Advanced Manufacturing – GE’s Response to Full Employment

When Tom Donilon, the National Security Advisor for President Obama was asked what the two most pressing issues that kept him up at night, he replied, terrorist attacks and the US declining national competitiveness. The backdrop of 600,000 unfilled manufacturing jobs at a time when unemployment is near 8% has most certainly been his nightmare in the making. He must be asking himself, how could our educational system fall so out of line with industry demands, especially when student debts have exceeded $1 trillion? With such a large investment made to prepare our youth, what kind of a workforce do we have as a Nation? If vacant manufacturing  jobs were filled today with US workers, experts tell us that the contribution of our manufacturing economy would jump from its current level of $1.8billion to $2.2trillion! What has gone terribly wrong?

Political leaders supporting manufacturing initiatives in Washington are calling for another ‘Sputnik moment’ to inspire American students to pursue manufacturing careers. Without a ready inventory of workers to support a competitive manufacturing base, America’s future will always be vulnerable to outside economic threats. History reminds us of our true potential, when in 1945, 50% of the products produced in the world were ‘Made in USA’. Today that number has trended down to 22%.

At a recent press gathering in Washington DC’s Newseum sponsored by GE (General Electric Company) and The Atlantic Magazine, GE’s CEO, Jeff Immelt, along with an impressive slate of industry experts and thought leaders addressed the next chapter in US manufacturing and its expected role in creating jobs. David Arkless, Manpower Group’s President of Global Corporate and Government Affairs, led the discussion with a non-sugar coated account of how the Chinese have managed to grow their manufacturing base, while the White House has been floundering along forming more committees than solutions. Arkless explained how the Mayor of Tianjin, Huang Xingguo, (the 4th largest urban population in China) learned from speaking with over 2,000 foreign firms in his district that their number one concern was a ready supply of skilled workers at the right cost. Working with his local universities, the mayor and his team of advisors forecast the skill sets companies in Tianjin would need in the future and created specific course tracks that met these requirements. Local students who chose a STEM career were offered a tuition-free package and employment after graduation. Tianjin’s efforts appear to be paying off well, since this year the city is expected to grow at 17.5%, well above China’s average of 6.5%. Arkless asked out loud why the US Government could not do the same as the Mayor of Tianjin.

Could/should the US follow a similar manufacturing strategy as the Chinese? 

The other panel members argued strongly against Arkless’ recommendations, citing that the US has a different political system and could never ‘get away’ with what is socially acceptable in China. What the US Government could do, instead, is establish a set of certification guidelines that colleges can follow and employers can use to hire with confidence. Colleges that produce well-trained employees using these standardized tests could expect their employers to reciprocate with needed financial support, which in turn would alleviate the need for future government subsidies. Based on each college’s performance, free markets would determine the academic institutions that can deliver and those that should be dissolved or merged.

Despite the many efforts to entice students to follow a manufacturing career track today; however, the US strategy is clearly not working. For starters, most students are not aware that goods are produced on factory floors in the US. For years they have heard negative news coverage about the loss of US factory jobs to other countries with lower wages, so much so, that college to them is their ticket to avoid a dead-end job on an assembly line. Like a page taken from a Charles Dickens novel, they perceive factory jobs as requiring long tedious hours in a dark and dingy work space spewed with numerous health hazards.

At the event, GE’s CEO, Jeff Immelt, exclaimed the pressing need to change this archaic perception of factory work among young students. Parents, teachers, and guidance counselors alike had to be on-board too. Results from a recent survey showed that only 3 out of 10 parents supported a manufacturing career for their children. Without greater parental support, the hurdle to attract students to a STEM career path (Science, Technology, Engineering, Mathematics) would become insurmountable, especially among the emerging, young Latino population who tend to be family centric. Alcoa’s VP of Human Resources, Natalie Shilling, noted that children’s long-term interests in STEM subjects tend to drop off significantly during the 6th grade level. In response Alcoa has partnered with local schools to sponsor science fairs and family factory visits but expressed concern that their ‘grassroots’ efforts may be insufficient.  Like GE, they also see the urgent need for a formalized regulatory framework backed by sound government policies.

