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The US manufacturing industry is no stranger to disruption. In the last decade alone, companies have seen their supply chains fall foul of the fluctuating forces of nature, politics and international trade. But then came COVID-19. The sheer scale and duration of havoc caused by the pandemic has forced manufacturing firms – like most others – to make dramatic changes to their business models at speed. For many, simply keeping the lights on while protecting the health of workers has been an extraordinary challenge.
Yet, while the crisis is far from over, there is now an incipient window of opportunity. A chance for firms to be reimagined and, crucially, for the US manufacturing industry to take its place at the forefront of a post-pandemic future. As the National Association of Manufacturers (NAM) points out in its American Renewal Action Plan, “Growing the manufacturing base is vital not only for America’s economic strength and job creation but also to prepare for future health crises.”
Naturally, this opportunity must be seized not awaited. Yet responsibility for doing so shouldn’t rest solely with manufacturing companies. Yes, there are some things they – both individually and collectively – must do to grasp the nettle, particularly when it comes to attracting fresh talent and closing the skills gap. But it also requires decisive action from the government to make the US a more attractive investment proposition for manufacturers at home and abroad. In the words of NAM’s chief economist, Chad Moutray: “We have to understand we’re in a global competition here. The dollars will flow to where the market is best.”
The good news is that the stage is set. The pandemic has given the public a greater appreciation of manufacturers’ essential role in getting them the products they need – everything from toilet paper and semi-conductors to medical supplies and even the vaccines. Interest in and empathy for the industry are at an all-time high.
There’s also a growing sense of urgency in Washington to help companies address supply chain vulnerabilities and build resiliency against future crises. Even the talent pool firms can draw upon is expanding due to job losses in the service sectors – workers who could be enticed into a career in manufacturing.
Today Washington is sensitive to the pressures on manufacturers and has a renewed focus on policies that help grow the US industrial base as a whole. This, in turn, could create jobs, bolster national security and boost our ability to compete for international investment.
For example, one of the key challenges facing manufacturers – one already present before COVID-19 struck – is the skills gap. Right now, too many Americans lack the specialized training necessary for a modern manufacturing job. Some existing proposals would address this by reducing the costs associated with training, including a subsidized earn-and-learn model or reducing tax liability for employees participating in skills programs.
Similarly, policymakers are concerned with how to strengthen government support for innovation. Manufacturing accounts for nearly two-thirds of all US private sector R&D yet, as a nation, we lag far behind other advanced economies when it comes to tax incentives that encourage it. With incentives scheduled to shrink further next year, Washington may be motivated to act quickly.
On the topic of debt financing, manufacturing is a capital-intensive business that requires heavy up-front investments in equipment and facilities. Given roughly three-quarters of American manufacturers are small or medium-sized companies employing fewer than 20 workers, such investments require taking on significant debt. While recent reductions in corporate tax have helped, some in the industry are calling for improvements in the ease and cost-effectiveness of borrowing .
Step up, speak out
Despite the momentum for federal action, manufacturing firms can’t afford to sit back and expect the landscape to change around them; they must step up and shape it themselves. For most, that means moving away from the just-in-time, low-inventory operating models of the past, focusing instead on diversifying and optimizing their supply chain to increase agility and resiliency.
However, perhaps the biggest step company leaders can take right now is a reputational one. Building on the heightened public appreciation of manufacturing, they must continue to shift industry perceptions and appeal to a new generation of workers, including those currently underrepresented, such as women and STEM graduates.
Encouragingly, the ball is rolling. Firms like GE are successfully showcasing what a modern manufacturing job is while the Manufacturing Institute’s Heroes MAKE America campaign, which trains military veterans to move into manufacturing jobs, are bringing a fresh wave of skilled personnel to the industry.
But such efforts remain too few and far between; CEOs have to do more to get out and tell a compelling manufacturing story to everyone. That might be by highlighting the industry’s impressive progress in sustainability. It could be by showcasing its advanced technologies, thereby going head-to-head with Silicon Valley in competing for the world’s top tech talent. It may be by speaking out on issues Americans care about, like diversity and social justice and addressing climate change.
Now or never?
None of this requires a complete overhaul of life as we know it. As NAM’s tax and policy expert, Chris Netram, shared recently, “There’s a lot we need to carry on doing, particularly in the SME manufacturing space. By and large, these smaller firms are heavily invested in their communities; they feel a personal obligation to make them better. It’s what makes manufacturing unique and why it’s such a fundamental piece of the American identity. We need to keep that.”
Rather, then, it’s about taking things to the next level. For manufacturers and policymakers, a once-in-a-generation window of opportunity has opened to grow the US manufacturing base, drive the nation’s economic and social recovery, and supercharge our global competitiveness for years to come. If we don’t step through it now, we may not see the likes of it again.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
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