This publication was created for Advanstar Communications’ fashion trade show group MAGIC in order to highlight the resurgence in American manufacturing and domestically produced retail goods for consumers both locally and abroad. Please join me February 17-20th, 2014 as I continue explore the state of our global trade market. From wearable technology to Hollywood and film, I’ll be exploring manufacturing important foundation as it relates to multiple different business verticals and driving consumer behavior and demand for retail good. The article text version of the article is below.
The Field Guide To Marketing Made In America
“Made in America” is making a comeback. As the United States emerges from its latest recession, a broad array of technological and societal trends are shaping the future of manufacturing. Economic reports show that consumers purchasing locally made goods results in more jobs and healthier local economics(1). Overseas, manufacturers are facing rising foreign manufacturing costs(2), energy costs, environmental concerns and a lack of protection of intellectual property overseas. It’s bringing production home. These trends have instigated a debate on the benefits, challenges, and economic viability of a resurgence of American manufacturing.
The Benefits Of Manufacturing In America
Domestic Production Increases Productivity
Many champions of domestic production believe that manufacturers in the United States are the most productive in the world, far surpassing the worker productivity of any other major manufacturing economy, leading to higher wages and better living standards(3).
“Companies who choose to source domestically can take advantage of benefits not offered by a longer global supply chain, including reduced lead times and shorter runs,” says Steve Lamar, Executive Vice President of the American Apparel & Footwear Association. “These two benefits help satisfy current trends by retailers to place smaller orders more frequently than with mass orders. Domestic sourcing can also provide a more reliable infrastructure to make and move goods, including more affordable utility costs.”
Domestic Production Creates Agility & Security
Domestic production of goods allows many manufacturers to be more strategic in the way they respond to consumer demands.
U.S. consumers consider three main criteria before making a purchase, including price, fit, and style. Country of origin remains a lesser consideration for mainstream consumers. However, recent trends indicate that the “Made in the USA” story helps position brands well in the marketplace. Recent surveys suggest that American consumers would be willing to pay more for U.S.-made product, but we haven’t seen that trend translate into purchasing habits. But, if more and more consumers seek “Made in the USA” products, brands will need to respond quickly to consumer demands. – American Apparel & Footwear Association
Sourcing closer to home increases direct visibility of the supply chain and the challenges that threaten its security. But to be clear, a shorter supply chain is not immune to these challenges. Supply chain security and traceability are essential considerations no matter the length of the supply chain.
Domestic Production Helps Maintain Brand Integrity
Consumers are beginning to expect and demand transparency in a retailers’ or designers’ manufacturing processes. Local production of goods enables both the retailer and designer to show their consumers how and where something is made, thus encouraging consumers to remain loyal to these retailers and designers.
Transparency helps maintain their brand’s integrity; domestic production is one the easiest ways to achieve such integrity. While domestic production currently drives up the cost of goods, consumers are willing to pay more for apparel and footwear that they know are made under fair working conditions in the country the call home. Thus, transparency is a key marketing differentiator for designers, retailers and manufacturers.
Lamar also believes that, “There is a compelling business case for Made in America products, and therefore the growth is sustainable. Growth trends, however, will not be overnight. Companies have to identify the business case for themselves before moving forward, and that process can take some time because of the global nature of the supply chain.”
Made In America: By The Numbers
In 2012, manufacturers contributed $1.87 trillion to the economy, up from $1.73 trillion in 2011. This was 11.9 percent of GDP. Of the $1.87 trillion dollars, $131 million is related to the manufacturing of apparel goods.
For every $1.00 spent on manufacturing, another $1.48 is added to the economy, the highest multiplier effect of any economic sector.
According to the American Apparel & Footwear Association (AAFA), domestic apparel and footwear manufacturing increased 8.6 percent and 9 percent respectively from 2012 to 2013.
Since 2010, overall domestic apparel manufacturing has grown more than 15 percent and domestic footwear manufacturing has grown 17.6 percent.