Advanced Manufacturing
Factories today are referred to as operations of ‘advanced manufacturing’.  Unlike yesterday’s plants, they include robots, ‘lean’ manufacturing practices that improve overall process efficiencies, and local distribution channels. They are smaller, cleaner, and automated. For example, the labor required for the production of a GE refrigerator is only 1.8 hours, less time that it might take to install the unit at a customer’s home and read the manual. Breakthrough technologies such as 3-D printing are pushing the limits on smaller runs of customized products with near-zero waste. GE is investing heavily in 3-D printing technology citing its shorter design cycle benefits. Shaving one or two years off the traditional design-to-production process could translate into significant savings and competitive advantages.

Immelt’s predicament poses an interesting future for manufacturing. As wages have been squeezed out of the cost of production, the focus on future investments has shifted away from countries with cheap labor to regions that offer a steady flow of skilled workers, access to specialized materials, and a basic infrastructure to move goods to consumers. Where specific components are lacking, GE is prepared to make investments to ensure the integrity of their business model over an expected plant life-span of 40 to 50 years.  Immelt believes that this ‘in-country’ strategy will prepare GE to serve an expected one billion middle class entrants over the next five years.

What does Immelt consider to be a skilled workforce worthy of GE’s consideration? According to Immelt, future workforces must be capable of performing ‘additive manufacturing’, which means they will need the knowledge-base to combine some computer training with artisan skills. They must also work competitively in teams. How important are team skill sets to Immelt? Recently the shortage of skilled workers prompted GE to call back veteran GE employees, who according to Immelt, will need some technical training but will easily fit in, since they already have proven GE team work experience. 

…and yet, one key question remains. Can GE’s ‘advanced manufacturing’ strategy achieve full employment without an increase in US exports? Time will tell.

As currency wars mount, what will stop US trading partners from setting up their own ‘advanced manufacturing’ operations that service their own local markets? Factories will be cheaper to build and faster to set up locally, therefore, offering a distinctive advantage over imported finished goods. Furthermore, STEM online training courses such as edx.org and ocw.mit.edu will help prepare a viable pipeline of qualified local STEM students/workers virtually anywhere in the world.

Immelt’s predecessor, Jack Welch, once envisioned the future of manufacturing with factories mounted on moving barges that would dock at different ports-of-call depending upon the market demand for a manufactured good. In part his vision had some validity. The barges he referred to, are today, smaller and more agile high-tech factories that can be easily built adjacent to their intended buyers.

© 2013 Tom Kadala
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7 Responses to Advanced Manufacturing – GE’s Response to Full Employment

  1. Much of the offshoring occurred because companies looked only at wages or prices and not total cost. The Reshoring Initiative’s free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. Current research shows many companies can reshore about 25% of what they have offshored and improve their profitability. Reshoring is far from the whole solution to the trade deficit problem, but it is one important and growing part.
    About 10% of the approx. 500,000 manufacturing job growth since the low in January 2010 is due to reshoring. Based on the 300+ published reshoring articles in our Reshoring Library http://www.reshorenow.org/resources/library.cfm, we calculate that at least 50,000 manufacturing jobs have been reshored.
    You can reach me at harry.moser@reshorenow.org for help using our tools for sourcing decisions and when selling.

  2. Wilf Wright says:

    Great Article. More of these symposiums are needed in North America.

    What our politicians and policy makers need to be aware of is the Dinosaur mentality that REDUCED the competitiveness and manufacturing capacity will effect there way of working also. Change in all areas of our decision making is constant and we need to review and consider how we provide a future workforce that is educated, empowered and has the right skills and these investments are seen as a critical competitive edge over the world wide competition. We need to get the best ideas no matter where they come from, utilized and practiced to ensure that the workforce of today and in the future have ways to improve the way of life of all.

    Again, thanks for sharing.

  3. ERNEST MILLER says:

    “More regulation and government management” to grow manufacturing in the US? A typical Atlantic Monthly answer, but the US is stymied by too much regulation and heavy taxation of manufacturing and business in general. Regulation is actually lower and less intrusive in China than in the USA and the taxation level is much lower. If you want manufacturing industries to grow in the USA, you first have to stop discouraging them with taxes and regulation.

  4. Rabah Bazouche says:

    It is absolutely right that the manufacturing industry is not perceived as a flourishing field in the United States. That, because of the outsourcing of companies looking for more profits centered on the Economies of Scale in china and in other countries. It will therefore be so helpful for the government to either offer some attractive advantages (concessions) or impose any other ways like designing more regulations (higher taxes Etc.) on those companies and bring them home. Nonetheless, let’s imagine all those companies, most of them manufacturers, are all operating in the United States. Is the task already over? Are the expected goals then reached?

