By Tommy Fanning, senior vice president, IDA Ireland
Ireland is targeting high-value manufacturing as a way to recover from economic recession and attract investment from multinationals.
The word renaissance may bring to mind images of Leonardo da Vinci paintings and the rolling hills of Italy, but today, a new European revival is underway only this time, it originates in the manufacturing facilities of Ireland.
The manufacturing landscape is evolving as the global economy steps into a fragile recovery.
Against the backdrop of the eurozone debt crisis and volatile commodity prices, multinationals are now having to perfect the art of manufacturing amid increasing uncertainty.
Ireland was one of the fastest growing European economies (though briefly it was also one of the most expensive), but suffered a major collapse starting in 2008. However, today its costs are rapidly coming back into line and Irish manufacturing companies are again becoming competitive.
Ireland, like much of Europe, realizes that the credit-fueled excesses of the past are now over and a more tangible economic model must emerge. It is very much about countries learning to pay their way in the global marketplace.
The Irish industrial strategy centers on transitioning manufacturing to increasingly complex, high value-add operations that are knowledge, skills and capital intensive. This transformation, in conjunction with foreign direct investment, has been vital for stimulating the economy and fueling a vibrant rebirth of the sector.
As the only European country to show month-to-month growth in its factories, Ireland has established itself as the new focal point of global manufacturing. This insight seems to contrast with conventional perceptions that manufacturing activity is only expanding in emerging markets such as China or recovering economies such as the U.S. and Eastern Europe.
For example, manufacturing downturns plagued the eurozone in September as overall manufacturing production declined for the seventh consecutive month. France and Austria saw the deepest drop in activity while Italy and Spain showed positive movement although not enough to indicate expansion in their sectors. Not even Germany, the engine of Europe, was spared as it experienced a steep decline in new export work.
Meanwhile, manufacturing in China shrank in September as the volume of new orders decreased for the eleventh consecutive month. The U.S. fared better, with its manufacturing activity expanding modestly for the first time in four months, according to the Institute for Supply Management. Still, the September data indicated sluggish, unsteady growth amid a weak global economy and uncertain political environment.
Manufacturing Defined by Transformation
At first glance, these statistics cast a negative light on the future of manufacturing; however, this sector is defined by transformation. Policymakers and manufacturers alike are calling for adaptability and a renewed emphasis on the role of production in bolstering economic growth.
Even the U.S., the once golden standard for manufacturing excellence, is dusting off the classic Made in America tagline as a growing revival is beginning to come into focus. According to a spokesperson for General Electric, the company plans to create more than 15,500 jobs and build 15 new factories in the U.S. This confidence in manufacturing, demonstrated by GE, is increasingly being shared by other companies across the U.S. and Western Europe, highlighting the gradual return of these players to the manufacturing game.
The opportunity for countries worldwide, then, is to embrace manufacturing as a strategic advantage, which is exactly what is occurring in Ireland. Divided between Irish-owned companies and major multinationals, Irelands manufacturing base is again growing and showing that it is possible to keep manufacturing in western economies.
These companies, too, have been the backbone of many regional economies outside of the capital Dublin. Liebherr employs more than 500 people in Killarney in the southwest of the country. Magna from Canada employs more than 200 people in tool-making for the automotive sector in Bagenalstown, a small town in the midlands. Kostal, another German company, has two sites again in regional locations manufacturing automotive electronic products.
Efforts by Ireland to mobilize its workforce, develop expertise in lean practices and drive meaningful collaborations have made it an increasingly attractive place to do business.
Collaboration and agility are at the heart of Irish culture, and now a range of international manufacturers are embracing this heritage, says Pat OConnor, chief executive of the Irish Centre for Business Excellence.
Critical to the growth of Irish manufacturing is its workforce, ranked first for its flexibility and adaptability, according to the IMD World Competitiveness Yearbook. Ireland also has one of the highest educational attainment rates in Europe, and its management professionals are becoming increasingly seasoned as they gain experience with multinationals. Today though, with over 14% unemployment and a strong crafts tradition, Ireland has the people available to work in the manufacturing sector. This has been evidenced by companies looking to hire apprentices with a surfeit of applications for many of these positions something that in the mid-part of the last decade was unheard of in Ireland.
As part of this experience, companies are turning to lean manufacturing to improve productivity. The participation of Irish managers and employees in adopting modern efficiency techniques has helped to position Ireland as a center of operational excellence, achieved through advanced practice of Lean, Six Sigma, Kaizen and Kanban.
While the availability of a trained, efficient workforce has certainly powered the manufacturing revival in Ireland, productive collaborations between industry, academia and government play an essential role in further driving a rich, knowledge-based economy.
For example, the National Institute for Biotechnology Research and Training, established by IDA Ireland, facilitates collaboration among four leading academic centers on research and training programs, designed to ensure an ongoing supply of skilled workers. These symbiotic relationships are framing a dynamic, knowledge-sharing infrastructure. Another example of this is the Materials and Surface Sciences Institute (MSSI) and iComp, a further research center working in the area of composite materials at the University of Limerick (UL). These have been developing research linkages with both multinational and Irish companies as they develop new products and processes in an area of strong future growth. There have also been direct investments by companies such as United Technologies Research Centre (UTRC) from the U.S., which has established itself beside the campus of University College Cork (UCC), working in the areas of energy and security research.
From Intel and Apple to Lufthansa and Liebherr, by way of Medtronic and Boston Scientific, multinationals are recognizing the value of Ireland as an optimal canvas to conduct high-value manufacturing activities in engineering and the sciences. The manufacturing sector may be stagnant in many parts of the world, but the renaissance in Ireland is empowering manufacturers to thrive, and given current trends, will continue to generate significant growth.
Tommy Fanning is senior vice president, manager, Engineering & Diversified Industries Division, IDA Ireland, the Irish inward investment agency. His team is responsible for building the national strategy as it relates to the development of engineering and the broad industrial products sectors for international companies in Ireland.