We are witnessing the evolution of a new manufacturing, a second industrial revolution, built upon advanced technology that is forging a new hybrid of manufacturing and services that does not fit into established categories. The new manufacturing is also creating many more jobs than are being counted by the Bureau of Labor Statistics (BLS). We need to step back and take a fresh look at the new manufacturing.
Underpinned by the quality revolution launched by the late W. Edwards Deming many decades ago, and driven by unprecedented foreign competition, manufacturing has been achieving extraordinary advances in quality, efficiency and productivity. This has enabled us to reduce the costs of manufacturing -- I believe by about a third over the last two decades -- while our international competitors have seen their costs increase. As U.S. manufacturers have become more competitive, racking up record profits, they have also been simultaneously setting up production all over the globe and bringing more production back to these shores.
A key driver of this transition has been a steady drumbeat of innovation in digital, robotics, materials and energy technologies. Clever exploitation of the Internet enables modern manufacturing to discern what consumers want, and to efficiently procure the supplies and parts needed for production much more quickly than in the past. This new environment blends mind and machine in new and exciting new ways that have created a hybrid of manufacturing and services. McKinsey estimates that 35 percent of manufacturing employees are today engaged in services that range from logistics to design, research and development, and of course information technology.
The technological and distribution revolution has also created incentives for more manufacturers to bring production back home -- what is now called re-shoring. Higher production costs overseas -- including higher wages and benefits and more attention to safety and environmental concerns, along with a shorter shelf life for many new consumer products -- are making outsourcing an out of date idea. The Boston Consulting Group estimates that in 2014 up to half of all manufacturers are planning to bring at least some of their production back here.
The Deming revolution also laid the seeds for sustainable manufacturing, which means a growing number of manufacturers are committed to products and processes that have minimal impact on the environment and consumption of natural resources, including energy. The new model of continuous improvement is a closed loop that is more efficient, avoids waste and contributes to improving the environment of the community. Simply put, more manufacturers are going green.
Taken together, this progress is gradually expanding employment. We lost millions of low skill manufacturing jobs in the first decade of this century, but now we are adding better jobs less susceptible to foreign competition. In addition to the 12 million now counted by the BLS, you can add another 6 million supported by manufacturing and when you consider the hybridization with services I believe the real world total is actually higher than that.
For a more detailed look at my views of the new manufacturing, see the speech I recently gave to The Forging Industry Association, which was well received. If you would like to see it, I will send you a copy. I am available to present this talk to other groups.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. You may quote from this with attribution. Let me know if you would like to speak with Jerry. May 2014