Manufacturing Myths and Entrepreneurial Opportunity…

Posted: January 29, 2012 by Chuck Matthews in Ecosystem, Operations, Startup

An economist’s guess is liable to be as good as anybody else’s. Will Rogers

Are there entrepreneurial opportunities in the manufacturing sector?  Given the relatively rough treatment that U.S. manufacturing tends to take these days, it is an interesting and timely question.

I often ask my students in class and audiences during talks the following two questions: 1) What percentage of the world’s manufactured goods are produced in the United States? and 2) What percentage of the world’s manufactured goods are produced in China?  Overwhelmingly, the response I get both from my students as well as the general public is less than ten percent for the U.S. and sixty to eighty percent for China.

Three persistent myths.  The answers are emblematic of the first persistent myth that U.S. manufacturing is dead at worst or on life-support at best.  The reality is that the U.S. is the world’s largest manufacturing economy consistently producing 21-23% of global manufactured products.  There is no denying that China has made a remarkable advancement in the manufacturing sector, today producing upwards of 15% of the world’s manufactured goods, but U.S. manufacturing is estimated to produce over $1.5 trillion of value or over 11% of the U.S. Gross Domestic Product.

That brings us to the second persistent myth – there are no entrepreneurial opportunities in U.S. manufacturing.  There are.

Last year, in recognition of the fifth anniversary of the  Tri-State Manufacturing Awards (The MANNY’s) sponsored by Cincy Magazine, I along with two of my doctoral students at UC, surveyed 84 past and present MANNY participants (I will share more of the findings of this survey in future columns).  We asked, “In 2011 and beyond, there are opportunities for entrepreneurs in manufacturing,” Over a third (35%) strongly agreed or agreed that entrepreneurial opportunities exist, with about 40% taking a neutral stance.  Clearly, entrepreneurial opportunities in manufacturing exist.

The Gap.   In fact, the Institute for Supply Management reports for December 2011, economic activity in the U.S. manufacturing sector expanded for the 29th consecutive month, along with the overall economy which grew for the 31st consecutive month.  Given the relative health of the U.S. manufacturing sector and the gap between myth and reality, what can we do to spur entrepreneurial activity in the manufacturing sector?

The Need.  Manufacturing has gone high tech and education and training needs to keep pace.  I often outline this very simple formula: Education + Enthusiasm + Innovation = Manufacturing Start-ups.  Encouragement and support for individual entrepreneurs, corporate entrepreneurs, and social entrepreneurs to engage in all facets of manufacturing will yield the much sought after job creation needed to keep the economy stable and growing.

In Greater Cincinnati, start-up and small manufacturers don’t have to go it alone.  Over 25 years ago, the City of Cincinnati, University of Cincinnati, the Greater Cincinnati Chamber of Commerce and local manufacturers formed the Institute of Advanced Manufacturing Sciences.  Today, it is known as TechSolve, but its mission to assist and improve local manufacturers in today’s global market place is as strong as ever.  Through its CFSB Small Business program, TechSolve offers no or low-cost confidential counseling to assist start-up and small manufacturers survive and thrive.

Which brings us to the third persistent myth, all U.S. manufacturing jobs have gone off-shore, fueled by the notion that U.S. manufacturing is not wage competitive and therefore all manufacturers will seek the lowest wage country.  Wages are only one of many interrelated variables (for example, supplier relations, production, equipment, facilities, administration, information systems, access to capital, federal, state, and local taxes, and more) that contribute to the establishment and growth a new venture.  Entrepreneurs are very adept at balancing all these factors to bring their venture ideas into focus and implementation.

Policy makers play a role as well and need to create an atmosphere that encourages, supports, and facilitates entrepreneurial activity in the manufacturing sector.  All too often, governmental policy paints a horrific picture of industry as the sole contributor to environmental ruin.  Mutual cooperation and support can lead to both a vibrant economy and a sustainable environment.

History is replete with numerous examples of manufacturing entrepreneurs who defined the nexus of technology, innovation, and new ventures that propelled our nation into the 21st century.  The very nature of manufacturing is changing as we continue to discover new technologies, apply existing techniques in new ways and settings, and redefine the playing field.  That is the perfect environment for entrepreneurs to seize the next opportunity. You can find more on our web site at https://cincyentre.wordpress.com.  Till next time, all the best for continued entrepreneurial success!

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Comments
  1. Great post. Eye opening. Scary part of MFG is the startup costs. Web apps: $50K. MFG sites: $50M???

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