Summary

Through its national network of affiliated manufacturing extension centers and field offices located throughout all fifty states and Puerto Rico, the Manufacturing Extension Partnership (MEP) provides small and medium-sized manufacturers access to expertise and offers services and assistance directed toward improving growth, supply chain positioning, leveraging emerging technologies, improving manufacturing processes, work force training, and the application and implementation of information in client companies. These services are provided in some cases through direct assistance provided by MEP center staff and, in other cases, from partner organizations and third-party consultants.

After more than 20 years of operation, the MEP program faces new challenges as the nation’s manufacturing firms adapt to a changing competitive environment. As summarized in Box S-1, these challenges include assisting firms that vary widely in terms of size, technological focus, and business needs.

Given the growing recognition of innovation and manufacturing to nation’s economic growth and competitiveness, MEP today is seeking to evolve beyond its traditional “technology push” mission to increase the innovative capacity of the nation’s manufacturers.

In 2011, NIST requested the National Academies’ Board on Science, Technology, and Economy Policy (STEP) to undertake a review of MEP. In response, a committee of the STEP Board held a series of fact-finding workshops and commissioned research papers and case studies to review and document the program’s current achievements, challenges, and new opportunities. The Committee also identified and reviewed similar national programs from abroad in order to draw on foreign practices, funding levels, and accomplishments as a point of reference and to discuss current U.S. needs and initiatives in light of the global focus on advanced manufacturing.



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Summary Through its national network of affiliated manufacturing extension centers and field offices located throughout all fifty states and Puerto Rico, the Manufacturing Extension Partnership (MEP) provides small and medium-sized manufacturers access to expertise and offers services and assistance directed toward improving growth, supply chain positioning, leveraging emerging technologies, improving manufacturing processes, work force training, and the application and implementation of information in client companies. These services are provided in some cases through direct assistance provided by MEP center staff and, in other cases, from partner organizations and third-party consultants. After more than 20 years of operation, the MEP program faces new challenges as the nation’s manufacturing firms adapt to a changing competitive environment. As summarized in Box S-1, these challenges include assisting firms that vary widely in terms of size, technological focus, and business needs. Given the growing recognition of innovation and manufacturing to nation’s economic growth and competitiveness, MEP today is seeking to evolve beyond its traditional “technology push” mission to increase the innovative capacity of the nation’s manufacturers. In 2011, NIST requested the National Academies’ Board on Science, Technology, and Economy Policy (STEP) to undertake a review of MEP. In response, a committee of the STEP Board held a series of fact-finding workshops and commissioned research papers and case studies to review and document the program's current achievements, challenges, and new opportunities. The Committee also identified and reviewed similar national programs from abroad in order to draw on foreign practices, funding levels, and accomplishments as a point of reference and to discuss current U.S. needs and initiatives in light of the global focus on advanced manufacturing. 1

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2 21ST CENTURY MANUFACTURING Box S-1 MEP’s New Environment Changing economic environment  U.S. manufacturing has faced increasing challenges and recent developments have accelerated what many see as the need for rapid change and adjustment in this sector.  Globalization, and especially the globalization of supply chains in manufacturing, means that American third, fourth, and fifth-tier suppliers can now face direct challenges from foreign manufacturers with different cost structures.  Innovation, and especially the accelerating pace of technological change in manufacturing, means that firms need to continually and rapidly adapt to—and develop—new products and processes.  Regulation, for example environmental regulation, is changing the way that manufacturing operates in the United States, and firms must adapt here too. The population of manufacturing companies and MEP’s market targets  The actual number of potential clients—i.e., manufacturing firms— in any given center’s region varies substantially, from almost 30,000 firms in southern California to less than 3,000 in some smaller states  Manufacturers range in size from the large majority with fewer than 20 employees, to a handful with many thousands.  The actual market for MEP services varies by region, but it likely does NOT include: o The very large number of firms that are in the main too small to take advantage of MEP’s services. o Firms larger than 250 employees who have other alternatives and tend to prefer commercial services providers. o The substantial numbers of smaller and mid-sized firms that have established customers, established products, and see limited value in change. They may not all be correct in this assessment, but their self-exclusion from MEP services is nonetheless a reality.  Given very limited resources for outreach, centers must therefore decide how to target their efforts to maximize impact, meet program objectives, and at the same time generate sufficient fee revenues to meet federal match requirements.

