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The U.S. manufacturing and distribution supply chain is the most advanced and successful in the world. It is the reason for our economic strength, and its flexibility and innovation spawn new technologies and whole new industries and provide us with a strong national security.

These are also the reasons that the U.S. remains the world's largest manufacturing nation, with a fairly steady 20 to 25 percent of worldwide manufacturing since 1990. In the last decade, the rise of new manufacturing centers around the world, especially in China, significantly altered many manufacturing supply chains.

Now the dynamic behind the manufacturing supply chain is shifting again, as rising energy costs make the shipment of parts and goods destined for the U.S. market more expensive. Containers that once cost $3,000 to ship from China to the west coast now cost as much as $8,000. In addition, concerns about product quality and safety are also causing some manufacturers to rethink their outsourcing strategies. Some companies are returning production to the U.S. because of these concerns.

These are not the only forces changing the perspective for manufacturers and suppliers. The U.S. dollar has fallen by more than 20 percent against major currencies since 2002 and has now returned to its level of the mid-1990s, back before Asian financial problems and the bursting of the tech bubble. China has (at last) let its currency rise in a managed float, leading the yuan to rise by 22 percent since July 2005. (Editor's note: for more on the latest update and analysis of our currency crisis, read "Show Stopper: The Demise of the Dollar" in the October 2008 issue of Fabricating & Metalworking magazine.

These exchange rate shifts have opened the door to almost unprecedented export opportunities for U.S.-based manufacturers. Many companies have seized these new opportunities to become exporters - many companies for the first time - leading to such strong growth in the export sector that it not only offsets the economic decline in housing, but it is also the major pillar in supporting U.S. economic growth.

The business world has certainly changed because of these factors. And manufacturers are beginning to see that we have a new opportunity to strengthen manufacturing as a result. A recent survey of North American manufacturers by The Manufacturing Institute and Deloitte showed that executives in the U.S., Canada and Mexico are very upbeat about their competitiveness.

Over 40 percent of the U.S. manufacturers said they are more competitive today than their primary global rivals - and here's the good part - nearly 60 percent of them said they would become even more competitive over the next five years.

That's the good news.

The other side of the coin is that to take advantage of these new opportunities requires some new strategies for many manufacturers, especially small and medium companies. Forging New Partnerships: How to Thrive in Today's Global Value Chain is a report that we undertook with RSM McGladrey that brings out four major supply chain challenges:

• Lean manufacturing and innovation. An Industry Week survey of manufacturers shows that 80 percent of large manufacturers use lean manufacturing and Six Sigma, but only about 50 percent of small and medium companies (SMMs) use these techniques, and 22 percent of the SMMs use no improvement methodology at all.