The key word that describes what America must do to meet the outsourcing challenge and to compete in the global economy is “innovate,” according to Peters. As for manufacturing professionals, Peters advises honing skills in leadership, management, making presentations and teamwork.
AW: What is your view on the state of manufacturing, both in the United States and worldwide?
Peters: It’s a well-known fact that manufacturing employment in the United States is down by 3 million jobs since 1998. This is primarily due to such factors as globalization, automation, improved labor processes and increased labor productivity. In short, we are victims of our own success. We see a lot about blaming China for the loss of jobs. Some of the blame is rational, but a lot of job reductions are a result of improved processes and sustaining output with fewer workers. I’ve read where overseas outsourcing only contributes 0.4 percent to the unemployment numbers.
Although the perception that lower overseas labor costs are pulling jobs away is true in many cases, it’s not always true. Sometimes companies move to gain better understanding of local consumer product tastes and the local consumer market. In some cases, you’ve got to be there to experience it. A lot of companies would tell you how hard it is to serve customers in a distant market.
One thing I should say, though, is that there is still a big issue of the world not being a level playing field. Until such things as trade imbalances and countries holding their currency values artificially low are addressed, we’ll be at a distinct disadvantage.
AW: As SME president, have you had a chance to provide a voice for manufacturing in Washington?
Peters: I attended a conference of manufacturing professionals in Washington, D.C., on March 1. The National Coalition for Advanced Manufacturing (NACFAM), a Washington, D.C., non-profit education, research and service organization for manufacturing, brought together hundreds of manufacturing professionals to secure a higher level of consensus and mutual understanding in order to send a unified message to lawmakers on what they should be doing to assist U.S. manufacturing companies.
We spent part of the day in breakout sessions discussing the recently released U.S. Department of Commerce “Manufacturing in America” report. The report is a series of recommendations aimed at unleashing the full potential of American manufacturers. Issues addressed were a comprehensive representation of challenges that are facing manufacturing. We felt that timeliness of policy implementations is crucial to success.
The key to the report, I think, is what Congress and the administration do with it. What we can do in the meantime, while we are waiting on political assistance, is to develop and learn new ways to manufacture, to continue to innovate, to implement lean strategies, eliminate waste and train our workforce in these areas.
AW: Given all these challenges, do you ever tell young people not to make manufacturing a career?
Peters: Despite employment declines and the evolving role of manufacturing in our economy, I still want to state that manufacturing is a well paying career choice. In 2000, the average salary in manufacturing was $54,000 per year, and the benefits were 20 percent higher than those of the average U.S. worker. All of this has contributed to the increase in productivity that has made manufacturing what it is today—a good career.
AW: Outsourcing of manufacturing jobs is making headlines these days. What does this situation mean to engineers and other manufacturing professionals?
Peters: What I’ve seen with outsourcing is often a Jekyll and Hyde scenario. When things are going great, when product is shipped within specification and on time, then it’s a great world. But when quality and production hiccups, your problems can escalate exponentially. To the manufacturing professional, that means that the first part of every business day is spent determining make or buy decisions. If the decision is made to outsource, you’re going to need to manage that program in areas such as cost, delivery and quality, as well as evaluating—and possibly helping—continuous improvement in the supplier’s core processes. These are whole areas we weren’t into before. So while outsourcing is certainly a viable option if you have that excellent supply base, this additional management hurdle could cause many companies to think twice before taking that plunge.
Manufacturers can look within their own enterprises to find ways to increase their efficiency and reduce their operational costs. Jim Womack, president of the Lean Enterprise Institute, in Brookline, Mass., thinks that companies should do “Lean Math” before moving operations overseas. There are lots of costs overseas that they don’t have domestically. For example, overhead expenses that are allocated based on producing in a high wage location don’t usually disappear when a product is transferred. Instead, these costs are reallocated into the products that continue to be made here, so that raises their apparent cost. Also, companies need to calculate the expense of additional inventory of goods in transit from the low wage location to the user, along with sales lost due to long lead times and the cost of out-of-stock or scrap stock because long-range forecasts were incorrect. It’s harder to manage when you’re dealing long distance.
