Reviving American Manufacturing Through Knowledge and Process Innovation

Executive Summary

The competitiveness of American manufacturing has, to this point, been based on the continual reduction of operating expenses and sustained pressure on supply chains to become more efficient and less of a cost burden — regardless of the long-term impact. As the United States continues to watch other nations aggressively pursue its manufacturing base with lower tariffs, ten-year corporate tax holidays, and tax incentives that effectively reimburse manufacturers for job creation, it is clear that a fundamental redesign of American manufacturing is needed.

Bailouts are not the answer; supporting an industry that is long overdue to compete on its own merits only delays necessary transformation. While some analysts argue that the best companies have become brand leaders — firms like Apple and Dell, where manufacturing is outsourced and the majority of spending flows to advertising, promotion, and sales — this is not a viable long-term solution either. Instead, America needs to rebuild competitiveness grounded in knowledge and intelligence at the individual level, extrapolating that strength to the corporate and national level.

Opportunities for American Manufacturing in the 21st Century

At the center of what must happen to make America more competitive in manufacturing is the recognition that the nation's core strength is not the ability to cut costs or consolidate industries — it is the ability to vastly improve the value of processes and products through knowledge. From government support in the form of tax credits for corporations that invest in knowledge-sharing networks to aggressive tax breaks for companies that bring their workforces up to speed on 21st-century technologies, America can compete if it aggressively pursues knowledge first.

There is ample evidence of this from other nations that have rebounded from deep economic recessions, with Japan serving as a prime example. Consider how Toyota developed and refined its Toyota Production System (TPS) and the associated government support it received as a result (Dyer & Nobeoka, 2000). TPS is today considered a best practice in managing diverse supply chains to support efficient, cost-reduced production — achieved through process efficiencies rather than by grinding suppliers to ever-lower price points.

American manufacturers need to seriously consider how their entire value chain could benefit from a process-level makeover centered first on the customer. Known as Demand-Driven Supply Networks (DDSN), this strategy places customers' demands and expectations as the catalyst for process design, product development, pricing, and production efficiency (Crampton-Thomas, 2006). Redesigning American companies to combine the supply chain excellence of TPS with the urgency and intensity of DDSN's customer focus would do much to revolutionize American manufacturing. Rather than competing on price, American manufacturers could raise customer expectations and meet them — winning customer loyalty at a profitable price point.

In effect, American industries that forgo these process efficiencies are handing their profit potential to competing nations. Competing on price alone is, ultimately, competing to erode profitability over time. American manufacturing must instead re-center on competing through aggressive intelligence and an intense focus on serving existing customers better than any global rival.

Conclusion

American manufacturing can regain its strength if it uses its depth of intelligence and expertise and stops playing the pricing game. Learning how to make supply chains collaborative (Dyer & Nobeoka, 2000) and streamlining the most critical revenue processes, including new product development (Burkett, 2005), is key. Regaining the lead in manufacturing begins with aggressive intelligence.