Prof: Innovation Can Prevent Carrier-Like Cuts

As Carrier Corp. begins the first round of previously-announced layoffs at its Indianapolis manufacturing facility, one expert says Hoosier companies must reinvest in themselves to prevent similar moves in the future. Mohan Tatikonda, professor of operations management at the IU Kelley School of Business in Indianapolis, says he would like to see companies invest in R&D to make innovative, customizable products best produced in the U.S. He says companies like Eli Lilly and Co. (NYSE: LLY) and Cummins Inc. (NYSE: CMI) have maintained work force by focusing more on innovation than competing on cost.

He says the deal Carrier’s parent struck with the Indiana Economic Development Corp. with the help of the Trump administration, while positive for the employees whose jobs it saved, is a “one spot, one time, one situation deal” that doesn’t address underlying policies to retain manufacturing jobs. Tatikonda says low-wage and low-skill work will naturally move to cheaper environments, meaning a focus on innovation can be a better strategy to retain and grow a manufacturing work force.

Tatikonda also says the impact of automation, recently outlined in a study from Ball State University, should not necessarily be seen as a threat, but natural progress. He says companies can redeploy displaced workers to focus on more innovative and value-added products, which don’t compete based on lowest manufacturing cost.

The good news, Tatikonda says, is that Indiana has all the elements needed to be a national manufacturing example: strong heritage, state leadership that cares about manufacturing, organizations like the state’s advanced manufacturing and logistics initiative Conexus, training programs and the benefit of location. He says he hopes Indiana companies will recognize industry trends and choose to invest in R&D to make innovative products that will be produced and delivered in the state.

As for Carrier, he says he’s surprised the company kept production in the United States as long as it did, adding “brilliant” local management kept the Indianapolis operations vibrant for years. More than 630 Carrier employees are slated to lose their jobs, with about 338 of them being laid off today.