New ghost towns: Industrial communities teeter on the edge

By: Rick Hampson, USA Today

Commentary:

The shift in manufacturing may become the biggest story to come out of this recession when the whole episode is closely examined by economic historians. The trends that had been building for many years simply started to accelerate and new developments affected the way that manufacturing was to be conducted in this decade and those that follow. The issues are many and complex but three trends stand out as the drivers that have affected most of the US industrial base.

The first is that manufacturing has gained in terms of productivity and output throughout the recession. How is it that industrial concerns in the US can be gaining in efficiency and output while they lay off hundreds and thousands of workers? The simple answer is automation and technology but it goes far deeper than this would suggest. The machines are certainly a factor and they have been for years but there is more to this process than just adding some big tools that replace workers. These machines are systems now and they are interconnected via computers and modern technology. The bulk of the work done in the old factory was concerned with moving things from one place to another so that a machine could do its job but in a systems oriented factory with modern material handling systems and computers that take the place of eyes, ears and hands – the bulk of the jobs are soon rendered useless. The truth is that many manufacturers have laid people off less because they have been facing a recession and more because they simply needed fewer workers.

The second driver is that the demand for manufactured goods has spread. This is good news in some respects but it also means that the market is not as concentrated in the US as it once was. If the demand is coming from Asia and Europe and Latin American there is little incentive to keep operations in the US. The movement of plants overseas was assumed to be purely a cost savings strategy and many assumed that the material now being made in India or China or Brazil was being sent back to the US. In fact the bulk of what is being made overseas is now being sold overseas. The consumer has moved as the Asian and Latin states grow their own middle class and that means that the US companies have to find a means to supply those markets when the deck is somewhat stacked against the US when it comes to costs.

The third trend is also a deep and complex one. The US stood at a crossroads a decade or so ago. It either found a way to compete with the foreign suppliers on their terms or it conceding some parts of the market to them. To compete would have required lowering costs her to levels comparable to theirs. That could not be done without affecting the pay and benefits of those in the US and for obvious reason that tactic was largely rejected. In order to protect the lifestyle of those that remained many others found themselves replaced by either machine or a worker in a faraway land.

The bottom line now is that the era of the large manufacturing plant is on the wane. Manufacturing remains a vital part of the economy and is growing in many areas but it is now smaller and more nimble. It is the province of the competitive and the company that cements relationships. But these are capital intensive companies as well and will never absorb the vast number of assembly line workers that have been let go. The manufacturing sector today needs people who are half skilled machinist and half engineer and many of those who have lost their jobs do not fit that description.

To read the full article, click here.

TranSystems is a company of subject matter experts. To email one of our transportation consultants, click here.