“When you bet on America, that bet pays off.”
– President Barack Obama
The Challenges of Manufacturing In America
Manufacturing in America presents many economic benefits, but in order to reap its financial rewards, we’re going to need to address the challenges we face.
We Must Balance Our Manufacturing Process
Simply put, we are a nation of over 330 million importers. According to the American Apparel & Footwear Association 2013 Consumer Study, last year, every single man, woman, and child in the United States purchased an average of 62 garments and seven pairs of shoes, spending more than $1,100 each. In all, Americans purchased about 20 billion garments and nearly 2.5 billion pairs of shoes. American families spent more than $350 billion at retail on new clothes and shoes in 2012. In 2012, 97.5 percent of the apparel and 98 percent of the footwear sold in the United States were produced internationally.
“The U.S. still relies heavily on products made overseas,” according to Daniel Meckstroth, Chief Economist at the Manufacturers Alliance for Productivity and Innovation, a research organization in Arlington, VA. The systems in place overseas are heavily automated and the labor is drastically cheaper, making it very difficult to compete against on a price basis, it’s 20 percent more expensive to manufacture in this country compared to our major trading partners, excluding the cost of labor. America is still new to developing better cost advantages, competitive differentiators (quality, durability, social responsibility), as well as addressing tax legislation that continue to fuel this trend.
We Face Infrastructure Challenges
U.S. manufacturers also face big challenges, including skill shortages and deteriorating highways and bridges. The U.S. cannot become a leader in global manufacturing if it cannot procure skilled workers and address logistical concerns in order to ensure timely delivery of goods. Lack of investing in educational programs, whether related to vocational programming or STEM education required for better R&D, has prohibited U.S. companies from accessing the talent pools necessary in order to build successful operations across the board. Insufficient funding of federal and state programs has hindered the development of more efficient transport methods.
We Face Political Challenges
Innovation is crucial for ensuring that the U.S. remains competitive in the global economy–and manufacturing is a key indicator of our nation’s innovative potential according to the U.S. Department of Commerce. Political challenges seem to be at the root of all the challenges to successfully manufacturing goods domestically.
“An uneven economic recovery continues to send mixed signals to businesses and consumers. The global economy remains shaky,” says Jay Timmons, President and CEO of National Association of Manufacturers. “The United States needs a comprehensive plan for economic growth. A bipartisan commitment in Washington to pro-growth policies will make our nation a more competitive place to do business.” From IP to global trade policy, the resurgence of American manufacturing is heavily tied to Washington.
How To Address American Manufacturing Challenges
In order to address domestic manufacturing challenges, there are several key areas for us to acknowledge:
Use Technology To Up End Competition
U.S. companies need to develop new manufacturing techniques ahead of global competitors. Manufacturers need to use new techniques to produce goods more efficiently by super automating factory floors. The cost of automation relative to labor has fallen by 40 to 50 percent in advanced economies since 1990, thus making robots more cost effective than human in domestic manufacturing.
The use of robots affects domestic manufacturing success because it displaces human workers, whose jobs are becoming obsolete with the growing use of technology in factories. In order to build successful domestic production, companies have better educate workers and help them develop new skill sets that the running of technologically advanced facilities require.
Obama’s 2014 State of The Union Address Calls For Aggressive Reform and Expansion of SelectUSA to Create the First-Ever Federal Effort to Bring Jobs from Around the World to the U.S.
The President has made bringing investment back to the U.S. a core priority of the federal government. He is using his executive authority to create the first ever whole-of-government effort to attract investment through expansion and enhancement of SelectUSA. This effort has meant a number of firsts: for the first time there will be a clear system for advocacy for high-priority, job-creating investments, driven by the most senior Administration officials all the way up to the President; there will be a single point of contact for ready investors looking to brings jobs and production to the U.S.; lastly, the Administration is engaging in unprecedented coordinated support for states and localities to attract investment. – White House
“No two companies share the same sourcing model, says Lamar. “Some companies choose to source completely inside the United States and some completely source outside the United States. Many choose a hybrid approach.” Hybrid approaches to domestic and international sourcing, overlaid technological advances can help boost global competitiveness.
