Manufacturing Industry

What happens to US manufacturing is four: globalization, comparative advantage, automation, and policy neglect at the national government level – all of which are very natural in the American capitalist system. The first three are unavoidable, but the last, policy, can be overcome. More about ignoring policies later in the essay. Let’s look at the inevitable after a little statistical background.

Since World War II, manufacturing has grown steadily. There have been some down years, but the slope of the line over the years has been upward. While ubiquitous — with factories emitting smoke into the atmosphere and employees queued up for the shift change — at its peak, manufacturing employment never exceeded 32% of the total non-farm labor U.S. labor force and was never more than 27% of GDP.

Between 1950 and 1970, manufacturing GDP grew at 3%; between 1970 and 1990, it grew at 4%. Since 1990, manufacturing GDP has grown at less than 2%. While growth between World War II and 1990 was good, and since then has been slow, there was always growth.

Employment is a different story. In the years since the war, manufacturing employment grew 18% until 1990 then declined by 33%! So as output grew, employment gradually declined, suggesting that productivity, abetted by automation, has grown. We are, in fact, a much more productive manufacturing nation. Increased productivity is good news. All we need now is to put that productivity to use making things. And therein lies the problem – we need to make and sell more goods. With all the positive productivity gains, the use of our bounty languishes in its sight. Manufacturing capacity utilization stands at 75%, its lowest in more than 20 years. Most economists think that capacity utilization has to be in excess of 80% for the industry to be healthy and investing. Manufacturing output isn’t declining, it’s just anemic.

Now let’s look at the unavoidable international phenomena and their effect on our ability to sell more. If India and China weren’t growing their manufacturing base, the United States would be producing more goods. We can’t stop globalization nor its close relative, comparative advantage, which is the labor cost differential enjoyed by developing countries. In a world that is experiencing rising expectations for the economic well-being of its citizens, industrialization is a rational policy for developing nations. We can see this industrialization/globalization as a threat or as an opportunity — and embrace it intelligently.

Comparative advantage will eventually take care of itself. Over time, wages in industrializing countries grow (just as they did in Japan), and the advantage disappears, often going to another less developed country until it, too, experiences wage growth. So it goes.

To try to compete with low labor cost countries amounts to a “race to the bottom.” The net effect of comparative advantage is that we are unlikely to see high labor content products, sneakers for example, manufactured in the United States any time soon. These two international factors won’t cease because we wish them to. We can, however, take advantage of them through policy.

In the United States, automation, which cannot be avoided, reduces aggregate demand among our citizens by requiring fewer workers and paying wages. Dramatic productivity growth since the 1970s, caused by a more educated automation and workforce, has not been accompanied by growth in comparable wages in manufacturing (or in other industries in this regard). Manufacturing wages grew in the postwar years until 1980 and then began to rise. There are various reasons for this wage growth and for the next leveling, including the influence of unions on the upside and their decline in the recent leveling period. Changing the pattern of wages is a complicated topic not within the scope of this essay. However, manufacturing and production work (and the consequent purchasing power that it provides) can be affected by an increase in output quantity. In terms of manufacturing operations, we need to manage demand so that the factory runs three shifts.

 

Industrialization and Economic

Industrialization is a pre-requisite for economic development as the history of advanced countries shows. For development, the share of the industrial sector should rise and that of the agricultural sector decline. This is only possible through a policy of deliberate industrialization. As a result, the benefits of industrialization will “trickle down” to the other sectors of the economy in the form of the development of agricultural and service sectors leading to the rise in employment, output and income.

In overpopulated LDCs there is overcrowding on the land, holdings are subdivided and fragmented, and farmers practice traditional agriculture. For rapid development, LDC’s cannot afford to wait for changes in farm practices to take place. Therefore. LDCs must begin with industrial development to supply fertilizers, farm machinery and other inputs so as to increase efficiency on the farm. Again, industrialization is necessary in order to provide employment to the underemployed and unemployed in the agricultural sector. In overpopulated LDCs, large number of people are underemployed or disguised unemployed whose marginal product is zero or negligible. They can be transferred from agriculture to industry with little or no loss in agricultural output. Since the marginal product of labor is higher in industry than in agriculture, transferring such workers to the industrial sector will raise aggregate output. Thus overpopulated LDCs have no choice but to industrialize.

Industrialization is also essential in LDCs because it brings increasing returns and economies of scale while agriculture does not. “These economies reside in training, stimulating communication, interaction within industry (inter-sectoral linkages), demonstration effects in production and consumption, and so on. Rural society tends to be stagnant, urban society dynamic. Since industrialization brings urbanization, it is superior to the stimulation of agriculture.”

Further the LDCs need industrialization to free themselves from the adverse effects of fluctuations in the prices of primary products and deterioration in their terms of trade. Such countries mainly export primary products and import manufactured goods. The prices of primary products have been falling or remaining stable due to protectionist policies of advanced countries, while the prices of manufactures have been rising. This has led to deterioration in the terms of trade of the LDCs. For economic development, such countries must shake off their dependence on primary product. They should adopt import substituting and export-oriented industrialization.

The case for industrialization in the LDCs also rests on the psychological boost which such a polio provides in their citizens in marching towards modernization. Industrialization is viewed as a mater of pride by every LDC, for it implies using the new technology, new and diverse skills, larger enterprises and more large cities. Moreover incomes rise rapidly in the industrial sector which are saved and invested for creating more demand for goods and services. Since industrialization is followed by urbanization, employment opportunities and incomes increase.

