More GA Manufacturers Gain Business from In-Sourcing than Lose from Outsourcing
Gaining Business: The 2012 Georgia Manufacturing Survey shows a line has been crossed, with more firms benefiting from in-sourcing than losing from outsourcing.
Posted: December 5, 2012
While industrial robots have captured public attention, they aren’t high on the shopping lists of Georgia companies. About 13 percent of the firms surveyed use robots now, but only 5 percent say they plan to add them.
About 9 percent of companies employ advanced materials in their manufacturing, while approximately 6 percent use additive manufacturing – technology for building parts directly from computer-aided design systems.
Although concerns are raised about the role of technology in reducing manufacturing employment, the Georgia Manufacturing Survey did not find a strong relationship between technology adoption and employment decline.
Manufacturers using production technologies and techniques were more than 40 percent more likely to have added employment rather than to have reduced employment.
“A model that controls for sales, capital, industry, year of establishment and other factors found that greater technology use is positively associated with higher employment,” noted Phil Shapira, co-director of the survey and a professor in Georgia Tech’s School of Public Policy and a professor of innovation, management and policy at the University of Manchester in the United Kingdom.
“One caveat is that the model does not represent manufacturers that went out of business due to technological or other factors,” he said. “That said, job losses related to technology substitution may have been offset by employment gains due to greater competitiveness.”
Though many companies responding to the 2010 survey said they were interested in sustainability, that didn’t translate into dramatic action in the 2012 survey. For instance, only 8 percent of Georgia manufacturers have produced an emissions inventory or carbon footprint of their facilities.
“We saw that companies followed through on plans for waste elimination and efforts to reduce pollution, but we didn’t see an increase in the re-use of materials, remanufacturing, less shipping or more use of renewable energy,” Youtie said. “The basic entry points for sustainability are there, but some areas haven’t seen much progress.”
As in past years, the study compared profitability of companies with different competitive strategies. The return on sales for companies competing on the basis on innovative products, processes or services was twice that of companies competing on the basis of low price. Innovative companies also pay higher wages than companies using other strategies.
“We see that science-based industries are more likely to prioritize innovation as a strategy,” explained Shapira. “Industries such as food and apparel are less likely to compete that way. No group has a large percentage of firms competing on innovation, though companies in any industry can use innovation.”
17 percent of Georgia manufacturers chose low price as their primary competitive strategy, compared to less than 10 percent that compete through innovation or the use of new technology. The most popular competitive strategy was high quality.
Other survey findings included:
- Half of Georgia manufacturers reported export sales, and 23 percent of respondents reported that their exports increased in 2011 over 2009 levels.
- Profits of Georgia manufacturers generally declined between 2010 and 2012, but the profitability difference between companies competing through innovation and those competing on the basis of low price remained.
- When Georgia manufacturers conduct research and development activities, they compared well with manufacturers across the country. However, only a third of Georgia manufacturers conducted R&D in-house, and only 4 percent used public loans or grants to pay for R&D. Less than 20 percent of companies used R&D tax credits available through state and federal sources.
The results show the challenges facing Georgia manufacturers. “Innovation, advanced technology and sustainability play crucial roles in helping manufacturers achieve competitiveness and maintain it for the future,” the authors wrote. “Manufacturers increasingly must operate using efficient and productive technologies, and with finite resources and greater awareness of environmental impacts.”
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