New Report Highlights Best Practices in Manufacturing Policy, Importance of Global Supply Chains

Manufacturing creates more high-value jobs than any sector in the global economy and is essential to sustainable economic growth in both the developing and developed world, according to the Manufacturing for Growth – Strategies for Driving Growth and Employment from the World Economic Forum (WEF). Written in collaboration with Deloitte LLP, the three-volume series of reports examines key trends, effective strategies and best practices related to the global manufacturing sector in three key areas:

• Globally competitive manufacturing policy,
• Partnering for competitiveness; and,
• Manufacturing value chains driving growth.

WEF contends a competitive tax system, free and fair trade, education and talent development, energy efficiency and technology and innovation are the key drivers behind a successful advanced manufacturing strategy. The report also provides recommendations from manufacturing executives to develop an integrated portfolio of public policies in the U.S. that spur innovation, increase competitiveness, create jobs and stimulate sustainable economic growth.

In volume one of the series, the authors define the features of effective, comprehensive national industrial policy by looking at six nations from the developing (Brazil, China and India) and developed (Germany, Japan, and the U.S.) nations. Using information collected from face-to-face interviews and surveys collected from manufacturing executives, WEF was able to identifity several common themes of effective manufacturing policy including:

• Consistant, stable and certain policymaking;
• Globally competitive, fair and enforced policies;
• Dialogue–driven, collaborative intiatives;
• Institutional structures that nurture legitimacy, credibility and market confidence;
• Harmonized and aligned strategies; and,
• Financially prudent programs that balance costs and benefits.

Although, survey responses indicate that the U.S. remains highly competitive with other developed countries, manufacturing executives expressed significant long-term concerns over the U.S. manufacturing sector. These concerns were dominated by uncertainty regarding the direction of energy, legal and regulatory policy; the continued debate on tax policy and the fiscal cliff; and, the slow housing sector rebound across America. To address these issues, manufacturing executives recommend to:

• Reduce the deficit by broadly supporting a Simpson-Bowles type approach;
• Lower corporate tax rates broadly;
• Develop energy policies with a focus on shale gas production; and,
• Establish free-trade agreements that are fair and equitable, and attack discriminatory policies imposed by other nations.

In volume two, the authors showcase examples of leading public-private partnership organizations established to foster collaboration to drive the talent and innovation agendas for the manufacturing sector. Overwhelmingly, manufacturing executives emphasized the need for public-private partnerships including partnerships with universities, national laboratories, nonprofit research centers and other organizations that help to create environments that breed both talent and innovation. According to the respondents, there are several best practices essential to a successful manufacturing public-private partnership. Public-private partnerships should be:

• Demand-driven and highly responsive to specific needs of industry and society;
• Able to offer a differentiated value proposition that transcends traditional business barriers;
• Focused on the Long-term horizon and flexible in measuring success;
• Continuely seeking new revenue streams beyond government or public funding; and,
• Grounded in a core structural integrity.

The report provides detailed case studies of eleven successful public-private partnership from countries around the globe including two in the United States — the National Association of Manufacturers' Manufacturing Institute and SkillsUSA. The report also highlights five other successful public-private partnerships in the United States.

In volume three, the authors discuss the increasingly important, but extremely complicated issues related to the globalization of manufacturing value chains. In attempt to reference concrete examples of these complex, interconnected and rapidly changing networks, three case studies of the aviation, automotive and chemical manufacturing sectors are provided. These studies highlight several key trends in global supply chains:

• Shift from trade in goods to trade in value-added — within the last 20 years, rapid development in East Asia has resulted in more intermediate goods than finished goods traded across borders, and more parts and components imported for use in exports.
• Top-down versus bottom-up — the shift from a framework driven by national governance to a framework led by businesses, nongovernment actors and society to bring a product from its conception to its end use and beyond.
• The new math of value-added — the discrepancy is growing between where final goods are produced and exported and where value is created and captured.
• Shifting end markets — as many developed countries face stagnation, emerging economy nations are becoming the engines of world economic recovery.

Read the entire report: http://www.weforum.org/reports/manufacturing-growth.