Editorial

Article Type: Editorial From: Journal of Manufacturing Technology Management, Volume 21, Issue 1

As we move into the 2010 volume of Journal of Manufacturing Technology Management, it is relevant to look back to 2009 and the global economic recession that has been the dominant consideration of almost all manufacturing companies during the year. The news in the beginning of the year was about plant closures, employee layoffs, temporary shutdowns and short time working, and to highlight this situation The Economist ran a cover story in February under the title “The collapse of manufacturing”. This situation raised the question of whether countries that had large manufacturing sectors were more vulnerable to recession than others with a relatively greater dependency on service industries. There was certainly some evidence to suggest this was the case. For example, two countries that felt the economic downturn earliest were Germany and Japan, both of which are important manufacturing nations. This was because these countries relied heavily on exporting their manufactured goods, so they quickly fell victim to the recession as many of their international markets collapsed due to lack of available credit and a fall in confidence among consumers.

This situation adds some weight to the arguments of those who say that it is not important to have a strong manufacturing sector. Indeed, many people have said this about the UK, and in fact the British government in the 1980s actively encouraged the growth of the financial and service sectors to replace the gap left by the rapid decline of manufacturing at that time (partly bought about by the government's own policies). I have my own views on the importance of manufacturing in a modern economy. I am not an economist, and indeed I may be prejudiced, but since economists rarely agree I can still make my point freely.

First, there are risks attached to being over dependent on any single economic sector or a small range of economic activities. It does not seem good economic sense to put all a country's eggs in one basket (or sector of the economy), so having a manufacturing industry simply to complement service activities would seem a sensible idea.

Second, there are also risks attached to being over dependent on foreign suppliers of manufactured goods. Political events, volatile exchange rates and natural disasters can all lead to problems of supply. Without a domestic manufacturing base on which to fall back and aid recovery there could, in the long term, be serious interruptions in the availability of goods.

Third, the real cost of importing manufactured goods rather than making them domestically is still the subject of debate. We tend to assume that “low-cost countries” make low-cost goods. However, there are many factors that are often not taken into account in calculating the real cost to the importer,including labour productivity, technology transfer and set-up costs, logistics,quality, reliability and product liability costs.

And fourth, having the skills and knowledge of manufacturing is still worthwhile even within a service-based economy. For example, banks and financial services companies have for a long time recruited engineers and manufacturing experts because of their expertise in evaluating investments in manufacturing companies. This expertise is still required even if the companies being invested in are overseas, so an indigenous manufacturing sector is important to provide a future supply of such experts.

So, is this defence and justification of manufacturing simply proving my prejudice or perhaps an attempt to make a case for the importance of this journal? Of course, due to the complexity of the world's economies nothing seems capable of being proved and economic forecasts are rarely correct,so we may never know one way or the other. On the other hand, at the time of writing this Editorial, Germany and Japan have among the largest trade and current account balances outside the oil rich countries and China. To me this seems like powerful evidence of their underlying economic strength.

David Bennett