Getting smart in a global downturn

After reading the news feeds during the past few days, I can tell you what my best Christmas gift was: a refreshing break from those news feeds. The-sky-is-falling manufacturing news came in steadily over the holiday, and it didn"t make for fun reading. The Institute for Supply Management"s Manufacturing Index fell to its lowest level since June 1980, and no sector was immune to the drop. New orders, in fact, dropped to their lowest level since ISM began tracking them in 1948. That"s not a good thing. The negative news, according to reports, was even worse than the not-so-rosy predictions made by analysts.

There has not been much good news to be had in any sectoreven those sectors that have been able to carry the overall sector to some extent in the past, Chris Kuehl wrote today in his Business Intelligence Brief e-newsletter. Kuehl is managing director of Lawrence, Kan.-based Armada Corporate Intelligence, and an economist for the Fabricators & Manufacturers Association. Aerospace is down, export-oriented manufacturing is down, all forms of consumer goods manufacturing is down, and, with the decline in oil prices, even the usually robust energy sector is in decline.

When attendees at October"s FABTECH® International & AWS Welding Show told me that times weren"t all that bad in 2008, but they had serious concerns for 2009, it turns out those concerns might just be validated.

I"ve gleaned two things from recent reports. One, times are tough, regardless of what market you serve, but how tough it really is for individual companies, well, depends. Buried within ISM"s report were several quotes that give a sense of how different conditions can be. Slowest month in years, said one manufacturer serving the chemical sector, while a fabricated metal products supplier said that the soft economy continues to decrease sales volume and price. Meanwhile, another manufacturer said that the power generation industry is still strong, but there is an unsettling feeling because of the general economy. There were no glowing reports, of course, but the severity of the slowdown varies from company to company.

Second, the manufacturing slowdown is global. We"re all in this thing together. A quote the Associated Press got from Shoichiro Toyoda, honorary chairman and a member of Toyota"s founding family, shows how dire things are.

We are all in trouble without an American recovery, he said. The American economy has a big impact on the world.

He should know. Even Toyota, a company that hasn"t posted an operating loss in seven decades, can"t grow without America. For its current fiscal year, which ends in March, Toyota Motor Corp.the originator of the Toyota Production Systemlikely will post operating losses.

Even the BRIC economies aren"t immune. Manufacturing in Brazil, Russia, India, and China all declined in December. Cheap labor, it turns out, doesn"t count for much when demand drops so much. More than this, because this slowdown truly is global, this recession may be different than the one that began in 2001, when so many shops shuttered as work was sent across the Pacific.

The labor-cost playing field isn't totally level, of course, but it may not be as skewed as it was in the past. Today"s recession requires everyone, from the rust-belt fabricator to the high-volume Chinese stamper, to get smart, provide more value, and continue improving.

I think we"re up to the challenge.