Opinion

The Great Debate

Why Siemens is expanding U.S. manufacturing

By Helmuth Ludwig
February 19, 2013

In his State of the Union address Tuesday, President Barack Obama talked about the importance of upgrading America’s aging infrastructure. He told the story of how our company, Siemens, recently created hundreds of manufacturing jobs in North Carolina. He quoted our U.S. CEO as saying that if America upgrades its infrastructure, we’ll bring even more jobs.

But there’s another important reason we chose North Carolina, along with more than 100 other manufacturing sites in this country. By manufacturing in the U.S., we get proximity to our largest market; highly skilled workers and crucial software engineers in the Research Triangle, educated at some of the world’s best universities; ready access to ports for export, and cutting-edge innovation that we can link directly to our manufacturing sites. All in a business-friendly atmosphere.

America is poised to lead the next manufacturing renaissance. Sophisticated software is the critical component — and that’s what America produces better than anyone. But smart public policy is also needed. So is a sharp focus on what will make U.S. factories more productive, efficient and sustainable.

When industry insiders talk about America’s improving manufacturing outlook, they usually cite four components of production that have shaped global manufacturing for the past decade. But these elements are now being radically rethought ‑ in a way that plays to U.S. strengths.

First, the idea that the world is “flat” has been supplanted by the idea that speed matters. Innovation speed is now understood to be a competitive advantage. So keeping design and manufacturing half a world apart – manufacturing in China, for example, when your design team is in California – makes less and less sense.

Second, the assumption that lower wages always correlate with lower total cost has proved to be false. Manufacturers increasingly recognize that months-long transportation chains can contribute to substantial direct and indirect costs.

Third, the belief that U.S. energy costs would be a long-term disadvantage has been deflated by unconventional fossil fuel reserves. The “shale gale” is driving U.S. natural gas prices to less than a quarter of those in much of Europe and Asia.

Fourth, the faith that outsourced “low-value” manufacturing jobs would be replaced by higher-value service jobs has been adjusted to the reality that manufacturing underpins the economy. It is crucial to create and sustain steady high-wage employment.

But the major reason why U.S. manufacturing is so well positioned for a renaissance is software that can bring the real and virtual worlds together in a way that erases all boundaries between the two. It connects everyone involved in product design and execution to the same network, sharing the same sets of data, to improve collaboration and decision-making.

This is nothing less than a paradigm shift in industry: The real manufacturing world is converging with the digital manufacturing world so that organizations can digitally plan and project the life cycles of products and production facilities.

This is the technology that automakers are using to turn around the U.S. auto industry, and that Procter & Gamble uses to make paper towels. Callaway is using it to make golf clubs, and NASA to design, build, test and practice “landing” the Mars Rover Curiosity.

The United States holds a decisive advantage in global manufacturing: Nobody does software like America. That is one of the reasons why we have invested more than $25 billion in America in the past decade, with significant emphasis on our software portfolio.

Software changes the manufacturing game in three fundamental ways:

First, it enables increased efficiency with time. SpaceX, the world’s first commercial spacecraft that docked with the International Space Station last summer, leveraged software to reduce its time-to-manufacture by 80 percent.

Second, it enables new levels of productivity with resources, connecting every function — from marketing to design to execution — in a manufacturing company, improving alignment while reducing errors and waste. Ford used just such an approach to save more than $100 million in warranty costs for in-vehicle software services.

Finally, software enables unprecedented levels of sustainability. As demonstrated by NASA, software can reduce or eliminate physical prototypes, saving enormous resources while further improving speed.

From Charlotte to California, Michigan to Mars, America has the opportunity to lead the next industrial revolution, and the White House is right to encourage it.

By enabling virtually what was once only possible physically, the industrial software revolution adds to the traditional manufacturing renaissance. It makes real that age-old American aspiration: If you can dream it, we can build it.

 

PHOTO: Former Treasury Secretary Timothy Geithner (R) walks with Siemens Energy Director of Operations Mark A. Pringle (L) during a visit to Siemens Energy’s plant in Charlotte, North Carolina, January 25, 2012. REUTERS/Chris Keane

Comments
3 comments so far | RSS Comments RSS

Great article!
Mr. Ludwig mentions the importance of considering total cost and the impact of keeping manufacturing near engineering. These factors, and many more, are included in the Reshoring Initiative’s free Total Cost of Ownership software which helps corporations calculate the real P&L impact of reshoring or offshoring. Current research shows many 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 300+ published reshoring articles in our Reshoring Library http://www.reshorenow.org/resources/libr ary.cfm, we calculate that at least 50,000 manufacturing jobs have been reshored.
You can reach me at harry.moser@reshorenow.org for help using our tools for sourcing decisions and when selling.

Posted by HarryMoser | Report as abusive
 

This article is encouraging because it suggests conclusions inconsistent with it’s facts. These “truths” are half-truths.

Mr. Ludwig points out how SpaceX “leveraged software to reduce its time-to-manufacture by 80 percent.” It likely ALSO reduced the people heretofore necessary to do what it will do by 80 percent. So, in the “good news/bad news” trade-off once again an American company is doing some amazing things BECAUSE they have found a way to do it for 80% less.

Ford “improved alignment while reducing errors and waste…to save more than $100 million in warranty costs for in-vehicle software services.” OK, but once again much of that $100 million was “good job” wages that were eliminated.

“As demonstrated by NASA, software can reduce or eliminate physical prototypes, saving enormous resources while further improving speed.” Those who built and worked with those “physical prototypes” were paid very well, and were highly skilled. Now many are redundant, and may NEVER find another decent job.

What good is it if America leads “the next industrial revolution” but it’s citizens are less and less able to afford the goods and services thus made available? “America’s future” in terms of innovation, production, etc. appears to be a death spiral of it’s “middle-class” consumers, and economists are wringing their hands still looking at dregs of the tea of “growth” and economic cycles long past? No one seems to have a clue.

Posted by OneOfTheSheep | Report as abusive
 

Isn’t most software developed (equivalent of manufactured) in India and other countries too? Very little actually developed on US soil. I’m sure some folks will post about the evil tree that is H1 and L1 visas. As Ms. Freeland’s piece suggests, corporate America spins this as “productivity gains” that will allow them to expand and create (few crappy) jobs. But labor sees this as a direct loss, or hollowing out of good paying middle-class jobs. Well, as with any game of Monopoly, it eventfully must end. Since our economy is based on the very same basic principles….

So growth based self regulating capitalism got us to the top of the economic ladder in the 20th century but then world changes, namely globalization and automation, have turn the tables on us. Now other countries are quite able to beat us at our own game. Like a Monopoly game, we are not being allowed to be both the Banker and a Player in the game at the same time anymore. Now we’re just a player. When we ran the show we rigged the game so “just a player” could not possible win. Now we can’t possibly win. I think it’s time we suggest a new game to all the players before we land on boardwalk, as we sold that to another player who has a hotel on it….

Posted by tmc | Report as abusive
 

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