Strategic Impacts of Advanced Manufacturing Technology on American Textile Industry

Strategic Impacts of Advanced Manufacturing Technology on American Textile Industry

Gregory W. Ulferts (College of Business Administration, University of Detroit Mercy, Detroit, USA), Terry L. Howard (College of Business Administration, University of Detroit Mercy, Detroit, USA) and Nicholas J. Cannon (College of Business Administration, University of Detroit Mercy, Detroit, USA)
Copyright: © 2018 |Pages: 16
DOI: 10.4018/IJSDS.2018040104

Abstract

This article describes how U.S. manufacturing was stricken when companies embraced outsourcing beginning in the 1990s as a strategy for taking advantage of lower labor costs in developing countries. The U.S. textile and apparel industries lost 76.5% of its workforce, or 1.2 million jobs, between 1990 and 2012. The catalyst which has renewed the interest in manufacturing textiles and apparel in the United States is the narrowing gap between the U.S. and Asian labor costs. The sector changed in response to technology and the global market, and both the number and type of employees demanded turned as well. The advanced technology currently drives the domestic textile industry. Despite a positive outlook on growth, it is unlikely that textile manufacturing will create the large number of jobs that it did in the past. Furthermore, it is only viable because of the technological improvements to its factories. The current production is designed to employ fewer workers in order be more productive and less dependent on labor costs. Nevertheless, the high demand for specialized and unique textiles in the U.S. and Europe will likely continue to drive improved manufacturing technology and performance. China's transition from a manufacturing economy to a service economy will increase its manufacturing operational costs, while probably growing demand for the sorts of specialized textiles on which American textile manufacturers tend to focus. If such manufacturers can increase their market shares in China and other Asian countries, while maintaining such markets in the U.S. and Europe, the American textile manufacturing industry will likely grow at a moderately high rate.
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The Global Textile Manufacturing Industry And Its Effects

Assessing the textile manufacturing industry on a global scale is particularly useful in identifying trends that may affect textile manufacturing in the U.S. A vital feature of the worldwide textile production industry is that it remains highly fragmented and regionalized (Hermes, 2016). That is, the industry can be broken up regionally into important textile manufacturing countries. For example, China is the world leader in textile manufacturing but remains much more tied to its region than to the more significant global market (McMichael, 2016). Likewise, Italy and India remain among the global leaders in textile manufacturing but focus their textile trade regionally (Hermes, 2016). A fragmented and regionalized global, textile manufacturing industry means, on the one hand, that the U.S. can focus its efforts on regional textile manufacturing, while, on the other, the U.S. has many opportunities for expanding its textile exports globally. Such opportunities will likely continue to grow as manufacturing costs in China and India continue to increase, and the U.S. continues to seek trade agreements with Asian countries.

The overall growth of the global, textile manufacturing industry was negative in 2015, with a 4% decrease (McMichael, 2016). In 2016, the growth rate is set to bounce back slightly, but only to a 1% decrease (Hermes, 2016). One of the current issues facing the global industry today is the disruption in the emerging markets that have been expected to boost the demand for textile manufacturing substantially. Most notably, poor economic performances by Brazil and Russia suggest that textile demand in these countries will not dramatically increase in the next several years. Meanwhile, China’s transition to a service-based economy will serve to increase the costs of manufacturing in China (McMichael, 2016). Additionally, several developing countries are facing stymied growth in the middle classes. Less than a decade ago, many researchers argued that the increase in the intermediate levels in developing countries would contribute to growing demand for textile manufacturing worldwide (Singleton, 2013). But with countries such as Turkey facing a declining middle class, demand for textile manufacturing in many developing countries is declining (Hermes, 2016). Such declines in market add to the strain many companies face in turning a profit in the textile manufacturing industry. In fact, globally, textile manufacturing ranks among the least profitable sectors.

The global, textile manufacturing industry is quite volatile currently and risk is expected to be moderate on a global-scale, but high in specific regions such as Europe (Hermes, 2016). One of the reasons for the high volatility in the global industry is that raw material prices have been volatile lately. Also, like many countries, including China, transition out of manufacturing-based economies, the costs of manufacturing labor are increasing in some areas of the world (Magnier, 2016). Demand for particular textiles is also fluctuating, making it difficult for many firms to run effective supply chain management.

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