28 Jan Wisconsin Manufacturing and the “Machinery for Change”
Wisconsin got a much-needed boost from a recent Barron’s Magazine story entitled “Rust Removal. The Milwaukee Journal Sentinel published, “Barron’s article knocks the rust of state manufacturing outlook,” in which I discussed some of the economic reasons for a Wisconsin and Midwestern manufacturing recovery, including shipping costs, prevalent “just in time” inventory practices and a decline in the exchange rate of the dollar.
In particular, the cost of shipping natural resources and finished products, both to and from China, has risen between 200 percent and 300 percent over the last year. This is increasingly important because China has risen to be a world-class manufacturing competitor. Like all foreign importers, they now face the prospect of lessened competitive advantage coupled with the possibility that shipping may be unavailable at any cost. In addition, U.S. companies are finally starting to put inventory back into their inventory.
While these bullish domestic trends are important precursors to a rebirth of Wisconsin manufacturing, I think it is worth discussing some of the ongoing challenges facing businesses: rising health care, rising liability insurance costs, regulatory costs and finally, rising energy costs.
Each of these areas has some relief in sight for manufacturing in Wisconsin. Health care has the newly created Health Savings Account; rising liability insurance costs are finally causing many states to enact TORT reform; regulatory costs are expected to be reduced by streamlining the cumbersome permitting process with the Jobs Creation Act; and lastly, energy costs can be significantly reduced by employing the latest in energy-efficient technology and more active demand side management.
Some examples of large annual electrical savings through energy efficient lighting projects include Quad/Graphics, saving over 35 million kilowatt-hour and $2 million annually; Oshkosh Truck, saving over 12 million kwh annually; and Bemis Manufacturing, saving 6.3 million kwh and $340,000.
These yearly electrical savings are also important for another reason. With all of the new power plants and transmission infrastructure in the works, electric rates in Wisconsin are expected to rise rather sharply in the upcoming years, so any reduction in electrical consumption becomes an insurance policy against future increases.
We need to admit that we have gone through a gut-wrenching process of industrial recession and, in some cases, depression. The loss of jobs has been particularly pronounced in the manufacturing sector here in the state. The positive side of job loss has been the remarkable improvements in productivity, highlighted by the 8.2 percent increase in the third quarter of 2003. It may seem counterintuitive, but we need to reduce certain types of jobs and other costs so that we can create whole categories of new jobs that add value to our products and ensure we remain globally competitive.
We need to acknowledge the changes being brought on by the increasing competitiveness of the global economy. There will be entire industries that will suffer from stagnation or even extinction. Local- and long-distance phone service comes to mind, as does some kinds of photographic film and paper production. No amount of governmental intervention or protectionism will save them.
Yes, Wisconsin does have a proud manufacturing history and remains among the top two or three largest manufacturing employers in the United States. However, we cannot rest on our laurels. We need to continue to invest in innovation and new technologies. We also need to actively control costs–including labor costs. Retaining jobs so whole businesses will fail from lack of competitiveness certainly makes no sense at all.
Not only that, Wisconsin has many medium and large industrial companies who are pioneering the concept of integration between manufacturing processes and technology. My company, Orion Energy Systems, is a small but emerging company representing a new breed of manufacturing companies who grow by providing their customers with sustainable cost containment strategies, like energy efficiency, that have good returns on investment.
Admittedly, China is now taking many jobs away from Europe, Asia and North America, but they have had their own employment and financial problems. In fact, China has lost something like 15 million jobs and poured $45 billion into their banking system recently thanks to the failure of their state-owned businesses that are not competitive.
We need to understand that trying to stop progress will never work. Wisconsin has a world-class manufacturing sector that has continued to control costs, innovate and reinvent itself. Wisconsin needs to stop wringing our hands, complaining about our temporary economic woes and trying to “protect” our manufacturing industry. To paraphrase the poet and songwriter Leonard Cohen, Wisconsin has the “machinery for change.” And, now is the time to use it.
Related Article: Wisconsin Manufacturing Poised For a “Barron’s Bounce”
Stephen Heins is Vice President of Corporate Communication at Orion Energy Systems. He can be contacted at
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of the Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.