Obama plan not the biggest factor for U.S. factory revival

January 28, 2012|Jay Hancock

Lion Brothers is outsourcing again. Unpaid child laborers will design one of the Owings Mills company's newest embroidered emblems.

That's a good thing, in this case. If the factory of the future is about fast turnarounds on custom orders produced close to the customer, Lion Brothers' new Girl Scout badge is a small but telling indicator that U.S. manufacturers might have a place in the global economy after all.

President Barack Obama's blueprint for reviving American factories should help retain and perhaps create manufacturing jobs at the margins. Tax incentives for capital investment and cutting income tax rates while eliminating loopholes could help U.S. manufacturing continue its recent rebound, manufacturers say.

But those factors aren't as significant as some that are largely out of U.S. control — the value of the dollar and the rising cost of manufacturing in China, for example. Neither are they as important as U.S. companies' attention to innovation, investment and change, which you can see at Lion Brothers every day.

The company makes tens of millions of badges for the Girl Scouts and Boy Scouts every year. Most are produced at Lion Brothers' plant in China, for the usual reasons of lower labor costs and other expenses.

But the Girl Scouts' new "Make Your Own" badge, which will be conceived and designed on the Web by Scouts — so that each girl's badge is unique — can't come from China.

The badges "are made one at a time," says Susan Ganz, Lion Brothers' CEO. "The cost of making one overseas and then shipping them back and individually packing them, labeling them and shipping them out would be time-prohibitive and costly."

So they'll be made in Owings Mills, along with the other 30 percent of the company's Scout badges and emblems that need to be made on short notice for quick delivery.

"We have a huge opportunity, at this moment, to bring manufacturing back," Obama said in last week's State of the Union speech.

U.S. manufacturing, of course, never really went away. The news media focuses on auto plants and steel mills, but all over the country, small, unsung factories such as Lion Brothers, Morrell Park's Kenlee Precision and Hampden's Link Gear & Machine are producing the less glamorous fabrics and foundations of life.

The value of American-produced goods is higher than ever, adjusted for inflation. There is an argument about whether China has surpassed the United States as the world's biggest manufacturer. But the U.S. share of global factory output is still around 20 percent — relatively unchanged over the years.

The problem is the number of workers employed to make the stuff. Thanks to robots, computers and other automation, U.S. manufacturing employment has fallen from 19 million in 1980 to less than 12 million now.

Link Gear's 15 employees make twice as many gears and other machined products as 20 workers did in the 1990s, President Bob Link says.

Manufacturing's productivity and technology boom is one reason there will never be a return to the golden age of factory jobs, when Bethlehem Steel's Sparrows Point mill employed tens of thousands. (There are about 2,000 workers there these days.)

"Times have changed," says Mike Galiazzo, president of the Regional Manufacturing Institute, a Maryland trade group. "There may be a little incentive we can provide to bring people back over here. But not all these companies are going to be able to come back."

Even so, economic sands are shifting in ways that could make the United States more competitive. Labor costs are soaring in China, prompting some companies to take another look at bringing production back to the United States. Energy costs have raised the price of shipping.

Product designs are changing faster than ever, prompted by the acceleration of the fashion cycle and the ability of computers and robots to customize small orders. Even orders as tiny as one Girl Scout badge. That's another incentive for factories to be near customers.

Thanks partly to rising Chinese costs and U.S. customers' desire for quick turnarounds, Ganz sees the number of jobs increasing modestly at Lion Brothers' Owings Mills plant, which employs about 100 and also makes embroidered emblems for the National Football League, police uniforms, the National Park Service and many other groups. (In China the company employs 700.)

But the skills required will be different, she says — with demand for more workers who understand quality control, engineering, computerized machines and logistics.

That might be the biggest challenge of all for U.S. manufacturing — getting the brainpower right. Even in China, a premium is increasingly placed on the best technology and the brightest minds to operate it.

That's where the international manufacturing competition of the future will be fought, and the United States is falling behind, says Phillip Phan, interim dean at the Johns Hopkins Carey Business School.

The country is not educating enough of its citizens in industrial technology, Phan says. And it's letting too many foreign engineering students return to their own countries to spur manufacturing there.

"The U.S. manufacturing sector is losing competitiveness not because of labor costs but because of the lack of human capital — and a lack of investment in technology," he says.

In coming decades, the story of manufacturing everywhere will be a tale of automation, which will tend to eliminate traditional factory jobs, and of global growth and a retooled workforce to run the machines, which will tend to increase the number of factory jobs. Successful manufacturing economies will play both sides of that game.

"We'll need people to run machines," Ganz says. "We'll need people to do the picking and packing. It may not be the magnitude of legacy manufacturing. But there will be places for many. And the world is changing. Stay tuned. This isn't over yet."

jay.hancock@baltsun.com

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