There seems to be a lot of confusion these days about manufacturing. As a guy who has worked his entire life in manufacturing, I’d like to eliminate this confusion.
The word “Manufacture” is made up from two Latin Roots “manu” and “factura.”
“Manu” means “by hand”
“Factura” is a derivative of “facere” which meant “to perform” or “to do.” Factura means ” a working.”
Those Junior High Latin Classes sure made understanding big words pretty clear.
While the linguistic origins of ‘manufacturing’ were “a working, by hand,” the essence was the creation of something by work into something else. In modern terms, it is “the conversion of raw materials into finished goods by labor.”
Today, with our abundance of machines, and non-human provided energy, we define manufacturing as “the use of machines, tools and labor to convert raw materials into finished goods.”
In North America, (for now) Manufacturing is denoted officially by NAICS codes numbering from 31-33 according to BLS.
So what is the confusion about manufacturing?
There is a move afoot to count the foreign production of Factoryless Goods Producers (FGP’s) as ” U.S. Manufacturing.”
If you don’t actually make something, you aren’t really a manufacturer.
If you don’t make it here, how can you count it here?
-You may be a great designer. Great engineer. Great logistics company. Great sales company.
But if you don’t make what ever it is that you designed, engineer, or sell- it ain’t manufacturing.
So when someone tries to tell you that they are a “factoryless goods producer,” don’t flinch, don’t blink, don’t bat an eye.
And what ever you do don’t call them a liar. (It’s rude to call people liars, even when they are lying.)
Just tell them that they are mistaken, they are an outsourcer, not a manufacturer.
Manufacturers actually make things and often export their products.
Factoryless goods producers don’t make anything themselves.
In some cases however outsourcers EXPORT OUR JOBS.
Tomorrow: What Uncle Sam means when he says Factoryless Goods Producer.
Andrew Geppert says:
Great point! Reminds me of Humpty Dumpty – “‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
How do I contact my congressman to vote against this farce?
speakingofprecision says:
Its being built into the 2017 census. See the Federal register Here: http://www.whitehouse.gov/sites/default/files/omb/assets/fedreg_2009/010709_naics.pdf
Miles
Dave R. says:
Two questions:
1. What do you suppose is the rationalization for re-catagorizing importers as (domestic) manufacturers?
2. Who came up with and/or is promoting this plan?
Could it be that this re-catorization is intended to confer upon importers certain favorable tax treatment that was intended for domestic manufacturers?
speakingofprecision says:
Question 1: They want to take credit for the Value Added off shore by contractors to Domestic “Factoryless Goods producers.” to count it as part of GDP.
Question 2: Office of Management and Budget, through the Economic Classification Policy Committee (ECPC) proposed this in January of 2009.
Opinion, They are foundationally incorrect because they define maunufacturing as “manufacturer utilizes inputs such as capital, labor, and energy to transform material inputs into a new product…” and then call a firm which does not so transform inputs as a manufacturer. The factoryless Goods producer neither utilizes inputs nor transforms inputs into products.
“Characteristics of factoryless goods producers include:
Does not perform transformation activities;Contracts with manufacturing service provider to perform transformation activities to its specifications”
In my world, such a firm would be called a Customer.
How does non-transformation count as manufacturing?
They make a two more points: “Owns rights to the intellectual property or design (whether independently developed or otherwise acquired) of the final manufactured product;”Owns the manufactured product it contracted another establishment to produce”
So lets use baking a cake as a proxy for manufacturing. Ingredients are transformed to make a final good for sale.
For example, I go to a real bakery (one with ovens and mixers) and I give it the recipe for the cake and icing and decoration I want. And lets say I want to sell these cakes (maybe they are special for a football team or something).
According to the proposal, I can call myself a bakery- I contracted for someone else to perform the transformation; it is my design and intellectual property, and I am selling it. I am now a Bakery by the logic of defining what is a factoryless goods producer.
Either manufacturing is transformation, or it isn’t.
Design is not manufacturing. Contracting is not manufacturing. Sales is not manufacturing.
Record companies are not manufacturers. Movie studios are not manufacturers. Companies who similarly design something for sale but have it made by someone else are not manufacturers either. Except in the wishful thinking of Washington.
Thanks for the questions.