PUSH 3D TO RESTART MANUFACTURINGManufacturing/Business/Technology

Do you remember a time when the United States’ manufacturing output was higher than that of Germany and Japan? How about when America’s manufacturing output was 40 percent higher than China’s? The above occurrences are not referencing the early 1900s, nor the 1970’s when U.S. manufacturing employment peaked, but rather, right now.

I N F E R E N C E S▪ Companies are reassessing who

produces their goods and where it gets done.

▪ Variables such as energy, wages, quality and logistics are being considered in the decision making process.

▪ Manufacturing is increasingly moving back to the U.S. (or not leaving in the fi rst place)

▪ China needs to (and is attempting to) reorganize its manufacturing sector, moving to higher quality, higher technology goods.

I M P L I C A T I O N S▪ Manufacturing increasingly returns to

the U.S. (or doesn’t go overseas to begin with), but does not mean a huge increase in jobs due to increased use of robotics and automation.

▪ Manufacturing jobs that do need employees require a higher level of skill – increased training will be necessary. Enrollment in community college/technical schools will increase.

▪ U.S. exports continue to increase improving the trade balance.

▪ Industrial factory equipment sales increase.

▪ States see increased tax base and they increase incentives for manufacturing.

C O M P A N I E SIndustrial REITS Prologis (PLD) First Potomic Reality Trust (FPO) EastGroup Properties (EGP)

Industrial Robotics and Automation MTSC Systems (MTSC) Adept Technology (ADEP) Cognex Corp (CGNX) Robot Worx (Private)

Manufacturing Plant Equipment/Services Kennametal (KMT) Actuant Corp (ATU)

Rail Wabtec (WAB) Union Pacifi c (UNP) Norfolk Southern (NSC) CSX Corp. (CSX)

© 2011 Inferential Focus, All Rights Reservedwww.inferentialfocus.com

inFocus 611 June 22, 2011

THE TAKE AWAY

While we anticipate some short-term growth challenges for the global economy, long-term global dynamics including rising wages in developing countries and changing consumer preferences are positively impacting the U.S. manufacturing industry and should continue to do so for the foreseeable future, especially if the dollar continues to fall. However, the renaissance Are positively impacting the U.S. manufacturing industry and should continue to do so for the foreseeable future, especially if the dollar continues to fall. However, the renaissance will not come without investment. Many of the new jobs now needed, in manufacturing require a higher-level of technological skill than many of the jobs lost over the past decade, so a move back to the creation of tangible products in the United States will require new equipment and a greater focus on education and training.

Bringing it home

Caterpillar, technology provider NCR, consumer-products company Wham-O and furniture-maker Sauder have announced new or reopened production facilities in the U.S. All are returning production to the U.S. from factories abroad.

In April, General Electric (GE) said it would build the company’s largest photovoltaic panel factory in the U.S. That follows on the heels of GE’s October 2010 announcement that it would invest $432 million on four new U.S. manufacturing facilities to build environmentally-friendly refrigerators and water heaters.

General Motors recently announced that it will invest $2 billion and add up to 4,000 jobs at 17 of its American plants.

A January 2011 survey by consulting firm Grant Thornton found that 44 percent of small business owners felt they got no benefit from going overseas, with another 7 percent believing that offshoring had actually harmed them.

Nineteen percent of companies that responded to an October 2010 MFG.com survey said they had recently bought all or part of their manufacturing back to North America from overseas, up from 12 percent in the first quarter of 2010.(Wired, 3/11; International Herald Tribune, 4/8/11; Economist, 5/14/11)

Not Just the Big Guys

It is not only large-scale manufacturing facilities that are being rethought in the United States due to changing dynamics. As we initially noted in an August 2010 eFocus, the falling costs and rising availability of sophisticated manufacturing equipment, including 3-D printers, is providing individuals and entrepreneurial companies with the ability to profitably manufacture goods on a small scale (see, eF 515, 8/31/10).

State of the art milling machines that once cost $150,000 now cost close to $4,000 thanks to Chinese production of the machines.

The cost of a 3-D printer, which creates an object by stacking one layer of material on top of another, has fallen from $125,000 five years ago to as low as $1,000 today. These printers had been used exclusively to create prototypes, but now more than 20 percent of the output of 3-D printers are final products.

Shapeways, a 3-D printing company, says its users are “printing” more than 10,000 objects such as jewelry and small pieces of art every month. (Wired, 2/10; GigaOM, 9/25/10, Economist, 2/12/11)

Why Now?

A range of factors including increasing global demand, higher shipping costs, rising wages in the developing world and changing consumer preferences are pushing U.S. manufacturing towards a future that is different from the past 25 years. (U.S. Banker, 5/11)

In our June Briefing on companies pressing their advantages, we cited U.S. growth in manufacturing output and employment. With Chinese manufacturing wages having more than doubled between 2002 and 2008, a weaker dollar, steadily rising shipping costs and a deeper consideration of intellectual property risks overseas, companies have been re-examining the advantages of outsourcing (see “Pressing Their Advantage: Companies and Individuals Find Their Leverage and Create a Circle of Pressure,” IF 3211, 6/14/11).

Manufacturing/Business/TechnologyinFOCUS eF 6112

© 2011 Inferential Focus, All Rights Reservedwww.inferentialfocus.com