People enjoy the fruits of modernization in the form of a variety of goods and services available in urban centers due to industrialization. These also affect the rural sector through the demonstration effect. Thus industrialization tends to raise the living standards and promotes social welfare.

Industrial Property

Industrial property is the entry point for many property investors to the commercial property industry. As a property type, industrial property is relatively straightforward with little complexity. The property owner just needs to target and strategise the following issues when looking for a property to buy:

  • Stable tenants
  • Achievable rentals
  • Good property location
  • Industrial property precinct
  • Growth of the local community and business sector
  • Vibrant industrial community supplying services, products, and raw materials
  • Access to transport links, ports, airports, and railheads

What do Industrial Tenants Need?

Traditional warehouses will include quality height, size, loading and unloading facilities, quality office space to support industrial operations, ample car parking for staff and customers, hardstand areas for operational flexibility, and high levels of security to protect the tenant’s goods and their operation.

Industrial tenants today are far more sophisticated and demanding when it comes to selecting a property to lease or buy. The investor should therefore select a property that has all the elements of property usage that tenants expect in the local market. Tenants know that the property will impact operational costs and eventually the bottom line of their business. Tenants will choose their property well as a consequence.

Taking the First Step to Investment in Industrial Property

Industrial warehouses are simple to construct and have a long economic life hence the investor sees it as an entry-level investment vehicle and popular. Providing they select a sound and strong tenant, and apply a good lease, the stable future of the property for investors is normally achievable.

There is very little management required on industrial property, and as direct result many private investors will manage industrial property themselves. Unfortunately this does have negative connotations, in that the first time investor sometimes has little awareness of the specialist terms and operational conditions that is supported by lease documentation on their property.

These first time investors can then overlook critical matters and make mistakes. To the experienced commercial property specialist and commercial real estate agent, it is easy to see these ‘first time’ landlord managed properties as you drive through a town or city. The errors of ownership are visually obvious. These errors can even reflect in the ultimate levels of rent and price on the property.

Invariably and importantly this self management problem will surface at final sale or rent review time when the investor has overlooked something or transacted it incorrectly. The buyers of property today will conduct a due diligence period and investigation of any property prior to settlement.

Those property owners that manage their own investments should only do so only when and if they completely understand the complexity of the task at hand. If the investors have only a basic understanding of property performance and function, then they should not self manage the property. The matter is plain and simple.

Critical property knowledge will involve key functional elements such as:

  • Types of rental
  • The lease clauses and provisions
  • Property maintenance strategies
  • Property operational costs
  • Contractor management
  • Vacancy resolution and strategy
  • Incentive use and strategy
  • Tenant negotiation skills

A good property solicitor is invaluable when it comes to Investment Property. The same should be said for a property experienced accountant. Even the most basic industrial property needs carefully prepared lease documentation and financial guidance. It is interesting to note that many first time property investors will sometimes choose cheaper lease documentation that is ‘generic’ and available off the shelf. Cheap is not a good option when it comes to documentation in investment property. You get what you pay for and so why would you take this risk?

Given that you are endeavouring to protect and stabilize cash flow, a few dollars saved on lease documentation preparation at the start of any occupancy can eventually lead to property instability or downfall, loss of tenant, higher property operational costs, and uncertainty when it comes to exercising the critical terms and conditions of the document of lease.

 

Food Manufacturing – Advantages Vs Disadvantages

Food manufacturing process is a series of methods used to convert ingredients into food or maybe change the shape of the food itself. Examples of these techniques can include: Drying, Salting, Canning, Confirming, Preservation, Cooking, Freezing, etc. The way slaughtered animal products or crops are harvested is used to produce marketable food products is an example of food making, as is the way to prepare food, which must then be reheated before meals, produced.

Advantages and Disadvantages

There are both advantages and disadvantages with food manufacturing. Some of the most obvious advantages include: Improved taste of the food, extended seasonal availability, and extended shelf-life.

For example, fruit and vegetables can only be picked when they are ripe, but if they are canned or frozen they keep longer. The longer shelf lives reduce food waste and perishable foods are now able to be transported to wider areas.

Manufacturing the food also makes them safer, reducing incidences of illness caused by eating the food – for example, many farm-based products can contain potentially deadly microorganisms but the manufacturing process will eliminate these. Processed food can also cater to the needs of individuals who suffer from certain allergies.

One of the biggest disadvantages with food manufacturing is that there will be a large effect on the nutritional density of the food product as it has been proved that, although it varies from product to product, up to a fifth of the nutrients may be lost.

An example of how a nutrient may be lost is heat destroying the content of Vitamin C in canned fruit. The manufacturing process adds unhealthy ingredients to improve taste and a high consumption rate of these products can cause an individual’s taste buds to dull as for example they become used to the taste of refined sugar. The high calorie content of the manufactured food, especially given the lack of nutrients, can lead to obesity.

If the food manufacturing industry ceased to exist, there would be benefits with an absence of junk food, a reduction in obesity levels leading to a healthier population with less associated illness such as diabetes and heart disease and there would also be a reduction in pollution levels from fertilizers and pesticides.

But there will be a reduction in food supply, a potential increase in infectious diseases, supermarkets as we know it will no longer exist and the result is a monotonous and potentially hungry diet. As we have seen there are very two sides of the story of food manufacturing and it’s all about getting the right balance.