariffs were imposed in four stages and divided into lists of various categories of goods. Lists 1, 2, and 3, were imposed between June 2018 and May 2019. List 4 tariffs were supposed to go into effect on December 15, 2019, but the planned implementation was suspended as part of the Phase One deal with China.

“CPA is calling on USTR to take the necessary actions to impose the List 4B tariffs and raise the List 4A tariffs to the originally planned level of 15 percent.”

In my opinion, across the board tariffs of 15-25% should be imposed on all imports from China as China has never lived up to the principles and terms of being a member of the World Trade Organization.  Every year, the annual U.S.-China Trade Commission has documented egregious violations on the part of China with regard to being a member of the World Trade Organization and enjoying the privileges of Most Favored Nation Aka Permanent Trade Partner granted by President Clinton in September 1999. No action to address China’s violation of WTO terms was taken by any subsequent administration until the imposition of Section 301 tariffs by the Trump Administration in 2018.

American manufacturers are competing on an unfair playing field in the global marketplace and even on their own turf of the domestic market.  China’s mostly state-owned enterprises are engaging in product dumping, selling below cost to take over market share of specific industries, and receiving generous subsidies and credit from the Chinese government.  Now is the time to protect American manufacturers against these predatory practices of China.  We cannot allow China to achieve their plan of becoming the world’s superpower if we want to remain a free, independent country.

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