US Manufacturing Sector Not Dead. Just on PAUSE.
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The US manufacturing sector is not dead.
It is just on pause.
My favorite demographer, Kenneth W. Gronbach in a recent post titled Manufacturing Will Return to The United States with a Vengeance!, apparently thinks the same.
When you are doing business planning of any kind, especially marketing plans your work is incomplete if you fail to consider the impact of changing demographics on the demand for your goods and services.
Changing Demographics Impacts Market Demand
Regardless your industry, demand for goods and services is affected by market size which simply mirrors the size of the population. Where does the population come from? Babies being born.
Tracking the birth rate tells us when, where, and who will be buying certain types of goods and services. As we age our need for specific products and services changes.
Changing demographics are pretty damn important for anyone responsible for marketing anything in corporate America. Especially the executive suite.
Will China’s Mistake Fuel Reawakening of America’s Manufacturing?
As Ken illustrates below, China is in a touch spot, all their own doing.
Now China has its own issues precipitated by their ludicrous “One Child Policy” that has been in force for the last three decades. The net result is an elimination of their young labor force. Duh! China is now experiencing labor shortages, yes, labor shortages! This does mean higher wages. Couple this with expensive shipping, a falling dollar and run-a-way inflation and you have Chinese goods that have lost their appeal to Wal-Mart. Wal-Mart does more business with China than Germany does.
Yes, manufacturing will come back to the United States for all the right reasons. We will satisfy our own markets with our own labor and if the dollar stays low we will satisfy world markets as well. Via Manufacturing Will Return to The United States with a Vengeance!
Ken’s points about increased shipping costs, run-a-way inflation, and the absence of a youthful work force in China (rising wage costs for Chinese manufacturing firms) will eventually cause us to seek homegrown goods. All these trends point to a return to manufacturing in America.
What are your thoughts?
4 Comments on this post
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Alain Saffel said:
I’m not sure I’ve ever heard anyone describe China’s one child policy as ludicrous.
I suppose if you look at things purely from a business perspective, it might be ludicrous. If you look at the big picture, it is a necessity.
Current food shortages and potential future shortages (as a result of expected global warming) are a good reason to consider limiting your population. China has only so much land, and they still need some of it to grow their own food.
Excess population growth does bring up other issues like environmental degradation. It’s an important one, and not just because people like to sit in nice parks. Clean land, air and water don’t contribute to poor health and disease like polluted land, air and water do.
We’ve only really just begun to calculate the costs of a polluted environment.
I hardly think that China could afford the costs of withdrawing its one child policy.
August 19th, 2008 at 1:00 pm -
Greg Balanko-Dickson said:
Alain, thanks for dropping in and participating in the conversation.
I was thinking about the sheer logistics of feeding 1.3 billion people. If each person ate 1 chicken per week thats over 50 Billion chickens! That is a lot of chickens. Do that many chickens even exist?
You make an interesting point and I am pretty sure that Ken was referring to it from a “business” perspective.
Great points.
The other thing is the cultural differences between China and US. What options do they have when they experience labor shortages? Extend delivery times, people work longer, and I think they will begin to incorporate technology to do much of the heavy lifting and assembly i manufacturing. I am sure they have already begun looking to technology for solutions.
What do you think?
August 19th, 2008 at 1:54 pm -
Alain Saffel said:
What I think is interesting is how people often speak from a “business” perspective. I think that’s part of the problem we have in our world today is that decisions are made from this kind of narrow perspective without looking at the big picture. I would venture that it’s this narrow perspective that has contributed to so many of the problems we have today.
Decisions and their consequences don’t happen in a vacuum. I think that businesses will eventually be forced to deal with the full life-cycle of their costs and they won’t be able to cost shift like they have in the past. As the population grows, there are fewer and fewer places to dump without it affecting others.
I suppose it’s possible that manufacturing will move to the U.S. again. China is likely to see increasing costs, and not just due to increased material prices. I think there will be increasing pressure to have a floating currency. Who couldn’t succeed with 25 cent an hour labour and a currency that’s pegged 40 per cent below where it should be? You’d have to be an idiot not to be able to make your economy a roaring success with conditions like that.
No, I’m not so enamored by the “Chinese miracle.”
I agree, they’re likely to become increasingly mechanized. It should be interesting to see what happens in the future with China. I’m not so confident they can keep the engines roaring especially at the rate they’re consuming increasingly scarce resources. Good luck.
China’s salvation will be to follow sustainable policies in all areas of its economy. It just makes sense when you’ve got a population of 1.3 billion. Those sustainable policies will just be business opportunities too. There are many Canadian companies developing technology that the Chinese could be interested in. It’s an opportunity for Canadians too.
And should anyone think I’m just raving from somewhere out in left field, consider that I used to be an accountant and I am pro-business. I’m just not pro-megacorporation. I’ve been involved in Chambers of Commerce and I am supportive of small- and medium-sized business. I’m also supportive of full life-cycle accounting and big-picture decision making.
August 26th, 2008 at 9:07 am -
Greg Balanko-Dickson said:
Alain, there is that word again. Sustainable. sustainable business is becoming increasingly important. Not just for the environment but it makes economic sense.
Having a sustainable business has never been top of mind for me, yet I think about it more and more. I have been examining my assumptions and beliefs about business.
Entrepreneur know thyself.
Unless we personally are sensitive to and aware of the needs of our business and environment (community, industry etc.) we operate within we do not know what we do not know.
Awareness, we need to wake up!
August 26th, 2008 at 9:23 am
