SAMA summit speaker touts industry's strengths

Thomas Murphy, executive vice president of Minneapolis-based consulting and accounting firm RSM McGladrey, told the Oasis Convention Center crowd that there are several fallacies about the “shrinking” manufacturing industry in the United States.

Spreading the word

Murphy, who works for the fifth-largest accounting, tax and business consulting firm in the country, according to Accounting Today, pointed out that U.S. manufacturing has grown faster than the gross domestic product; the value of manufacturing is up an average of 3.2 percent a year since 2002, while the GDP is averaging only 2.7 percent growth, according to the U.S. Bureau of Economic Analysis.

“We are leading the world, contrary to what anyone else says,” he said, noting that the U.S. manufacturing economy, if separated out on its own, would be the eighth-largest economy in the world.

Brad Armstrong, area business manager for Missouri Enterprise, said the summit’s message was uplifting; he noted that people often focus not on the value of the manufacturing industry but on the number of employees.

“Manufacturing is doing the most work it has ever done, when you look at it from value added and dollar growth,” said Murphy, whose business helps companies enhance productivity. “But what gets noticed by so many is the number of employees involved, which has not grown at the same rate. A lot of that is recognition of the hard work and the foresight a lot of manufacturers have put in – there’s been a lot of focus on improving processes, which has in turn allowed us to produce much more with much less input.”

U.S. Bureau of Labor Statistics data shows that over the same period when manufacturing values have grown, employment has shrunk – from 16.4 million employees in 2001 to 14.2 million in 2006.

Information issues also extend to the civic and education communities; Murphy said too many young people – and their teachers – have an antiquated image of manufacturing as a dirty, uneducated and uninspiring job.

“We’ve got to get involved in the community – talk to business leaders, community colleges, universities,” he said. “It goes back to being too busy ‘making stuff.’ But we have to take time out for these things.”

Armstrong agreed; he said his organization constantly battles the misperception issue.

“I don’t think we’ve done very well getting the educators of the work force of the future into these manufacturing operations, so they can see what the process is like now,” he said. “These days, it’s often more a laboratory than it is a scene out of a 1910 automotive assembly line.”

Changing times

Despite the strength of the industry, Murphy told attendees that their place in the supply chain is rapidly changing, and with the changes, comes a need for a new way of doing business.

The biggest challenge is global competition, Murphy said, pointing to growth in China and India.

“The rest of the world can catch up to us – we have a lead, but we have to stay in front,” Murphy said. “We have to think faster than they do and innovate faster than they do.”

He added that companies need to be more willing to participate in the global economy, especially now that the world is operating on what he calls “Internet time.”

“Goods are moving around the world at an incredible pace – FedEx will pick up a product here today and ship it across the pond and get it there tomorrow,” he said. “People don’t understand it’s the global economy they’re competing in, and there is someone else who can do what we do better, faster and more timely.”

Yet most manufacturers are still avoiding global business. Murphy said a 2007 RSM McGladrey study found that 64 percent of small- and medium-size manufacturers export less than 10 percent of their product overseas, and 29 percent do no exporting at all.

Steve Choate, general manager of SRC Heavy Duty, said he has noticed the disparity.

“There’s a lot of opportunity on the exporting side that we’re not all taking advantage of,” Choate said after attending the summit. “We need to take it seriously and realize it’s a big part of doing business in today’s world.”

Work force

Murphy also pointed to the worsening worker shortage. Part of the problem, he said, is education, and another part is demographics. The U.S. Census Bureau estimates the manufacturing industry will face a shortage of 10 million workers by 2020.

“Last time I checked, it takes 19 years to make an 18-year-old, and we only have 13 years to go,” Murphy said. “There’s a lot to do.”

One way to battle the work force issue is to keep employees on staff – and one way to do that, Murphy said, is to share information with them and help them appreciate their place in the process.

“You’ve got to share your financials, with your employees, especially,” he said. “These are smart people, and if we share with them, they’ll stay with us.”

Choate was pleased to hear that from Murphy. The various entities of SRC Holdings have long been proponents of the open-book management philosophy espoused by company founder Jack Stack.

“We know what it’s done for us, making sure everyone gets together each week and talks about income statements, cash flow and how the business is running,” Choate said. “To hear him say that, … and that other companies are utilizing it, is gratifying.”