Manufacturing in America – Competitive Advantages: Skills

16/10/2011

In the previous post I listed some of our obvious supply chain advantages. The post detailed the advantage of abundant raw material  that our country enjoys. One of the most under-esteimated advantage that we possess is the skills of our executives, managers and the factory workers who are directly involved in the manufacturing operations and supply chain management. This advantage is further enhanced by the intellectual capabilities of supporting functions such as legal, finance, and other service sector people. Our universities and research labs are constantly at the cutting edge of innovation. Our marketing and branding expertise is second to none.

There are very few economies in the world that can boost such a diverse and well diversified work force. Try finding a supply chain expert in Cambodia or a CNC machine operator in Algeria or a global manufacturing executive in Guatemala. There are very few countries where one can put together a highly qualified team of experts to conceptualize, design, create and manufacture a complex product.

In US we can easily pull together a team that can create products, secure necessary finances, build the plant and other infrastructure, create a competitive supply chain, market the products and manage transactions. All under one roof without worrying about geo-political issues or the security of assets and employees. How many places in the world can claim that. Very few!

Now, consider the advantages of raw material and combine that with the skills – a powerful combination. A strong competitive advantage. Instead of making a simple product like steel that anyone can make, consider high value added complex products. This could be specialized steel or products that are further derived from raw steel such as parts for automobile, planes, construction machinery and alike. Instead of just producing producing apples why not make high quality products that are derived from apple, edible or otherwise.

The case of products which do not require complex skills but a lot of manual operations does not give us a competitive advantage. It is nearly impossible to create cost effective supply chain with manufacturing base in US for these products.  Take for example t-shirts. A simple operation that just about any country has the skills to do. You can pack a bundle of them in a box and ship across the world for a minimal shipping fee. We can’t compete with that. A t-shirt making supply chain with US as the manufacturing base is just not competitive.

However, consider shirts for specialized function such as fire-fighting. We need a much more complex fabric and manufacturing process. Not too many countries can produce such a fabric or have the manufacturing know-how to effectively compete with us.

Another interesting example is manufacturing (or printing if you prefer) of bank notes. We probably have one of the most sophisticated technology that spans across materials, designing, printing and quality control. I doubt that a country looking to print bank notes will go for labor cost as the criteria. Similar technologies can be used for making many other paper products that require high degree of security.

Two key take aways from this discussion: One, we need to focus on high value added and technologically complex products. There is no point in fighting yesterdays’ battle. Second, if the skill set is combined with our raw material advantage the resulting supply chain is much more competitive.

In the coming articles we would discuss more about the other natural advantages that we enjoy. You may get an idea that a product that leverages multiple such advantages could start forming the base of a competitive supply chain with US as manufacturing base for both domestic and global demand. But more on that later…

There are 5 comments in this article:

  1. 16/10/2011Manufacturing in America – Competitive Advantages: Raw Material « Mani Agrawal says:

    […] Mani Agrawal Thoughts that keep me awake Skip to content ← Manufacturing in America – A Simple Supply Chain Model Manufacturing in America – Competitive Advantages: Skills → […]

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    […] if you combine brand image advantage with other advantages like raw material, skills and innovation we have a strong case of brining the manufacturing back to […]

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    […] basis it may still be profitable to manufacture in America and export to Asian countries. Technologically complex products that require highly skilled labor is a good example of such a situation. Can you imagine, swiss made mechanical watches, that sell for […]

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    […] highly complex and technologically sophisticated products, where we have a competitive edge in manufacturing in US, the increase in finished goods inventory […]

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