Build It In The Back Yard: Why We Need American Manufacturing

12/14/12Follow @bpqhimself

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its manufacturing offshore is not usually a venal pursuit of cheaper goods. Cost is often a deciding factor, but, as noted earlier, foreign manufacturers are capable of more than winning business on price alone. Customers of manufacturers in China, in particular, speak admiringly of these firms’ adaptability and nimbleness and drive. The competition, in short, is real. To stay in the game, American manufacturers will need to be as adroit and determined as their rivals overseas – and to be innovators themselves.

Our own experience offers one look at a future much different from the present. In the pharmaceutical industry, the majority of drug products (that is, the tablet you take or the solution you inject) are manufactured in foreign countries. Greater Boston, where we’re located, benefits from an extraordinarily diverse and well-serviced pharma and biotech cluster, but ultimately that final, critical step of manufacturing tends to happen somewhere else. Those overseas facilities offer more favorable labor and production costs, but rely on an increasingly old-fashioned manufacturing technique called batch processing. Vertex recognized that a domestic manufacturing operation could compete with these overseas sites not on cost, but on technological sophistication and easy communications with the research lab next door. To that end, the company started constructing its own internal drug-product facility, one built around an efficient and innovative procedure called continuous processing. This facility will be used for development-stage drugs and, potentially, for commercial manufacture. In either capacity, it will be greener and more efficient than a conventional drug-product plant, using less power, water, and space; it will also enable Vertex to develop higher-quality drug-production processes and generate the final product in a fraction of the time and cost needed for batch processing. The technical complexities involved are considerable, but Vertex is engaging with the FDA – which encourages innovation in pharmaceutical manufacturing – to ensure that the facility meets the highest standards for quality.

In addition, Massachusetts already provides a compelling model of public-private cooperation that aims to expand local biotech-related manufacturing. The Massachusetts state government has funded a 10-year, $1 billion life sciences initiative administered by the Massachusetts Life Sciences Center. The Center has publicly expressed its support for the development of a full-service drug manufacturing facility like the one just described.

In conclusion, supporting local manufacturing – in the context of a globalized manufacturing strategy – is good for business and good for society. But, on that last point, why should businesspeople even care how America is doing? Some might say they’d be well within their rights to treat the social prosperity and economic stability of any one country as just another externality. The private sector is a competitive world in which the weaker competitors do not survive. And if America, economically and socially, is flattened by other countries’ growth – well, they might say, so what? Obviously the others deserved to win. America needs its businesses, these objectors would say, but business doesn’t need it, and any suggestion to the contrary is pointless, jingoistic fist-pumping.

These objectors are sorely misguided. They assume that economic competition among countries is like competition among companies. They assume, in other words, that someone can win. But when China surpassed Japan as the world’s second-largest economy last year, Japan didn’t disappear; it didn’t go the way of Betamax or HD-DVDs. The “victory,” in this sense, is meaningless. What matters is the competition itself.

Anyone who believes in capitalism knows that strong competition makes everyone play their best. If Porter is right in his assessment of creating shared value, then the strongest societies will be those that support their businesses, and the strongest businesses will be those that support their societies. This is true across the American political spectrum. Whether you believe that the highest purpose of government is to show restraint and stay out of the way of the most successful, or to show compassion and ensure opportunities for the less successful, a government with a stronger fiscal position and a healthy, employed, productive population will be better at doing its job.

Manufacturing – as many others have argued – is vital to many strong businesses and to all strong societies, even in the 21st century. It is incumbent on the public and private sectors to do their part to strengthen manufacturing in America. Along the way, we mustn’t mistake this faith in business for conservatism, this faith in government for naïveté, or this faith in original thinking for anarchy. Being a strong competitor in the world of the next hundred years will take all of that faith – as well as the public trust, to be earned by those who seek to do the public good.

Brian Patrick Quinn researches and implements new R&D programs, strategic plans, and external partnerships at Vertex Pharmaceuticals in Cambridge, MA. Follow @bpqhimself

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  • http://www.reshorenow.org Harry Moser

    The author links Michael Porter’s work on companies sharing value
    with society with the impact of offshoring manufacturing. The Reshoring Initiative is developing a
    software to help companies estimate the societal impact of their offshoring and
    reshoring decisions.

    Much of the offshoring occurred because companies looked only at
    wages or prices and not total cost. The Reshoring
    Initiative’s free Total
    Cost of Ownership software helps corporations calculate the real P&L
    impact of reshoring or offshoring.
    Current research shows most companies can reshore about 25% of what they
    have offshored and improve their profitability.

    About 10% of the approx. 500,000 manufacturing job growth since
    the low in January 2010 is due to reshoring.
    Based on the 309 published reshoring articles in our Reshoring Library http://www.reshorenow.org/resources/library.cfm,
    we calculate that at least 50,000 manufacturing jobs have been reshored.

    I was one of the business experts in Pres. Obama’s Jan 11, 2012 Insourcing
    Forum. I emphasized, and the assembled
    executives supported, the need for companies to more consistently utilize TCO
    analysis instead of price variance in making their sourcing decisions.

    You can reach me at harry.moser@reshorenow.org
    for help using our tools for sourcing decisions and when selling.