But what is the cause and what is the effect? The supply chain latency in the US is so high because over the last 3-4 decades we've moved from a producer to a consumer. It's because we don't manufacture stuff anymore that this latency is an issue.
That's a myth. The US has a huge and growing manufacturing base. We make airplane engines, medical devices, computer chips; all kinds of complex, high-tech manufacturing. We have the highest manufacturing productivity per worker in the world. What we don't make anymore are the kinds of products that require rote assembly tasks, like shoes and clothes and iPads. The upshot is that we have decreasing manufacturing employment even as the manufacturing sector grows rapidly.
Would it surprise you to learn that US manufacturing output looks like this?
Everything you mention has long design cycle times. Airplane engines and medical devices need certification, which means you can't iterate fast anyway. Chips take 8+ weeks to iterate on the lithography. An efficient consumer electronics operation in China can iterate every day.
I completely agree with your point, but I think it's important to point at this is measured in $$ value. We are manufacturing lower volume, higher value stuff than before (high tech) but we probably don't manufacture the same volume that we did 30 years ago (measured by weight or # of widgets).
I can believe a 60% increase since 1985 (which is what this shows; check the Y-axis range), as that is around 2% a year of growth, but the longer I look at that site, the more I wonder whether that is what it shows. Main question is what is on the Y-axis. Relative dollars or relative inflation-corrected dollars? I could not find that at the site.
You realize I didn't mean we manufacture nothing, but that we manufacture much, much less than we used to, right?
If we can't agree that manufacturing started to move out of the US decades ago, was accelerated by NAFTA, and that we are a consumer of goods made elsewhere (more than others are a consumer of goods made here), then this conversation isn't going to go well.
In summary US manufacturing output is increasing and US manufacturing output exceeds that of China by about $100B, but only employs about a tenth as many workers as China.
Not sure what metric you're using to claim that we manufacture "much, much less than we used to". US manufacturing output continues to hit all-time records. Measured in real dollars, output is ~40% higher than in 1990, and ~$220% higher than 1970.
The only way to stem the tide of downvotes here is going to be to stop repeating yourself in other comments and directly address acslater00's graph.
There's nuances here to be explored in what exactly is being manufactured, and there's some other interesting ways to extract bad tidbits of news out of that data, but it is certainly the case that the data does not justify running around shouting "DOOM! DOOM!" about manufacturing qua manufacturing in the US.
Personally I'm upbeat about the future. As robots and automation continue marching forward, the US goes from having a major labor cost disadvantage relative to poor countries to having a significant educational advantage. (Not a unique advantage, Europe and Japan also have good stories here, but China is not as well off on this time frame per capita.) I don't expect the broad direction of that curve to change anytime soon.
The US is manufacturing more than they ever have and it's continuing to grow. If you want to complain about the loss of manufacturing jobs complain about automation and not the incorrectly stated lack of manufacturing output.
It's because we don't manufacture stuff anymore that this latency is an issue.
I love it when people say that. I love it because I work for a company that very much does still make stuff in the US.
We just make more stuff, with fewer people.
We also make stuff in Asia, EU, Mexico. It's hard to stereotype who makes what - but generally sites in NA make the complicated, expensive widgets, Asia make the high volume not-so complicated gear, EU is a mix.
Harder to find. Where is the alibaba.com of the US? Lets say I want to manufacture a device with a printed circuit board, a case, and some artwork. Where can I fill out a form and have it go to at least a dozen the US manufacturers and have them come back with bids?
This is a huge gap that filling would reap both financial and political rewards.
You can't, because that work can't be done here economically, we've moved further up the value chain.
On the flip side, let's say you want to manufacture a new custom processor for your ipad competitor, or turbine for your new 787 competitor. You won't get those things in China, at least not without significant involvement from US companies.
"You can't, because that work can't be done here economically, we've moved further up the value chain."
Fundamentally I don't believe that. I could just be stupid.