    The answer would be obviously a big No! We are then halfway through in our project. It is therefore very important to the three major characters in the economic play to collaborate and work together to rich the summit and leadership at the international level. The Government, those companies, and colleges therefore should start working in an unprecedented collaboration to fulfill those promised goals of employment to the young and strong workers like myself.

    The international market, despite the economic crisis, is huge, big, and still is attractive. The manufacturers therefore should just work harder to research and in fact scrutinize the demand to adapt, despite the value of the change (currency wars), their products made in US to its’ social, cultural, and especially financial needs.

    Collages should, at this level, try to adapt their structures to those new demands by creating different specialized and specific programs aimed only at satisfying those specific needs of each company. Students, therefore, would know exactly what they are acquiring as knowledge and where (which company) they will be using it (their acquired knowledge) in the next one, two, or three years. Collages consequently will base their specialty programs (customized programs) on their clients (companies) that they are working with and striving to serve in a best way possible.

    If collages do not respond to the needs of the manufacturing industry, companies should find out a way to provide themselves with the adequate working hand armed with what I would call specific-context-based knowledge. Creating a Training and Development department, that already exist as L&D that is not adapted really, within the company or even an outsourced training at their own terms becomes then valuable enough for their prosperity and competition at the international level.

  5. Ric Shorten says:

    The corporation was created to protect investors and managers personal assets from company losses. When corporate income is larger than the Nation States of the world like GE’s and influence government that is unacceptable… understandable…yes. Its a crime in most countries.

    As individuals when we earn more than we spend…those are profits. We bank them, invest them.

    Corporate profits are the same.

    As individuals when our home grass needs mowing; our sons or daughters do it grudgingly for little or nothing…is this sweat shop or slavery? The neighbour hood kids come over to offer to cut the grass. One asks $10 the next $5 and the last $1. Your families profit was $10 last month…which kid do you give the job to? Your wife and kids are counting on YOU to make the right decision!

    Corporations are people under the law…the CEO and CFO could be held responsible when laws are knowingly broken…with a three day jail term on the third offence. Laws would not be broken. Pollution is made a crime.

    The Solution:

    EVERY DOLLAR EARNED BY ANY ONE within a country is taxed by 25%… everywhere through out the world and paid monthly. No exceptions. Governments must stay with in their spending limits. Guaranteed income supplements mailed monthly…clawed back at tax time. All health care provided but billed to citizen as received but centrally paid. All education paid to the PHD. level. Retirement assured to adequate standards.

    KIDS COME ON…its not brain surgery!

  6. Mike Stephens says:

    Perhaps the answer to the skills gap in the next generation workforce is right in front of us – namely apprenticeships. Apprenticeships or, Co-op programs as Colleges and Universities call them, consist today of a mix of classroom theory study and periods of practical hands-on work terms, mainly on construction job sites and/or in Engineering or Design shops. As a “side-bar”, the students make a wage during their work terms which are typically applied towards the cost of their education, This dynamic would certainly begin to address the student debt crisis we are now facing.

    Apprenticeships/ Co-ops, that are well entrenched in the skilled trades and largely in the Engineering faculties, I suspect can be easily adaptable to almost any program at any College or University. They also provide the framework for Manufacturers, Schools and Governments to collaborate in the design and management of the programs with the objective in mind to graduate young men and women equipped immediately with the basic skills, knowledge and culture (teamwork, hard work and innovation to name a few) required to significantly contribute to the success of the businesses they join.

    • Tom Kadala says:

      Mike – Thank you for your astute comment. I personally believe that you are spot on. What I don’t understand is why the Obama Administration with their recent CEO roundtable initiative did not recommend this option. I’ve heard from both Jeff Immelt and Steve Case (both of whom were on this task force) but neither alluded to the development of a mentor-based solution.

      I believe Germany offers one and from what I have heard it is working well and exceeding expectations. Perhaps our Teacher’s Union sees it as a threat or younger Gen-Y CEOs fail to see the value in having baby-boomer mentors/experts involved in the workplace. We can be certain that the longer we wait to solve our education’s relevancy in the work place, the longer our unemployment figures will remain at historic levels.

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