Thursday, April 11, 2013

Why Manufacturing Matters

By Pascal Dennis

Aussie & Kiwi Adventures, Part 3

It was my distinct pleasure to meet Dr. Goran Roos in Australia.

Goran is a noted international business guru, and "Thinker in Residence" at Australia's Adelaide University. (I recommend his work warmly.)

We had a pleasant dinner in Perth, looking over the Indian Ocean and freely shooting the breeze.


Goran and I are kindred spirits on the importance of manufacturing.

In my experience, gained working in North America's 'rust belts', healthy societies cannot subsist entirely on service work.

"If service work is so great," I reflected, "why are towns that have lost manufacturing plants still barren, years later?"

"Your instincts are right," Goran replied. "There has to be a reliable net inflow of cash."

He then expanded his argument and backed it up with data. Here's why manufacturing matters:
  1. Biggest spender of applied research & innovation -- with spill-over effects into the rest of the economy

  2. Key driver of productivity improvement, with yet more spill-over effects

  3. Makes up the biggest share of world trade and hence is critical for export earnings that pays cost of importing things

  4. Largest driver of high value services so is critical for the high end of the service economy

  5. Each job in manufacturing generates on average 2 to 5 jobs in the rest of the economy

  6. Each $ of turnover in the manufacturing sector generates $1.74 turnover in the rest of the economy

  7. Underpins construction & the resource sector

  8. Integral part of business services sector

  9. Underpins public sector

Thankfully, many countries, including America & Canada are waking up from the long nightmare of thoughtless outsourcing.

(Hearing the so-called pundits extol outsourcing's inevitability, I used to wonder, "While you're at it, why not outsource thinking too?")

Goran's thoughts on key enablers for manufacturing success?

Tune in next time!

Best regards,

Pascal

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