Tuesday, June 23, 2009

Chains in Command

Ed. Note: The Middle Class Task Force is meeting today on the future of American manufacturing in Perrysburg, Ohio.

When we think about manufacturing in America, most of us probably picture a big factory churning out cars or refrigerators. But there’s another side to manufacturing in America: the supply chains that provide these end-users with the inputs they need to make the final product.
In fact, there are more workers at the suppliers for big companies that make cars, or appliances, or wind turbines than there are at the factory that actually puts the thing together. In the case of autos, suppliers employ 3-4 times the number of workers at the big factory at the end of the line.
So supply chains are a big deal, and when the big factories hit hard times, the pain is amplified through this chain of suppliers. These are often good jobs too, so this is an important issue for the Middle Class Task Force.
The good news here is that, while some segments of the manufacturing industry, like autos, are contracting, others, like wind and solar production, are expanding. And these folks need supply chains too.
And while these manufacturing subsectors have been doing relatively well for a while, their growth is being accelerated by the Recovery Act, which helps to generate some pretty hefty demand for products like renewable energy, advanced battery technology, smart grid components, and advanced medical devices.
So we’re in that space where crisis equals opportunity, but we need to make sure that suppliers have the information they need to make the necessary transition. They don’t always know what these new, growing industries are, what kinds of parts they need, and whether those parts are a good fit for the equipment and the skilled workforce the suppliers already have.
Another problem is that, even with the right equipment, suppliers can’t turn on a dime. They’ll often need to retool existing equipment (e.g., they might still make transmissions/gearboxes, but for a turbine instead of a car) and perhaps even learn whole new technologies.
That’s where the Commerce Department’s Manufacturing Extension Partnership and its National Innovation Marketplace (NIM) come in. The task force and our friends at Commerce see the NIM as a great solution to this problem, but it’s really just a pilot project now. As we’ll announce today in Perrysburg, Ohio, we plan to bring it up to scale.
The NIM helps manufacturers figure out what new products they can make and whom they can sell them to. It helps connect suppliers, who have often depended on one customer for years or decades, to large manufacturers in new industries who can become their customers of the future.
These suppliers have valuable, advanced equipment and some of the most skilled manufacturing workforces in the world. In some cases, all they need is information. In other cases, they might need to craft a new business plan, involving new capital, new tools, and new technologies. Oftentimes their workers will need new skills.
This isn’t a huge, new, expensive program, but it doesn’t have to be, because once we help manufacturers get the information they need, they’ll be able to take advantage of new opportunities and thrive in new industries. By helping our manufacturers make that shift, from aging industries into vibrant, growing manufacturing subsectors, this program will help put them on a self-sustaining path, building strong supply chains to support the new economy and creating good jobs along the way.

Jared Bernstein is Executive Director of the Middle Class Task Force and the Vice President's Chief Economist
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