Using the term “third rail” when attached to any subject is a cliché that brings up a certain mental image of Instantaneous or sure death. Depending on whom you talk to and what their perspective is, you will get differing opinions on what exactly the third rail of the screen printing industry (or any industry) is.
With manufacturing in general, the loss of the collective ability to innovate and the quality ethic are usually cited as being the “third rail”. With the American manufacturing base, from another perspective, the loss of large legacy manufacturing complexes with vertical integration has apparently been our third rail for keeping jobs on this continent.
For those not swimming in the economics 101 pool, vertical integration is loosely explained as a company or complex of companies that can produce products starting from raw material through substrate production, product design, R&D, testing, tooling manufacture, production of parts and final assembly of products.
This practice allows companies to very nimble when creating new products and designs. An idea could be brought to prototype stage very quickly because nothing had to be outsourced or transported. For example the cost for mold and die tooling in other countries with vertically integrated systems is typically 1/10th the cost in ¼ of the time that it currently is in the USA. These abilities are the hallmarks of innovation.
Vertical integration of large company complexes was partly made possible in the 19th and through the mid- 20th centuries by the factory town and housing systems that went along with factory complexes. One only needs to look at the remains of East Philadelphia and sections of London to see the remains of this pattern. Bluntly put, unskilled immigrant labor was taken in and highly trained. The laborers tended to stay for longer tenures because of the housing and community benefits. Long tenured workers are the cornerstone of any apprentice system and are required to build the long term quality ethic that insures survival. It creates generational families of skilled workers. It also makes for low cost product development and allows the requisite low wages..…to be almost tolerable. This was not a paradise, but it was practical from a business standpoint and built the American industrial machine (and others).
What I just described should sound familiar. It is the stage China and other countries are working their way through as we speak. Because they started their cycle in relatively modern economic times, they will enter, toil and exit this phase in a fraction of the amount of time that Western countries did in the last two centuries. When that happens they will enter the same economic playing field the rest of us are on. When that happens, opportunity will be rampant.
I don’t have a crystal ball but I do talk to a lot of printers and manufacturers. There are good things happening and things we should be worried about. Right now, a small portion of the American hard product manufacturers are shipping in the range of 50-65% of their products overseas. This is not American industry wide. It is within specific small segments. It also exists in the industrial and textile screen print segments. These exports are to what we might consider third world countries. They have cash flow right now….because they have vertical integration…..and cheap on-site labor.
But the reason they are buying American goods….in an increasing trickle….is because it’s far easier to buy the innovation and quality at this point than it is to manufacturer it locally and work through the problems of copying or stealing technology. Their local economic systems are evolving too fast for that. They do not have a century to learn innovation. They might have five years.
It is in this area that our economy still excels. We are skilled in innovation and to a still competitive degree….the quality ethic. In this there is opportunity. If we don’t take this and run with it we see it, we will be stepping on the third rail.
Submitted by Ray Greenwood SGIA staff
