Myopic Mis-focus

I try hard to avoid picking on NAM.  Really I do.  But sometimes banging my head against the wall just doesn't relieve the frustration with an organization that could do so much, but refuses to focus on the real opportunity. 

Today NAM released yet another joint study on the horrors of how the U.S. business environment affects domestic manufacturers.  It's the usual story... the costs of litigation, natural gas, environmental regulations, employee benefits, and corporate taxation are rising.  "Dramatically rising" in their words.  Adding the equivalent of about $5 per hour in production costs.  With one exception U.S. corporate tax rates are higher than its nine largest trading partners.  Table 1 and Chart 1 in the full report show that employee benefits and regulatory compliance costs are also higher.

Yes that is a difference, and it does impact competitiveness.  But is it significant?  Not at this time. 

A $5 per hour "competitiveness burden" is vastly overshadowed by the opportunity of improved efficiency.  Not efficiency by chasing lower cost labor or investing heavily in robotics that need to be "absorbed", but by simply analyzing processes and methods to drive out waste.  Those of us who have mapped value streams know that even a first pass analysis of steps and activities can identify more than 20% in waste that can be quickly removed.

NAM and others focus on how hard it is to be a domestic manufacturer, while apparently ignoring the foreign manufacturers who are extremely competitive with U.S.-based plants.  Toyota obviously comes to mind.  By removing internal wasteful processes and activities, Toyota can build a car at its U.S. plants with an average of 27.9 hours of labor.  GM, the most efficient of the domestic manufacturers, still requires 34.3 hours.  Six years ago Toyota's U.S. plants took 30.3 hours, so they are more than six years ahead of GM.  Yes some of that is a result of structural impediments created by union job classification structures, but that is due to an adversarial union-management relationship... a function of leadership.

U.S. companies that focus on internal waste reduction are extremely competitive.  Bill's correct that it is often private companies that don't have to genuflect to Wall Street's nearsightedness, but there are examples of U.S. public industrial manufacturing companies as well.  The stock charts of Danaher and Parker-Hannifin make it pretty obvious.

Another day, another excuse.  It's time to focus on the major impediment to competitiveness... internal process waste.  Only then will single digit percentage differences in tax rates and energy costs make a real difference.  There's a long ways to go before we hit that point.