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Steve Melito

Lean

American Manufacturing Is Globally Competitive

Talent and three other factors are pushing the country to the top

Published: Tuesday, June 28, 2016 - 15:13

How competitive is American manufacturing? By the year 2020, the United States is projected to take the top spot in the Global Manufacturing Competitiveness Index (GMCI), a multiyear research platform from Deloitte and the Council on Competitiveness.

The 2016 GMCI surveyed more than 500 of the world’s leading manufacturing CEOs and is the third such analysis in a series. Previous studies in 2010 and 2013 held promise for New York State manufacturers, but four reasons and two new programs could mean the best is yet to come.

What’s driving U.S. manufacturing competitiveness? Talent, cost competitiveness, workforce productivity, and supplier network are the four factors that Deloitte and the Council on Competitiveness emphasize. For manufacturers in New York State, funding opportunities, such as Global NY and START-UP NY, can also promote innovation, expansion, and increased profitability. These and other initiatives for manufacturers are offered through Empire State Development (ESD), New York State’s chief economic development agency.

Understanding the drivers

Across the United States, the 2016 GMCI reports, “talent remains number one” among drivers of manufacturing competitiveness. In the Deloitte and Council of Competitiveness study, talent is defined as “the quality and availability of highly skilled workers” who can help manufacturers embrace innovation and advanced manufacturing strategies. Although considerable media attention has been devoted to America’s manufacturing skills gap, the United States is second only to Germany in terms of talent today.

Cost competitiveness and workforce productivity are secondary to manufacturing talent, but these two drivers of manufacturing competitiveness are especially important. “In an era of sluggish economic growth,” the 2016 GMCI explains, “containing costs and increasing productivity to boost profits remains critical for manufacturers.” China beats all of its major manufacturing rivals in terms of cost competitiveness, but the study warns readers against emphasizing one factor alone. Rather, a “mosaic” of factors or drivers is what determines a nation’s overall GMCI rank.

Executives ranked “supplier network” as the fourth most important driver of manufacturing competitiveness. Globalization has increased supply chain lengths, but top-ranked nations have their own strong and diverse supplier base. Importantly, these networks include “industrial clusters focused on R&D.” The 2016 GMCI doesn’t reference a 2015 Brookings Institution report about declining R&D as a share of U.S. GDP, but perhaps it should. In that study, Brookings authors Mark Muro and Scott Andes described U.S. R&D as a troubling enterprise.

Past, present, and future

If the predictions of Deloitte and the Council on Competitiveness are correct, the United States will take the top spot in the Global Manufacturing Competitive Index (GMCI) in 2020. China, the manufacturing competitiveness leader in 2010, 2013, and 2016, will fall to second place as it transitions toward higher-value manufacturing and adjusts to rising material and labor costs. Germany and Japan are expected to keep their third and fourth spots, respectively, in 2020.

For the United States, reaching the top of the GMCI represents the logical next step in a steady progression from fourth place in 2010, third place in 2013, and second in 2016. Longer-term, however, issues such as the manufacturing skills gap and declining R&D spending (at least as a share of GDP) could affect U.S. manufacturing competitiveness.

For now, however, the four drivers of manufacturing competitiveness are propelling America towards GMCI primacy. It’s a great time for U.S. manufacturing—and the best is yet to come.

First published April 22, 2016, on FuzeHub’s manufacturing blog.

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About The Author

Steve Melito’s picture

Steve Melito

Steve Melito is an award-winning content developer specializing in manufacturing, material science, and homeland security. He is the founder and owner of Thunderbolt Business Services, a content marketing agency with clients and partners in New York, Montreal, Los Angeles, and New Delhi. Before starting his own business, Steve was the director of engineering editorial content at GlobalSpec (now part of IHS). His prolific content creation and community-building were instrumental to the success of CR4: The Engineer’s Place for News and Discussion.