A funny thing happened on the way home from China. Instead of worries on how Wisconsin manufacturers could possibly compete with the global industrial juggernaut, conversations were sprinkled with cautious optimism among many of the participants in Gov. Jim Doyle’s trade delegation.
Clearly, challenges remain as manufacturers find new ways to compete globally, but the gloom and doom that once predominated talk about manufacturing is giving way to a new reality. Wisconsin manufacturers can compete, and we can win.
Ask Paul Luber, chief executive officer of Grafton-based Jor-Mac Co. Jor-Mac, a contract metal fabricator, estimates 20 percent of its work has been won back from China in the past two years. “If you just look at a unit price, outsourcing to low-wage countries can look very attractive. But you need to look at the whole picture,” he said. That includes the ability to maintain high quality, make engineering changes quickly and offer precision deliveries. Add to that rising sea freight costs and waiting five weeks for a boat to arrive.
To succeed in today’s intensely competitive manufacturing environment, Jor-Mac has aggressively embraced technology and innovation, installed state-of-the-art laser cutting systems and adopted lean manufacturing. The company strives to align itself with growing customer needs, and has integrated key suppliers into its operations. Sales are up sharply, and employment has grown more than six-fold since 2000. Jor-Mac is an excellent example of next-generation manufacturing – firms that are lean, agile, innovative and focused on new markets and customers, here and around the globe.
With the New Year upon us, Jor-Mac’s story is a timely one, as manufacturers in southeastern Wisconsin continue to find new ways to grow and succeed.
It’s a time of significant opportunity and challenges. A recent national survey of manufacturing executives by Ohio-based The MPI Group, a national research firm, found that manufacturing executives are more optimistic than they’ve been for years. At the same time, manufacturers say that achieving profitable growth – instead of merely working faster and selling at ever lower margins – is harder than ever for most firms.
The good news is that manufacturers who are relentless in their efforts to create new value in products and services are on a path to higher sales and profits. The bad news: if you’re doing business the same way you did five years ago, you probably won’t be around in another five.
There are signs that Wisconsin is moving in the right direction. Wisconsin’s industrial economy grew $2.2 billion in 2006 to $47.2 billion, according to data from the U.S. Bureau of Economic Analysis (BEA). The Milwaukee metro area represents about 30 percent of that, with manufacturing output of $13.3 billion in 2005 (the latest metro data.) Though the credit crunch and housing slump may cause growth to slow in 2008, the long-term trends in Wisconsin of manufacturing output are in a general upward trend. That upward trend should continue as long as manufacturers make the transition to next-generation manufacturing.
So what does it take to be a next-generation manufacturer? For one thing, a serious commitment to lean manufacturing and lean culture. That means employees are trained in the lean philosophy and are constantly finding ways to improve processes and products. Though lean is the world’s dominant manufacturing strategy, and its benefits of increasing productivity and profitability are well known, many firms in southeastern Wisconsin are just getting started on their journey, or not doing lean at all.
That needs to change.
Innovation is perhaps the greatest challenge and opportunity for today’s firms to become next-generation manufacturers. This isn’t just about inventing the next iPod or high-tech products that dazzle consumers. It’s about using innovation as a long-term sustainable competitive advantage by infusing it in every aspect of the manufacturing enterprise -from products to processes to business models to supply chains to green initiatives that reduce waste and energy use.
Next-generation manufacturers understand a global strategy is essential today because the fastest-growing markets are outside the U.S. Manufacturers also need a global focus to strategically align themselves with suppliers and partners. Wisconsin exported $17 billion in goods last year, and China is now our 3rd largest trading partner. Exports are a huge opportunity for manufacturers and for Wisconsin’s future economic growth.
And finally, perhaps our greatest challenge in fostering next-generation manufacturing is to develop and secure a talented and highly-skilled workforce. As I travel the state, this is the one issue I hear over and over again from manufacturing presidents and CEOs. Manufacturing has a terrible image problem, with many young people – and their parents and other influencers – thinking it is dark, dirty and low-tech. Nothing could be further from the truth. Manufacturing offers young people tremendous career opportunities in a variety of professions including industrial and design engineers, CNC operators, production managers, research and development technicians, sales and marketing professionals, machinists and others. These are desirable, well-paying careers.
Wisconsin has a global reputation for being a manufacturing leader. Our ability to make the transition to next-generation manufacturing represents an excellent opportunity for future economic growth and prosperity.
