Differing Views Of Global Competition

May 16, 2003
| By Katy Rent |
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GRAND RAPIDS — Manufacturing operations have long been key to Grand Rapids’ economhy and the Right Place Program wants to keep it that way.

One company in town, however, feels area companies may be able to compete on a more global level by outsourcing.

As labor has grown continually cheaper overseas, American manufacturing jobs continue to be at risk. And while many companies look to the Asian Pacific market to lower costs and increase productivity, The Right Place Program’s Manufacturers Council has issued a position paper stating the importance of manufacturing to this region and how to strengthen its manufacturing sector.

“The Manufacturers Council could hear the transformational shift and could see that companies in the area are being forced to become globally competitive,” said Michelle Cleveland, vice president of The Right Place Program.

“The council thought this was a good opportunity to become involved because this is larger than a specific firm or sector and we have watched the global markets grow and know this is a great opportunity to attract companies.”

The Manufacturers Council commissioned IRN, Inc. to create the comprehensive position paper. The paper released in March is “A Growth and Innovation Agenda for Manufacturing.” It details the status of U.S. manufacturing, challenges facing manufacturers, and innovative strategies to improve the health of the domestic manufacturing sector.

“This report comes out of a realization that it will take more than operational excellence to compete,” said Nancy Ayres, Manufacturers Council chairwoman and general manager of Clipper Belt Lacer Co.

“It has become clear that innovation is the only way to reach the next level of global competitiveness.”

Some of the report’s recommendations were to increase the visibility, priority and investment in the manufacturing sector within the federal government. That recommendation would include creation of a secretary or undersecretary of manufacturing.

It also would expand research consortia,boost interest and participation in science and engineering education, particularly at the K-12 level.

Other recommendations were to increase economic development support and strengthening regional clusters of innovation.

The position paper reiterates the economic impact of manufacturing on federal and state level, noting that the manufacturing sector and the non-manufacturing industries that are directly linked to manufacturing, account for 45 percent of the U.S. Gross Domestic Product and 41 percent of national employment.

Manufacturing is the largest employment sector in Michigan, accounting for 25 percent of all payrolls in the state.

Manufacturing also has a high economic multiplier effect. Each manufacturing job generates three to four jobs in other sectors.

The report stresses that the automotive industry multiplier is even higher: 7.6 jobs.

“This innovation agenda established by this position paper is an essential guide as we continue to advocate for and support our manufacturing community,” said Cleveland. “But this is a national economic issue that requires national attention.

“We cannot affect real change without working as a region, as a state and as a country in the creation and implementation of a manufacturing agenda. We will be working with our Manufacturers Council, regional partners, educators, lawmakers and national associations to act on the recommendations called for in this paper through policy creation, systems development, and on-going support.”

On the other side of the border sits David Hemmings, president of Pacific Rim Alliance, an Asian Pacific market consultant and service provider and business development specialist.

Pacific Rim Alliance helps local companies transition to Asian Pacific markets. It creates opportunities for lower wage labor and cheaper productivity, to allow local manufacturers to compete with global operations, already using the same labor markets.

And while Ayers believes innovation may be the local key to global competitiveness, Hemmings believes the answer may well lie in placing some operations outside the country.

“We are working to support these companies,” Hemmkings said, “to help them to think through these transactions as to what it is they want to become in the light of the new prevailing reality … and to help them make that transition into an overseas market.”

For companies looking to get into doing business overseas, Hemmings noted there are several resources for assistance locally, including Pacific Rim Alliance. In addition knowing the market can often be a make or break point.

Often, Hemmings said, companies don’t know what they’re working with and that going overseas without a business plan and without knowing the demographics or culture could ruin a deal.

“Many large American and European countries went in with no real plan, assuming the return on investment was going to be tremendous,” he said.

“Regrettably if you are going to sell stuff in China, you have to understand that the vast majority of the 1.2 billion people that can’t get by on a day-to-day basis are not going to be buying Chanel perfumes and Mercedes Benz motorcars. There is no real middle class,” he said.

“Doing business in China is not fundamentally different from doing business anywhere else in the world. But with a little bit of guidance and support anyone can do business in China, provided that doing business in China makes the same kind of sense that doing business in Michigan or Europe does.

“You can’t go and cause business to happen somewhere if it isn’t fundamentally right.”

And while Hemmings and Cleveland have differing opinions of where it is fundamentally right to do business, they agree about doing what is right for businesses in the area.

“We want to raise awareness of the situation,” said Cleveland.

“We have worked with Pacific Rim Alliance on several projects and we believe that by making the area aware of what the position paper says and what our end goal is, that we can come together on future projects to help the industry of manufacturing as a whole.”

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