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Industrial Manufacturing Market Blues

Jun 1, 2004 12:00 PM, By Michael Eby, Editor-in-Chief

There's been a lot of discussion of late about the issue of outsourcing jobs to overseas markets. Much of the discussion centers on the manufacturing, IT, and customer service industries. Local and national newspapers discuss it on a regular basis. Debates have taken place on Capitol Hill as to how best to handle the situation. President Bush has even addressed the topic in a speech or two. The worst of it is, I haven't seen a thing implemented that would alter this disturbing trend. And nowhere in the electrical industry is it more visible than in the industrial manufacturing market.

Electrical wholesaling industry players are seriously concerned by the renewed interest electrical manufacturers have shown in moving industrial production facilities offshore. According to Electrical Wholesaling's Annual Market Planning Guide, the industrial market accounted for 45.8% of electrical wholesalers' annual revenues in 1992. In late 2003, this number had dropped to 30.5% — a decline of more than 15% in a little more than a decade.

Many low-cost manufacturing facilities are finding new homes in Asia, namely China. In fact, two-thirds of the respondents to a recent National Electrical Manufacturers Association (NEMA) survey on China noted they are already sourcing from China, and half of the remaining one-third indicated they soon plan to be. With support of the U.S. Commerce Department's Market Development Cooperator Program (MDCP), NEMA just opened an office in Beijing, which will be housed in the American Chamber of Commerce. Malcolm O'Hagan, president of NEMA, said China is the “single biggest factor influencing NEMA members' business these days.”

The move of U.S. factories to offshore locations is also affecting independent manufacturers representatives. In an October 2003 article in Electrical Wholesaling, Henry Bergson, president of the National Electrical Manufacturers Representatives Association, wrote “With manufacturing moving offshore, the opportunities to sell electrical products into manufacturing facilities has diminished significantly.” The loss of the higher-margin industrial business is also driving consolidation of manufacturers' rep firms.

And the news doesn't get any better on the construction front. The level of manufacturing construction performed today is a mere shadow of its former self. At the beginning of the year, projections noted in McGraw-Hill's Construction Outlook 2004 called for a 9% increase in the construction of manufacturing buildings to $6 billion. This figure is down 57% compared to the peak of $14 billion in 1997.

How do we solve this current dilemma? If I knew, I sure wouldn't be writing this column. I'd be serving as a high-level advisor to the current administration and raking in the big bucks.

What I do know is that you better pay close attention to business trends like these if you want to remain employed or keep your business afloat. Don't place yourself or your company in a position where the export of manufacturing can put you out of a job or shut down your business for good.

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