Infrastructure investment vital to US manufacturing growth
Friday, May 22, 2015
Kathy Mazzarella, CEO, Graybar | JOC.com - Over the last several years, companies have made news for shifting all or part of their manufacturing production back to the United States, a process known as reshoring. This is a positive trend that offers real advantages to many manufacturers and to the U.S. economy as a whole. Although many factors influence the choices companies make, I believe infrastructure is an often-overlooked factor in sustaining the shift toward U.S.-based manufacturing.
From transportation to communications and technology infrastructure, investments in building, maintaining and upgrading the systems that keep our economy moving are vital to long-term success.
The U.S. has immense freight transportation capacity and the most extensive physical infrastructure in the world — more than 4 million miles of public roads, more than 95,000 miles of freight railroad and 5,100 public use airports.
Although the United States’ physical infrastructure is impressive, it’s aging. Investing in maintenance and expansion is critical. The American Society of Civil Engineers gives U.S. infrastructure a grade of “D+,” and the U.S. ranked 14th in the World Economic Forum’s latest global competitiveness report. A strong physical infrastructure is important to this country for many reasons, and is a key factor for bringing manufacturing back to the U.S.
The U.S. offers manufacturers several important advantages. First, there are significant costs associated with managing a global supply chain compared to a U.S.-based supply chain, such as the need for increased safety stock, increased shipping charges and maintaining compliance with foreign regulations. A company that manufactures its products in the United States eliminates these costs and can invest the savings back into the company, creating jobs in the process.
Second, the combined advantages of the expansive U.S. physical infrastructure and technological expertise provide better visibility throughout the supply chain. This minimizes inventory-tracking errors and improves accuracy and planning.
Third, having a U.S.-based manufacturing facility helps companies replenish inventory more quickly and respond to changing customer preferences. Companies with manufacturing in the U.S. can benefit from shorter wait times for shipments, which can improve efficiency and lower costs. It also allows manufacturers to maintain better control over their inventory, while reducing new inventory lead time and the need for additional stock.
At Graybar, we understand the importance of the U.S. infrastructure for the success of our business. As a distributor, we use company vehicles, parcel services, and freight and cargo carriers to deliver the material from our warehouses to our customers accurately and efficiently. Our company relies on a solid transportation infrastructure to serve our customers and carry out our mission as the vital link in the supply chain.
Investing in upgrades and additional infrastructure capacity is important for attracting manufacturing plants in the United States. Preventive maintenance is equally important. Just as regular oil changes for your car is less expensive than replacing the engine, maintaining roads, railways and runways is less expensive than building new ones. Preventive maintenance can add an estimated five to 10 years to the service life of a road surface.
With so many infrastructure needs, it’s important that the U.S. prioritize and target its investments strategically. By evaluating the entire system and identifying the bottlenecks, we can invest in improving the productivity of key targeted areas rather than spending to expand an entire system. It’s all about making smart investments and using our resources wisely.
Technology also can help. In the U.S., we have a strong technology infrastructure, which we can use to help manage our physical infrastructure. Governments, for example, can enhance peak-hour capacity through dynamic lane management and technology-based route management. In some cases, leveraging technology to improve physical infrastructure can be more cost-effective than adding physical capacity.
In relative terms, our current U.S. infrastructure is capable of handling the growing demands of the manufacturing industry. A choice to invest in our infrastructure is a choice to bring more manufacturing back to the United States. Taking a much more strategic, long-term view of all aspects of our country’s infrastructure will position the United States as a strong global competitor in manufacturing.