Modernize and Invest in Manufacturing Infrastructure
In order to drive the economic viability of U.S.-made goods, we must help manufacturers in the United States more efficiently move people, products and ideas. This means investing in innovating business models and investing in a long-term infrastructure strategy that includes highways, bridges, rail, transit, airports, seaports, inland waterways, and water and wastewater systems will help U.S. manufacturers build and expand their businesses both domestically and internationally.
The U.S. apparel and footwear industry directly employs more than four million U.S. workers, which is three percent of the entire U.S. workforce. These important jobs include textile mill workers, warehousing, sourcing managers, compliance, wholesalers, retail floor associates, technical designers, and marketing professionals, just to name a few. Our workers can be found in every city in every state in America, as well as around the world. – Steve Lamar, American Apparel and Footwear Association
Implement Fair Legal Reform
We need to create a national tax climate that enhances the global competitiveness of manufacturers in the United States.” In short, We should avoid policy changes that would increase the tax burden on the manufacturing sector as it discourages job creation and further capital investments, something that the Obama administration and Secretary of Commerce Penny Pritzker have been tackling since 2012 through heavy investments in innovation, development and data.
Pritzker most recently launched “Open for Business” which calls for long-term fiscal reform, rate-lowering business tax reform, pro-growth investments in infrastructure and education, and comprehensive immigration reform in conjunction with the Obama Administration’s overarching economic blueprint. The Agenda reflects the support that’s need to shift the current economic landscape.
Reducing Federal Prisoners’ Unfair Advantage
The biggest threat to domestic apparel and footwear manufacturing is not foreign competition. The biggest threat to domestic manufacturing is actually the U.S. government through Federal Prison Industries, a federally owned corporation that puts federal inmates to work while in prison. FPI has long been able to control majority shares of major contracts, up to 100 percent in some cases.
Because of this, the AAFA is actively pursuing reform of the FPI program to prevent lost opportunities for new business, layoffs, plant closures, and complete business shutdowns. AAFA is also working with Defense Logistics Agency Troop Support (DLS-TS) to implement “best practices” acquisition policies in place of current reverse auction methods, and with the Department of Defense to expand the Berry Amendment to cover athletic footwear for American troops.
Promote U.S. Exports in the Global Market
In order to drive demand of American-made goods, we need to increase their visibility on an international level. Leveraging the growing popularity of “Made in USA” products, doesn’t extend to just local markets, it extends to consumers globally. As such, the AAFA and US. Dept of Commerce are working to ensure free trade agreements that include important provisions that open markets for U.S.-made apparel and footwear. A prime example is the AAFA’s current negotiations toward a commercially-meaningful Trans-Pacific Partnership, a trade agreement that stands to expand opportunities for U.S. manufacturers in lucrative markets like Japan, Australia, Singapore, and New Zealand.
“Given our competitive advantages in energy costs, research and development, labor productivity, and intellectual property protection, there is no better place to do business than the United States,” – Penny Pritzker, U.S. Secretary of Commerce
Education, Awareness, and Innovation Will Drive Success
Innovation, education, and awareness foster growth, help create broad opportunities for entrepreneurship, and drive continued growth in the digital economy. A recent MIT study points out that innovation occurs not only at the point of invention, but at every stage of product development and delivery.
Innovation is a catalyst for success in American manufacturing; it’s a belief supported by and outlined by Bill Gates and Vaclav Smil in WIRED: “Innovation is not done by research institutes and national laboratories. It comes from manufacturing—from companies that want to extend their product reach, improve their costs, increase their returns.”
