5 Advantages of Cluster Manufacturing
Posted August 6, 2013 & filed under Uncategorized
Manufacturing has become one of the most widely discussed industries in the country. As a contributor of 12% of the nation’s GDP, and one of the hardest hit by the recession (5 million jobs were lost from 2009 to 2012), pundits, politicians, and industry professionals have endlessly debated how to revive American Manufacturing. Some are now looking towards the benefits of cluster manufacturing as the answer.
Since the early 1990s, groups of similar businesses in a multitude of industries began to experience the benefits of cluster manufacturing. Tech companies became the most notable example, as many big companies rooted themselves in Silicon Valley.
However, examples of cluster manufacturing have roots further back than the tech industry’s takeover of the San Francisco Bay area. Collected manufacturers in the steel industry once made Buffalo and Cleveland two of the most thriving cities in the Northeast, and automotive manufacturing notably put Detroit on the map at the height of its industry.
While the Internet has made it easy for companies to exist far apart from their competition, as global communication is now only a click away, manufacturing competitors can still reap the benefits of locating within close proximity of one another. Cluster manufacturing still allows companies to reap the following benefits:
Increased Productivity
The specialized inputs, synergies, and increased access to information/public goods that accompany cluster manufacturing all boost productivity of plants.
Specialized Workers
Clustering major players within a certain geographic area breeds highly skilled workers for that industry. In the height of Detroit’s automotive boom, you would be hard pressed to find a family that did not have several members working at one of the major companies. Occupations tend to stay in the family, and when there are positions to fill, children are trained from young ages to compete for those jobs.
Retrieving Investors
Along with directing their recruiting efforts, cluster manufacturing helps cities steer their efforts towards maintaining the industry that supports their local economies, which includes enticing investors both domestic and abroad. When local governments make it attractive for investors to pour their money into an industry, that industry receives a big boost in growth.
Rapid Innovation
Cooperative research and competition makes innovation a must for manufacturers. When the competition is clustered right at your doorstep, innovation is imperative to stay alive in the game. Plus, word of mouth and cooperation amongst competitors is a big contributor to new technologies.
More Effective Business Formations
Being close to the supply chain is beneficial to any business, and when manufactures cluster in any location, businesses that sell that particular industry’s goods tend to pop up there as well. When Nissan and Volkswagen began to cluster in Tennessee, more than 860 auto supplies moved to the area as well.
Not without fault
While cluster manufacturing has its known benefits, it can be hazardous for a city to place all its eggs in one basket. Since the American steel industry tanked, Buffalo and Cleveland have been hard pressed to jump start their economies. Furthermore, the effects of an ailing American auto industry have wreaked havoc on a now bankrupt city of Detroit. Although the maneuver is risky, cities can still benefit from helping manufactures cluster their operations within their area, and perhaps the manufacturing industry can start to prosper once again.
By Kevin Withers
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