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Editor's Note: Survey Reflects Manufacturing's "New Normal"

Winter 2011
A recently released report from The MPI Group - a Cleveland, Ohio-based research organization - highlights "The Return of Manufacturing Investment."

According to the report, during the economic downturn, manufacturing executives were getting their "corporate houses in order" so that they could be prepared when growth returned. The results of our 2010 Annual Corporate Survey, which was conducted at the end of 2010, validate that point. A quarter to a third of the surveyed executives said they had deferred capital spending, reduced staff, and put new facility plans on hold during the Great Recession.

Will growth return to pre-recession levels? Not quite yet; however, the respondents to our annual Corporate Survey express cautious optimism. Although plans for new facilities and facility expansions are up over 2009's survey results, 85 percent of the survey respondents do not expect the economy to improve significantly until 2012 or 2013.

Nonetheless, the Manufacturers Alliance/MAPI Survey on the Business Outlook reflects continuing expansion of the U.S. manufacturing sector. A December 2010 composite index of 75 percent represents the fifth consecutive quarter the index has been above 50 percent, the dividing line that separates contraction and expansion.

But will manufacturing employment grow as well? Our survey results are not too promising on that account, with more than half of the reported new domestic facilities creating fewer than 20 new jobs.

However, this need not lead us to conclude that the manufacturing sector is weak. Although the manufacturing and assembly line manufacturing jobs that have been lost may never be regained, "the future of U.S. manufacturing is.in the design and engineering and management of the supply chain," says Daniel Griswold, director of trade-policy studies at the Cato Institute in Washington, D.C. Technological advances have allowed manufacturing output and exports to grow while utilizing fewer workers.

The increasing importance of supply-chain factors noted in the survey results was commented upon in the survey analysis by Andy Mace of Cushman & Wakefield. He predicts supply-chain cost drivers may displace other site selection factors in the quest for the optimal facility location. A strategically designed and managed supply chain will allow manufacturers to maintain global competitiveness.

Economists talk about the "new normal" of economic growth without a swift and significant drop in unemployment rates. The increased focus on supply-chain strategy in location decisions may be another facet of manufacturing's "new normal."

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