Two Great Articles in Forbes about US Manufacturing Strength

There are two great articles in Forbes online today on the strength of US manufacturing. I've mentioned before that I feel a resurgence of American manufacturing coming as we move out of this recession driven by several factors.

The first article describes the transformation of tape manufacturer TaraTape. It's a great example of a manufacturer adjusting based on the opportunities and threats facing it. It's a great story. Hats off to TaraTape and continued success.

http://www.forbes.com/2009/05/27/taratape-manufacturing-china-business-rivoli.html

The second article is by former Michigan Governor, and current President of the National Association of Manufacturers, John Engler. He highlights some of the strengths of US manufacturing and also the challenges. He briefly describes three companies/factory locations that adjusted to their opportunities and threats and are now thriving. This is another good read.

http://www.forbes.com/2009/05/27/john-engler-manufacturing-business-america.html

Even at OPSA we are moving to incorporate more US manufacturing and assembly into our service offering. It feels right and it's the right thing for our customers and our business. I'm looking forward to this phase of our transformation.

A Contrast in Directions

There is an interesting contrast in two articles from today's China Daily. The first one describes how the Chinese government is pushing to privatize more industries including oil, power generation, and railways to "boost efficiency". The second article describes how the US government will soon be taking a majority ownership stake in GM.

Who would have thought twenty five years ago that China would be privatizing this quickly while the US government took majority stakes in large banks and auto companies. What a change.

I don't have alternative ideas for the Obama administration that I'd like to throw out to solve the GM or banking situations. I do know that they need to have an exit plan just like any investor, and I hope that exit plan has a short horizon. Government ownership of industry has not shown to be a benefit to citizens or economies throughout history.

These sure are interesting times. Here are links to the two articles:

http://www.chinadaily.com.cn/china/2009-05/27/content_7948433.htm

http://www.chinadaily.com.cn/world/2009-05/27/content_7948681.htm

Memorial Day Remembrances

Memorial Day weekend is upon us. This is one of my favorite holidays of the year. Not only is it the traditional start of summer, but it's a very meaningful holiday for me. My father was a Air Force veteran, my father-in-law and his brother were both Army veterans who fought in WWII, and my partner Dan Cook and his wife are both Navy veterans. I sometimes wonder how my life might be different if I had entered the military either before or after college. I do strive to serve our country and community in very significant ways, but it still doesn't match the service and commitment required of those who join the military.

I am a bit of a history buff and hold in very high regard those who have sacrificed for our country by committing to military service. My family enjoys the lifestyle we have in this country in large part due to the service and sacrifice of millions of veterans. Thank you so very much for your service.

Our work in China relates in a small way to the security of the USA. China and the USA are the two main powers in the world right now. By fostering business relationships and cultural understanding, our two countries can work together to make the world a safer and better place. In my small way I'm working to advance this cause.

So, enjoy the holiday weekend. Please take time to fly Old Glory and reflect on the sacrifice of those who've served in the military, especially those who've died or been wounded in that service. I will do so several times this weekend and will be humbled when I do.

An "Edge" for China in Energy Efficiency?

Hopefully not. An LA Times opinion piece today notes that China is becoming the leader in wind and solar energy products manufacturing and in electric cars. Most new technologies are coming from the US, but China is pushing hard to become the main manufacturer in these markets and also develop new technologies.

I've long stated that the US needs to move into energy and water technologies hard as these are the next great high-tech growth industries. The article discusses how the investment markets drying up in the US during the recession is giving China an edge. China is opening the "public purse strings" to fund energy technology development and manufacturing. Both private industry and the US government need to step up and keep the US in a leadership position in these key markets. Here's the article:

http://www.latimes.com/news/opinion/commentary/la-oe-silver19-2009may19,0,6622766.story

Beijing Touts China's Recovery Status and Plan

There are several articles out today on the Chinese government's positive comments on its recovery and project 8% growth rate for this year.

The article linked below from Forbes is the best example of these reports. In it a top figure in China's economic planning body says the government has a handle on the economic situation and still has additional measures it can take if necessary. The article describes well the tax reductions Beijing has implemented to help manufacturers.

He also touches on domestic consumption in China and exchange rates which should be stable for the foreseeable future. Here's the very interesting article on this good news for the global economy.

http://www.forbes.com/2009/05/18/china-stimulus-growth-markets-economy-recovery.html

Four Year Anniversary with OPSA

May 9, 2005 was my first official day at OPSA. Four years is a bit of a milestone in our culture. Both high school and undergraduate college degrees are earned in four years. Presidential terms are four years and the Olympics occur every four years as well.

My four years with OPSA has been a roller coaster. There have been great high points and some tough low points. We've grown significantly and reached annualized profitability. We've experienced many of the typical challenges of a start-up and some not so typical.

I am fine telling everyone that we haven't reached our financial goals. It's been an extended "beans and franks" period for our families. However, we are investing in and building a new business that will support our families and those of our employees. It's just taking longer than we expected.

We are not immune to the impact of the economic downturn. Some of our larger customers' sales are down, so their purchases from us are down. When we all get through this time we will have stronger businesses.

The last four years have been an outstanding ride. I've learned more and experienced more than I ever could have working for someone else. I would change some of the decisions we've made and not made as a company, but I wouldn't change the decision to join Dan and Joel in this adventure. I'm not sure what the next four years holds for me or OPSA, but I take all I've learned the last four years and look forward to new challenges and successes.

Happy Mothers Day (one day late) to all Moms out there. Mine is the best ever.

China Battles Protectionism in Europe

Here's a link to a China Daily article on discussions between China and the EU on trade. It talks about China sending teams to Europe on "buying missions" and calling for the EU to reject trade barriers.

http://www.chinadaily.com.cn/china/2009-05/08/content_7755335.htm

When the economy is weak and unemployment rises, countries naturally turn protectionist. We are certainly seeing that in the US and this article shows the EU is having similar strains. A review of history will show that protectionist measures worsened the Great Depression. As I've mentioned before, free trade is the way to go.

Importance of Being Present with Chinese Vendors

At OPSA we've cut down on our travel from the US to China just a bit over the last six months in order to conserve cash in case the recession continues impacting our customers and their purchases from us. I'm sure many companies that do business overseas are doing the same.

My word of caution in this regard is that it's vitally important to maintain live communciation when you can't be there in person. We use Skype for calls to our HK office and other locations in China. It has worked well for us and the quality has improved over the last two years. The video option has also been helpful for project management with our HK office.

To summarize - Being there in person is still important in successfully sourcing in Asia. However, when there are times that you can't be there as often as you'd like, it's important to use multiple communication tools (not just e-mail) to keep in touch with your Asian vendors. I need to remind myself to call more often this year.

A Rebound in the Chinese Manufacturing Sector

April marked the first month since July 2008 that the Chinese purchasing manager's index showed expansion. The number of new orders increases also for the first time in nine months. Export orders continued to contract, but at the slowest pace in many months. GDP growth is also forecast to increase now for the second quarter. Here's an article on all this from Forbes:

http://www.forbes.com/2009/05/04/china-manufacturing-orders-markets-economy-stimulus.html

The news does seem to be improving on both sides of the globe. Equity markets are way up, of course, over the last several weeks. I believe if we can get past the swine flu scare and into summer, things will continue to look better. US consumerism may not rebound to where it was (which is a good thing as the savings rate may stabilize in positive territory), but the economy will adjust over a longer period.