Survey Points To Expanding Service Roles For Manufacturing In U.S.

aj — Mon, 14 Jul 2008 18:49:15 GMT

In a recent survey from Deloitte, U.S. manufacturing executives say they consider North America "the most desirable region for expansion over the next three years."

But before you go out and start pulling out the champagne, you should know - there's a catch.

First, the good news: the confluence of recent financial events is absolutely influencing U.S. businesses and where they choose to expand.

In terms of the executives' agendas for expansion, the survey found that sales and services topped the list with 76 percent planning to expand sales in the United States, 58 percent in Canada and 67 percent in Mexico. Sourcing of raw materials and parts (50 percent in China, 49 percent in the United States, and 43 percent in Mexico) and production (44 percent in the United States, 37 percent in Mexico and 37 percent in China) rounded out the top three priorities.

Overall, the vast majority of respondents said North America will not lose competitive ground in those areas over the next five years. And a significant number said they believe North America will become even more competitive by 2012 in sales and marketing (45 percent), information technology (41 percent), customer service (37 percent), R&D/engineering (36 percent) and finance/accounting (34 percent). A small percentage predicted that North America will be less competitive globally in these areas by 2012, with the balance being neutral.

And good news it is, because these are mostly high paying jobs that require intellectual competence but less direct manufacturing domain expertise.

And that brings us to the less than pleasant news, especially for those closest to the shop floor:

The only dark spot is production capability. Despite plans to expand in North America in the short term, survey respondents painted a gloomy picture of this region's ability to compete over the long run with lower-cost locations for production, especially Asia.

More than half of survey respondents (61 percent) said they expect North America to become even less competitive globally as a site for production by 2012. The key barriers to making production competitive globally were seen as labor cost (cited by 71 percent), tax policy (66 percent), work rules (66 percent), lack of availability of skilled labor (51 percent) and costs of raw materials and energy (56 percent). Not surprisingly, these were the issues most frequently cited by executives surveyed as areas that governments should address as matters of public policy.

Clearly, U.S. manufacturing management intends to continue outsourcing production to low cost countries. But while some companies may test those same regions to host their operations, most seem to be shifting toward North America for those ops - and that's not entirely a bad thing. According to Craig Griffi of Deloitte:

"The simplistic way to view manufacturing is to look only
where production is located. It's clear that a more accurate way to measure
the economic impact of these companies is to look at where all operations
are located, including sourcing, research and development, distribution,
finance, marketing, and all of the other functions necessary for a company
to thrive. In most cases, executives are telling us that North America
provides a competitive business environment for most of these activities."

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Survey Points To Expanding Service Roles For Manufacturing In U.S.