Talk to the CEO of any major corporation about their global competitiveness and the conversation will almost always turn to their supply chains. They will tell you that a strong, nimble supply chain helps fuel innovation, creates efficiencies and strengthens operations.
However, according to Gary Pisano and Willy Shih of Harvard Business School, for decades, companies operating in the United States were steadily outsourcing development and manufacturing work to specialists abroad and cutting their spending here at home. Over time, this outsourcing moved up from low value tasks to more sophisticated engineering and manufacturing.
This has hurt America’s competitiveness and our ability to innovate.
But the trend is shifting, and across the Obama administration, we have put in place programs that attract more production, more investment and more jobs back to our shores.
Caterpillar, GE and Ford, for example, are among those that have recently announced they are shifting some manufacturing operations back to the United States.
The reasons are clear. In an article about onshoring GE’s appliance manufacturing to Kentucky, CEO Jeff Immelt wrote that “engineering and manufacturing are hands-on and iterative, and our most innovative appliance-design work is done in the United States. At a time when speed to market is everything, separating design and development from manufacturing didn’t make sense.”
This trend is likely to continue as companies recognize higher U.S. worker productivity, rising labor and energy costs abroad and logistical advantages here at home. Couple that with global demand for high quality American-made products, and it is hard not to be bullish about America’s long-term opportunities.
The key now is building capacity and investing in our country’s small business supplier base so that these firms can better support global manufacturers and help bring more jobs back to the United States — and both the government and the private sector have a role to play in making this possible.
The United States has some of the world’s most innovative small suppliers and entrepreneurs. We have the types of small businesses that, with the right support, can go toe-to-toe with China (particularly on the higher end of the value chain) or with Germany’s famed Middlestand companies.
Businesses around the world are taking notice. Foreign companies like Lenovo, Ikea, Nissan, Airbus, Siemens are starting or growing U.S. operations, and they are looking for networks of U.S.-based suppliers to support them.
So how do we build on this momentum?
Today, U.S.-based, forward-thinking companies are looking at their supply chains very differently. They are working together to co-innovate, they are helping supply the capital and skills their small suppliers need, and they are operating as partners.
At the U.S. Small Business Administration, we are leading a government-wide effort called the American Supplier Initiative to support small suppliers.
Between 250,000 and 750,000 U.S. businesses are part of commercial and government supply chains. We are using our experience and the best practices we have developed overseeing the federal government’s $100 billion small business contracting program to help more small firms be successful commercial suppliers. Here’s how:
Making connections: We are connecting small and large businesses together through matchmaking activities and through public private partnerships like IBM’s Supplier Connection, a portal that makes it easier for small businesses to connect to supply chain opportunities.
Access and opportunity: The Washington Post highlighted a recent Massachusetts Institute of Technology (MIT) report that concluded that the “future of manufacturing will consist of smaller firms that may not always have enough money to train workers, commercialize new products and procure financing on their own.”
Our agency has a $100 billion loan portfolio to help get capital to these businesses. We also train and counsel more than a million business owners each year. And, as I highlighted in the second blog in this series, the president’s budget proposes $40 million for intensive entrepreneurial training to support established firms that are well positioned for growth. The training is tailored to ensure that entrepreneurs get the skills, resources, counseling and long-term business planning advice they need to be part of corporate supply chains.
Creating ecosystems: A key component of a thriving manufacturing base is a network of nimble suppliers. At the SBA, we launched the first official federal government cluster initiative in 2010; today, the federal government is invested in more than 50 clusters across the country.
The goal of these clusters is to leverage, integrate and better align all of a region’s assets (local industries, skill base of local workforce, economic development agencies, universities and community colleges). These ecosystems are a proven tool for attracting and strengthening regional manufacturing and for boosting exports.
In addition, as part of the American Supplier Initiative, the SBA is supporting efforts to fund supply chain mapping techniques.
This is only the beginning. All across the country there are small suppliers ready, able and willing to make America’s corporations more productive, more innovative and more globally competitive. As those supplier networks grow and connect, they will serve as a magnet to bring more manufacturing and more jobs back to our shores.
That’s how we can accelerate economic growth, strengthen the middle class and make America more globally competitive.
Karen G. Mills is the Administrator of the U.S. Small Business Administration. Mills was appointed by President Obama in 2009 and has served on his cabinet since 2012.
Blog series part 1: America’s four most critical small business sectors
Blog series part 2: Do existing businesses hold the key to recovery?
Blog series part 3: U.S. needs entrepreneurs to get back in the game