In other words, the innovation that comes from manufacturing has to be nurtured here at home in order to make us successful.
“Manufacturers are ready to power the economy. With the right policies in place, we will transform a difficult and sluggish recovery into an economic resurgence,” says Jay Timmons, President and CEO of the National Association of Manufacturers. Programs such as the Obama Administration’s Make it in America and The Commerce Department’s recently unveiled Open for Business Agenda, were created to encourage domestic manufacturing.
By prioritizing the American manufacturing at all stages of the product life cycle, we continually strengthen our economy. The government policies that support it, coupled with educational programs and the awareness of building activities for American manufacturing companies, trade organizations, and designers will ultimately lead to the success in the resurgence of U.S. manufacturing.
Manufacturing Data & Trends from the U.S. Department of Commerce
A program of the U.S. Department of Commerce, The National Institute of Standards and Technology’s Hollings Manufacturing Extension Partnership (MEP) reports that the U.S. manufacturing industry is looking good.
Currently, there is more employment, better wages, more hours worked and higher productivity than last year at this time. So, here’s our new year’s dilemma…how are we going to find enough talent to keep manufacturing growing? The “skills gap” has been eating away at manufacturing for a least a decade, so what will we do in the near-term, and in the long-term, future to ensure continued growth?
A new report by Bersin recommends that manufacturers build a supply chain of skills, because talent gaps take years to fill. The new report documents examples from firms that reorganize their training functions into “capability development” functions and approach their skills acquisition and development as multi-year programs.
Josh Bersin, the report’s author, believes that firms should be able to catalogue and report on future internal skills gaps (by virtue of talent management planning) and then start building their talent supply chains. If you don’t make talent predictions and plan, you’ll lose out on hiring and retaining the skilled individuals you’ll need to keep growing. The “future” is going to be a very competitive skills marketplace.
Federal Funding Opportunities
The positive outlook in manufacturing brings federal funding opportunities from the U.S Department of Commerce due to growth in this sector via MEP. MEP offers its clients a wealth of unique and effective resources centered on five critical areas: technology acceleration, supplier development, sustainability, workforce and continuous improvement. MEP field staff has over 1,400 technical experts – located in every state – serving as trusted business advisors, focused on solving manufacturers’ challenges and identifying opportunities for growth.
They believe that SMMs must do more than hang out a virtual shingle and wait for job applicants to show up. That’s why they’re working to develop and deploy SMARTalent, a cloud-based software tool for talent management. The focus for this year will be to pilot test with a group of MEP centers starting January 2014 with the intent to open it to others late in 2014.
SMARTalent will be used for job profiling, want ads, workforce diagnostics, competency and skill identification, work-flow planning, lay-off aversion and succession planning, and will automate functions for these activities. Like all technology, it does not replace the creative thinking and analysis necessary for high-quality workforce development. Rather, it will enable manufacturers to eliminate task redundancies and streamline processes through the use of data analytics.
For more information, visit the U.S. Department of Commerce’s Website at http://blog.trade.gov/tag/mep/
15 Manufacturing and Sourcing Business Resources
Producing Prosperity: Why America Needs a Manufacturing Renaissance – Prof. Willy Shih, Harvard Business School
The Commerce Department’s Economic Development Administration (EDA),
The Labor Department’s Employment and Training Administration (ETA),
The Delta Regional Authority (DRA)
Commerce’s National Institute of Standards and Technology Manufacturing Extension Partnership (NIST MEP)
Reshore Now – Newsletter
Alliance For American Manufacturing
US Dept Of Commerce – Blog
McKinsey & Associates – Six Myths About Trade & The Future of Manufacturing
Wired Magazine, The Man Bill Gates Believes You Should Be Reading
Fify13.com – West Coast Brand News
California Fashion Association
We Are Made In New York
Made Movement
Maker’s Row
IOU Project
Shop Floor – Manufacturer’s Blog
Check Out: ABC’s Made In America