U.S. manufacturers look to innovation and efficiency to drive growth

July 13, 2012

The state of the global economy has many analysts worried about a potential double-dip recession, but there are several steps that U.S. manufacturers are taking in order to weather the worst of the storm.

Regardless of the economic climate, adopting lean manufacturing practices and making a move toward efficiency can help firms in the U.S. limit the impact of negative developments in the euro zone and China.

According to the Natural Resources Defense Council Staff blog, more efficient practices, like those adopted by Henry Ford in the early days of American industry, are now being encouraged by the government.

The Department of Energy (DOE) announced the creation of grants, valued up to $54 million, and a number of other initiatives in order to motivate companies to make a switch toward leaning their organizations.

While the introduction of more efficient practices will help businesses by lowering their operating costs, it will also lessen the impact of these organizations on the environment. Companies are more focused on the former issue, but the latter will lead agencies like the DOE to invest in American manufacturers.

According to the blog, businesses like GM and Dow Chemical are using this money to limit the amount of waste associated with their factories, and companies can use savings to bring more people on board.

Savings means more money for hiring, and this could help American manufacturing firms expand their global reach, increasing their ability to compete with Chinese companies. Innovation, the blog noted, is the foundation of the sector in the U.S., and increased efficiency will allow businesses to spend more on R&D and expanding production.

The move to lean manufacturing practices could help U.S. firms reverse the recent slowdown in the sector, as a recent report outlined how growth subsided in the industry.

According to the Manufacturers Alliance for Productivity and Innovation's quarterly report, the slowdown in the second quarter was a direct result of economic turmoil in Europe and China.

The sector reported a 61 on the survey's composite index, well above the 50 reading that signifies contraction in the industry. This slight drop, it was 65 in the previous quarter, was due to a lack of demand from China and Europe.

"Unsurprisingly, the non-U.S. prospective shipments and non-U.S. investment indexes registered the sharpest declines, showing the effects of the euro-zone recession and the slowing growth in China," Donald Norman, MAPI senior economist and survey coordinator, wrote in a release.