Caterpillar is bringing jobs and manufacturing back from Japan. Ford is investing in and adding hundreds of jobs at an engine factory in Ohio. And, as the President said in his State of the Union address, Apple will start making Macs in America again. These decisions build on the momentum we are seeing in American manufacturing, which has added over half a million U.S. jobs in the last 37 months, the most of any such period since 1986. According to the Boston Consulting Group, on-shoring of U.S. manufacturing is likely to continue as companies recognize higher U.S. worker productivity, increasing labor costs abroad, and other logistical advantages of U.S.-based production.
So what can government and the private sector do to further fuel this trend? And how can we strengthen what Gary Pisano and Willy Shih, of Harvard Business School, refer to as “the commons” – the local business environments where manufacturers draw their resources, their workforce and where they connect to local suppliers?
Strengthen America’s Supply Chains
Harvard Business School’s Michael Porter and Jan Rivkin noted in FORTUNE that “companies find huge advantages with excellent, nearby suppliers – low logistical costs, rapid problem solving and easier joint innovation.” To strengthen America’s supply chains, the U.S. Small Business Administration (SBA) has launched an Administration-wide initiative called the American Supplier Initiative.
Today, there are approximately 250,000 to 750,000 small U.S.-based suppliers. The goal of the American Supplier Initiative is to increase market access for these small suppliers, to offer counseling and mentoring services, and to provide ready sources of working capital to support increasing sales. A key part of this initiative is a public-private partnership between the SBA and IBM called Supplier Connection, which is a free portal that makes it easier for large corporations to connect with a wide range of small business suppliers. Suppliers can qualify and sign up here.
Increase Export Sales
Many of these small suppliers also are prime candidates for export growth and for supporting President Obama’s National Export Initiative and its goal of doubling U.S. exports by 2015. Exporting allows small businesses to sell goods and services to markets around the globe, while creating good jobs here at home.
At the SBA, we lead an effort with the Export-Import Bank of the United States and the
U.S. Department of Commerce to provide the types of tools, financing and insurance that small businesses need to reach lucrative export markets around the globe.
Spur U.S. Innovation
We also know that a growing U.S. manufacturing sector spurs innovation. According to the National Science Foundation, U.S. manufacturers perform two-thirds of all private sector R&D, driving more innovation than any other sector of our economy. And advanced manufacturing industries, such as medical devices, aerospace and energy systems, punch above their weight. According to the Brookings Institution, advanced industries comprise over 10 percent of the overall economy, generate 45 percent of U.S. goods exports and support over four million high skilled jobs and millions of additional ancillary jobs.
The Small Business Innovation Research (SBIR) program, run by the SBA, is an important tool for supporting manufacturing innovation across a broad array of these advanced industries. The SBIR program provides $2.5 billion annually to small businesses who are looking to commercialize promising technologies.
Strengthen America’s Manufacturing Infrastructure
In his State of the Union address, President Obama laid out a comprehensive plan to strengthen America’s manufacturing infrastructure. It includes creating Manufacturing Innovation Institutes; developing innovative education opportunities, like IBM’s partnership with the Pathways in Technology Early College High School (P-TECH); improving our nation’s aging infrastructure; and investing in skills training for American workers (research shows that there are 600,000 manufacturing jobs not filled due to the skills gap).
At the SBA, we also are working to support “the commons” and regional manufacturing innovation through investments in clusters and a national network of growth accelerators. The goal of these place-based investments is to better integrate the entire value chain of a region, which research shows spurs new business formation, the commercialization of new technologies and results in more job creation.
Everybody benefits when manufacturing is going strong. In fact, for every dollar in manufacturing output, another $1.48 is generated in other sectors of the economy.
And, for every new job created in the manufacturing sector, another two jobs are created
in the surrounding community.
American manufacturing is alive and well. Products made in America are in demand around the globe. That is why we are using every tool we have to ensure that American manufacturers are globally competitive and well positioned to do what they do best:
grow our economy and create good jobs in our communities.
Karen G. Mills is Administrator of the U.S. Small Business Administration.