One other thing is that the cost of offshoring is more than just the loss of jobs. When products are no longer made in the United States, the skills necessary to make them will disappear. Resurrecting those skills is in many cases impossible. Technological innovation springs from research. And manufacturing—which accounts for 60 percent of the U.S. economy and about 62 percent of exports—still supports nearly two-thirds of all research and development. Lee Iacocca once reasoned that ideas spring up from plant floor and assembly lines. If you don’t see things being made, you’re less likely to think up better ways to design, engineer and manufacture them.
There’s real skill erosion that gets lost in the numbers. For us to remain competitive, we need to embrace ingenuity and rely on our traditional strengths of technology innovation. We need to work on emerging technologies like alternative energy, nanotechnology and biotechnology, rather than clinging to the industries of the past. The lowest skilled jobs, making low-value, mass-produced items, have moved off shore. They probably won’t come back. Our attention should now be focused on preparing our nation’s work force with the skills necessary to develop new industries, capital-intensive technologies and value-added products. So we’ve got to prepare for the future and continue to lead in the innovation of technology, and that will keep us in manufacturing.
AW:Membership organizations seem to have been in a decline over the past few years. Do you agree? If so, to what do you attribute this?
Peters: We’ve seen that decline. The numbers over the past few decades and particularly in the past few years of almost all membership-based organizations have dropped. Mostly I think it’s due to reduced time people have to devote to non-work, non-family activities. It’s also the way we communicate. There’s a lot less face-to-face activity today.
Another reason lies in the tightening belts of corporate America. Certainly the recession hasn’t helped. Companies once valued the skills and experiences that employees gain from membership organizations. They encouraged employees to join, and reimbursed them for their dues. Now fewer and fewer are doing that. That’s hurt.
One of the things I want to do is to let companies know how much membership in these professional societies does help that individual. It really creates more valuable employees because of the interpersonal skills and knowledge base that the employees gain.
The key for us and for other member organizations is to work hard to prove our relevance and value to the individual and company. Involvement is not just a social or volunteer activity. Members gain real value that will help them progress in their careers, be more effective and get that competitive edge—either against the other company in the market, or the person in the next cubicle aiming for the same promotion.
One way we accomplish this is to improve our members’ knowledge base. We have many educational materials. We want to make sure that our members have education, research and technology at their fingertips. We have a technical community network that encompasses the current depth and breadth of new technologies. We introduce new events and resources and new conferences and summits. For example, there is the new Automation and Assembly Summit that will be held in Dallas, May 11-12, and a new Manufacturing Technologies Summit in Dearborn, Mich., on August 10-11.
Last but not least, we improve our members’ skill sets. SME membership affords speaking opportunities and chapter and region leadership opportunities. It provides network opportunities to see what others are doing to solve problems. These are areas that they might not get exposed to in their everyday jobs. That’s what I’ve really found valuable in this part of SME. Getting out and meeting others and assuming leadership positions really helps you grow personally, and that helps you in your career.
AW:What are the values to individuals for joining and becoming active in organizations? What value does the employer of these people realize?
Peters: The major value is to gain and maintain a competitive edge. Both individuals and companies must change and grow. It’s through their involvement with SME that individuals can improve presentation and leadership skills and the fine art of give-and-take when discussing issues with peers. They can take advantage of opportunities to have their voices heard by elected officials. They have opportunities to stay on top of the latest information and advances of technology. Members continuously learn best practices and can benchmark new processes. That’s why I truly believe in emphasizing that it’s more critical than ever that manufacturing professionals remain at the top of their game. They must have knowledge and information, and SME excels as a provider of this continuous learning.
AW: Are there new skills that manufacturing engineers need to meet today’s challenges? What are they?
Peters: Unlike a decade ago, new professionals are pressured to come out of the blocks from day one, right out of school, with a well-developed set of personal skills. These include team skills, written and oral communication skills, management skills and business knowledge. There’s no time for a long learning curve for these things in today’s business world. I believe that having these skills is a given, just like quality is in manufacturing. Without it, you can’t even get in the game. Add to this the fairly recent requirements to have a knowledge of project management, manufacturing process control, lean manufacturing, management, design, customer service, product development and supply chain management, along with a multidisciplinary set of talents. In this global economy, it also helps to have an international perspective. In fact, you’d better have it or you’ll be left behind. The good news is that SME is equipped to help develop all of these skills.
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