I see the automation that is possible in the US, the infrastructure, and you tell me that its not possible for someone to make a business out of assembling things? Sure its cheap to pull 10 dextrous laborers out of the Chinese working class and make an assembly work cell out of them, what prevents a technologically sophisticated engineer from doing the same with one robot workstation and some programming? I've had boards made and assembled in the US, that is pretty straight forward, getting a tool and die shop to make cases isn't that hard either. What I haven't seen is an infrastructure that ties together all of these small shops like the ones in China, Korea, and Malaysia do.
Disruption is our middle name, why not disrupt the world of real goods?
Here is my thesis, creating a 'small' factory in the US is hindered by the inability of that factory to find work to fill its capacity. That limits its ability to make a profit, so the bids are priced to make sense when the factory is running far below its ability to produce. That makes the costs of goods it produces 'expensive' relative to a factory which is running at or near its theoretical capacity. If we had a way of keeping those small factories pipelines of work 'full', they could charge less because they would be getting more work out of their sunk costs (equipment, facilities, power, etc). In terms of comparative advantage we gain, transportation and communication benefits to the local markets.
It's not that it isn't possible, it's that given the resources we have, it isn't optimal.
Your thesis is wrong not because it can't be done, but because the competitive gains (transportation, communication) don't outweigh the gains to doing much higher value-added tasks. (Not to speak of the potential costs in having to pay higher wages, deal with environmental concerns, etc, but i'll leave those out because they're political, not fundamental.)
Let's say the US only has 10 engineers, but they're really really good. China has 50 engineers, but they're less good. (Good being a stupid shortcut to saying they have more domain expertise/resources, not Jingoism about the quality of Chinese engineers).
Now the US engineers _could_ start a factory making iPods, and they'd be just as good as the Chinese, or just a little better and sell for around the same price, with a profit $X. It's relatively low startup cost, and has relatively low barriers to entry.
Or, the US engineers could start a factory making specialized composite-material airframes for space ships, which the Chinese lack the ability to build at all (so far), with a profit of $50 * X. It's much higher startup cost, and has huge barriers to entry, so there won't be competition for years.
The US engineers can build the wings, buy iPods from the Chinese engineers, and still pocket a huge difference! Meanwhile the Chinese engineers are thrilled to build ipods, because it's the first step in learning the skills to build Rockets. (Nonsense example, but you get the idea) This is basic comparative advantage with respect to a value-added chain.
Your theory would override this IF we had unlimited engineers and a basically level playing field for production costs at the low end, but we don't for tons of reasons, mostly around regulation (which I'm not saying is a blanket bad thing).
With only so much capital, why make iPods when you could be making satellites?
Now of course this example is trivial for lots of reasons, but the general pattern has been playing out for 100 years.
As nations gain expertise and working capital, they move up the value chain and outsource what they lack the resources or environment to build cheaply. Historically this gain in ability has been accompanied by an associated gain in wages/worker protections (for lots of complex reasons), which even further propels you a nation to move up the value chain, since you only want to build the most profitable possible things that you can.
It is possible. I work for a high tech manufacturing company and our minimum bid for work (especially if it's prototyping that could lead to either an ODM/JDM relationship or a more significant mass manufacturing contract) is only a couple thousand dollars. There isn't an Alibaba-type marketplace, but that doesn't mean there aren't a ton of options for hobbyists, startups, universities, or anyone else who just want to build a few of something... and do it in the US/Canada/Western Europe.
So because you work for a company that makes stuff, my argument is invalid. You realize I wasn't saying we make nothing at all, right? It's that we are ever making less in the US and ever buying more made elsewhere.
You may want to check your data sources or clarify if you mean 'manufacturing jobs' or 'manufactured goods'. One of those has decreased significantly, while the other has increased...a lot.
It's that we are ever making less in the US and ever buying more made elsewhere.
iPods, sure.
But if you're talking really expensive, high-quality, hard to make stuff ... it's likely made in the US.
One just doesn't see it because the average guy sees a lot of cell phones, and iPods, but doesn't really notice manhole covers or iron-castings with millionth-of-an-inch tolerances.
