Coming decade to reshape manufacturing

Forces weighing on the manufacturing industry, including globalization and technology, do not indicate its decline, says a recent report from the McKinsey Global Institute. Instead, the coming decade will reshape manufacturing as demand grows, technology produces gains and companies find new growth in parts of the value chain. To be able to be able to compete in the future, U.S. manufacturing needs to scale up efforts on multiple fronts, the report maintains.

In Making it in America: Revitalizing U.S. Manufacturing, the trends affecting manufacturing are outlined, with the authors holding that a fundamental advantage for the U.S. is that it is still one of the most lucrative markets in the world and that the foreign market presents growth opportunities as well. The report contends manufacturers can use technology to boost efficiency and respond to new market opportunities. Scaling up the entire sector will take supportive government programs and policies with long-term certainty and funding and regional coalitions comprised of large and small manufacturers, workers, technology experts, educators, public officials and investors.

The report makes several recommendations:

• Strengthen the U.S. supplier base. It advocates for policy that can help modernize smaller manufacturers through financing programs, business accelerators, or tax incentives and notes that smaller firms need expanded access to advanced technology, whether at federal labs, universities, or public-private hubs.
• Pursue growth through deeper global engagement. It notes that the federal government can help facilitate foreign direct investment matches and direct investment where it is most needed.
• Improve digital adoption to boost productivity. Manufacturers will need to identify strategic use cases, link their digital initiatives to their broader business strategy, and consider how to begin working alongside machines in a more automated and data-driven environment, the report states.
• Develop the manufacturing workforce of the future. Apprenticeship programs need to happen on a much larger scale and with a system of established, transferable credentials, MGI says.
• Think and invest for the long term. Faced with competition, financial constraints and shareholders driven by short-term expectations, many manufacturers deferred investments and focused on cutting costs. While programs exist, policy makers should examine which existing initiatives are producing the most promising results, then scale up those efforts and commit to them for the long term. Incentives should be part of a solid economic development plan targeting growth industries that complement a region’s legacy strengths.