President Obama is in Cleveland, Ohio, today planning to talk about his plan to strengthen U.S. manufacturing by investing in new technology.

 

For starters, President Obama is expected to announce that the Department of Defense is launching a competition for leading manufacturers, universities and non-profits to form a new manufacturing hub focused on research and building prototypes of revolutionary fibers and textiles with what the White House calls “extraordinary properties.” The $75 million federal investment will be matched by more than $75 million of private sector resources.

 

The competition will be nationwide, but Obama is expected to note that the concept of such a research center—an expansion of the National Network for Manufacturing Innovation—started in nearby Youngstown, Ohio. Called “America Makes,” the Youngstown center started in 2012, bringing together researchers from industry, academia and government.

 

The President is also expected to explain a $320 million competition to strengthen small manufacturers. Non-profits in 12 states will compete for $158 million in Federal funds matched by $158 million or more in private investment over five years to provide technology and engineering expertise to small manufacturers through the latest round of competitions to strengthen the Manufacturing Extension Partnership (MEP)’s network of centers in these states.

 

A new White House and U.S. Commerce Department report titled, “Supply Chain Innovation: Strengthening America’s Small Manufacturers,” describes what it calls a dense network of small manufacturers that make up the backbone of America’s supply chains. These manufacturers play an increasingly important role in U.S. supply chains and the manufacturing sector overall because they employ 42 percent of all U.S. manufacturing workers.

 

Dense networks of these small manufacturers are vital to the process of taking a product from concept to market, and the exchange of manufacturing know-how across suppliers is essential for the diffusion of the new product ideas and innovative processes that give U.S. manufacturing its cutting edge, the report explains. However, small manufacturers face steep barriers to innovation—from invention, to commercialization, to the diffusion of new technology. For example, small manufacturers contribute less than one-third of all manufacturing R&D, despite making up 98 percent of manufacturing firms, and as a general rule, small firms are one-seventh as likely as large firms to conduct R&D, according to the report.

 

As a result, small manufacturers are often in the positon of having to adopt technologies invented by others. They also face unique barriers in accessing the capital and expertise to take on the risk of new technologies. One of the results of the challenges they face in adopting new technologies and processes, is that small manufacturers are only 60 percent as productive as large manufacturers, according to the report.

 

The White House Supply Chain Innovation Initiative will focus on public-private partnerships and new federal efforts to strengthen U.S. manufacturing overall by addressing the challenges small manufacturers face because, as the report notes, strengthening America’s supply chains and the small manufacturers at their core is essential to the long-term competitiveness of U.S. manufacturers both large and small. Manufacturers spend on average 60 percent of the price of their final product on purchased inputs, the report explains, so differences in the quality and nimbleness of their supply chains can make or break a manufacturer’s ability to compete.

 

What are your thoughts on initiatives to strengthen small manufacturers, and therefore manufacturing supply chains overall? Secondly, what impact would such initiatives have on your supply chain?