|Source: Data and map from Duke University Center on Globalization|
A few months ago, it was announced that Google would build a data center in Caldwell County, North Carolina. Now most of you do not know where that is, much less care what is going on with regard to economic development in that region of the country. Maybe this will pique your curiosity: the state and local government incentives given in order to land this $600 million facility were more than $1,200,000 per job created. [The actual numbers reported by the Associated Press were $260 million for 210 jobs.]
Now that I have your attention, I should point out that this area of North Carolina has suffered a tremendous loss of jobs during the past 10 years or so. (See the map above, used with the permission of the Duke University Center on Globalization.) According to Duke, 20,000 furniture manufacturing jobs were lost in North Carolina (2,816 in Caldwell County) during the period of 1995 to 2005. This represents a loss of 26 percent of the furniture industry jobs in North Carolina during this period. Thus, we understand why local and state government officials were so eager to bring these new jobs into the region. The loss of any job is tragic and affects people's lives, but the loss of multiple plants can devastate a local economy.
It still amazes me to see such examples of what the cost of the globalization of our industry (and others) is doing to society today. Our wood products industry is just a small part of it. It is not my intent to criticize, nor even to create debate about this or similar economic development strategies throughout the country, but to show you what is happening as the globalization of our industry matures and to stimulate your thinking toward alternatives that are working today.
A Train Wreck About to Happen
One could liken the globalization of our industry in this century to a freight train moving downhill at full throttle, picking up speed with every turn of its wheels. I see that speeding freight train heading toward a sharp curve in the tracks, and boy is it going to cause a huge crash. Let me explain.
First, a lot of our manufacturing companies have chosen to close U.S. plants and shift production of their products to overseas manufacturing facilities. Thus, either much or all of their manufacturing base has left the United States. (The freight train is in motion.)
This is nothing new and has been going on for years. By necessity, many of the larger companies that have closed plants have assisted overseas manufacturers with technical support and technology transfer, and have provided ongoing training. Now, some of the larger offshore companies are sophisticated and quite capable of meeting the needs of the North American consumer on their own. (The freight train is rolling.)
For many years, sales groups and distributors also have been selling overseas wood products to various distribution channels, including furniture retailers. Thus, the only thing the overseas producers do not have at this point is a customer list.
As the offshore manufacturers strive to overcome continuous price pressures from U.S. manufacturers, they look for alternatives. A new strategy is that Asian manufacturers (and other suppliers) will decide to cut out the middleman (the U.S. or Canadian manufacturer) and sell directly to the North American market. In fact, this already is happening, as was evidenced at the recent High Point Furniture Market where Chinese manufacturers were offering the same quality product for sale directly to retailers, well below the pricing of U.S. furniture companies that are importing and re-selling essentially the same products. Missing are the U.S. manufacturers and distributors. (The train now has jumped the tracks.)
So, what happens next? Some of those companies that have chosen to relegate manufacturing capabilities over the past few years are going to lose market share and may disappear. Crash! (The train just hit the wall.)
The Need for Innovation
I have written and spoken for years on the necessity in every wood products company for innovation through continuous positive change. This is not only the way to participate in globalization for your company's benefit, but also the only way to fight the specific threats that globalization poses to your company. It is not a revolutionary new idea, but, unfortunately, it is an idea still ignored by many.
The trend of outsourcing and then offshoring began decades ago when most wood products manufacturers were attempting to reduce costs. We have to be competitive if we are to survive, but the easy way is not always the best way — especially in the long term. Unfortunately, there has been little or no focus on Continuous Improvement (CI), nor innovation in our industry in manufacturing methods to improve productivity. If CI had been a major focus in the '70s, '80s and '90s, many plants that became obsolete could be operating today. During that span of three decades, some educational institutions attempted to encourage the industry to embrace new methods and technologies as they became available. Most institutions did too little too late, and those that did try met stiff resistance from our stubborn industry, because “the cost to modernize was too high.”
While some industry-specific education programs have all but folded, others are promoting the importance of productivity improvement and are out in our industry actively demonstrating the results of CI and assisting companies all around the United States and Canada in its implementation. The good news is that you can hardly find a company now that is not at least aware of Lean Manufacturing and is pursuing additional knowledge on the subject. This is encouraging indeed.
Resurgence Under Way
As an optimist, I am excited to relate a phenomenon that I believe is a rebirth of the wood products industry in the making. I am encouraged by the growing entrepreneurial spirit within our industry that thirsts for knowledge and welcomes change necessary to be successful. I have seen this in my travels around the country, in speaking engagements and in other written materials. In addition, I am elated with the growing number of new start-ups in our industry over the last few years. Yes, there is a rebirth of a sleeping industry, now awakened and interested in the latest developments to improve productivity.
Small companies are creating new and innovative products to fill niches ignored by the importers. Others are concentrating on in-demand wood products, that importers can't supply, with super short lead times. Many are investing in new machinery and technology, and implementing lean manufacturing concepts that older companies have ignored.
Fortunately, other more established companies are beginning to realize the need for CI and are re-inventing their companies to become more productive and globally competitive. They, too, are developing into lean producers and quick responders to customer demands.
Strong Industry Leadership Required
While this is a great trend, momentum must not be just maintained, but accelerated to make a significant impact in our industry today and tomorrow. We need all the help we can get.
If your state and community colleges and universities are not proactive and have “given up” on your industry as a dinosaur, set them straight. Get together with those in your industry who have common needs and go seek assistance equivalent to that which they would provide a new industry like Google. If that doesn't work with educators, go to your state government and make yourselves heard loud and clear.
If you can show that imports are hurting your company, you may be eligible for federally funded assistance now. However, if your state or provincial government is not providing real assistance, band together and “march on the state capitol.” It's time to demand new training in your industry, not just re-training of employees you must lay off because you can't compete with imports from competitors who have given up on manufacturing in North America.
Don't go it alone. Another good sign of a rebirth in the industry is the fact that we have many active and successful industry associations. In the United States and Canada, there are scores of wood products associations — some regional and some national. Are you a member of the one that could best serve your company? If you are not, you should go to the new 2007 Wood & Wood Products Red Book that was mailed in March and turn to section 13 on page 289 — Industry Associations. Look over the list for one or more associations that look like they would suit your company and give them a call. Learn all you can about them and then join at least one of them.
There is a vacuum in the leadership of our industry today. To the many associations, I would suggest that you get together and discuss an alliance. Each of you could remain autonomous, but have an annual meeting as the “U.S. Wood Products Alliance” to share across industry lines. Broad new leadership opportunities could emerge to help the industry move forward.
Unfortunately, there is no U.S. or American Furniture Manufacturers Association anymore. You furniture manufacturers should form one that is relevant to the new emerging industry in this country and join the alliance above.
Things are looking up in our industry and I encourage manufacturers, suppliers, educators and associations to think outside the box and find ways to keep this resurgence alive and well. Don't let it pass by you and your company, so that you become a statistic in a color-coded map.
Tom Dossenbach is the managing partner of Dossenbach Associates LLC, a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017 or e-mail email@example.com. Visit his Web site at www.dossenbach.com.