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SUMMARY 3 MEP structure and funding  Diversity. NIST MEP must lead a system that includes 60 centers that are quite diverse in terms of size, capabilities, market penetration, strategic orientation, functional organization, and openness to innovation.  Balance of authority. Centers have their own local supporters and funders, which translate into considerable independence. NIST MEP can influence center choices and encourage new initiatives, e.g., the Next Generation Strategy, but insofar as NIST MEP provides a maximum of one third of center funding, this tends to limit leverage on day-to-day operations. Moreover, in practice, center funding formulas are largely fixed, with very limited discretion for MEP management to shift resources across centers. Varying center capabilities  Centers have to a considerable degree focused on their existing core services for more than a decade. Staff are tuned to providing these services—and introduction of new services will require substantial readjustment of personnel.  Some centers have developed significant in-house capabilities. Others rely almost exclusively on external consultants to provide services.  Some centers have developed training and support programs focused on linking to C-level staff; others have not begun this process.  Some centers are already well along the road toward more innovation- oriented practice, while many others have not yet engaged. Based on this review, the National Academies Committee for the Study of the Manufacturing Extension Partnership developed a series of findings and recommendations, which are detailed in Chapter 8 of this report. The core findings and recommendations of are as follows: CORE FINDINGS  The Value of MEP: o Spread across 50 states and 60 centers, MEP is the leading U.S. Government program designed explicitly to provide support services to the nation’s small and medium manufacturers.1 1 See Finding 2.

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4 21ST CENTURY MANUFACTURING o Overall, MEP’s support for lean manufacturing shows evidence of success. Evidence of this overall success is found in academic reviews, as well as in the analysis, case studies and interviews of company staff conducted for this study.2 o MEP’s annual budget is relatively modest, given the importance of SME manufacturing in the U.S. and in comparison to similar foreign programs.3  Focus on Innovation: o MEP efforts to add support for innovation and growth through its national network are commendable. This strategy is in line with recent academic and policy analyses that call for U.S. manufacturers to become more innovative and more focused on growth and international competitiveness.4 o NIST-MEP evaluations and programs are evolving from a focus on quantified metrics derived from a survey of clients and center reporting to a new emphasis on qualitative metrics.5 o Implementation of the Next Generation Strategy (NGS) poses risks and challenges for MEP centers. MEP centers encounter significant risks as they seek to transition from a tight focus on lean production to a much wider range of services that require new clients, new contacts, new kinds of client conversations, new services, new toolsets and capabilities.6  U.S. Support for Manufacturing: o While the United States has numerous public organizations engaged in applied research, notably in fields such as medicine, agriculture, energy, and defense, large segments of the U.S. manufacturing sector are often underserved with respect to technological support from the national research base.7 o Major U.S. trading partners have initiated substantial programs to support manufacturing. Drawing on a portfolio of programs and policies, they provide shared use facilities, expertise garnered from working on multiple projects over long periods of time, and connections to other parts of the innovation ecosystem, be it suppliers, 2 See Finding 3. 3 See Finding 4. 4 See Finding 7. 5 See Finding 12. 6 See Finding 8. 7 See Finding 15.

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SUMMARY 5 customers, or sources of finance, as well as a ready and low cost source of technical support.8  Best Practices o The most successful foreign applied research programs around the world share elements of the following characteristics:9 The institutions benefit from substantial and sustained funding over a long time horizon, providing first class equipment and infrastructure and retaining qualified staff to maintain focus on core missions and client base. They often have a high degree of autonomy in establishing technology strategies, deploying resources, and developing relationships with the private sector, and rely on funding from public and private contract research. They also build strong links to local clusters, partner with universities, and provide a source of training. Many of these institutions also benefit from periodic assessments by independent reviewers on a longer-term basis. CORE RECOMMENDATIONS While the committee finds that the MEP program provides valuable help to small manufacturers, with the enhancements recommended here, the program will be an increasingly important element in the nation’s portfolio of programs to support manufacturing and the jobs it brings.  Funding for MEP should be commensurate with the importance of manufacturing: o Funding for MEP should be commensurate with the importance of manufacturing to the growth of the economy and the program’s proven ability to contribute to improved firm performance and adapt to the changing needs of the manufacturing sector. The current level of funding is not adequate to maintain the program’s focus on small firms, build new services around the Next General Strategy, and provide the resources required to drive the improvements recommended by this assessment.10 8 See Finding 13. 9 See Finding 16. 10 See Recommendation 6.

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6 21ST CENTURY MANUFACTURING Box S-2 Challenges NIST Needs to Address for MEP To adapt the MEP program to the new global environment, NIST needs to:  Continue efforts to enhance growth, increase innovation, and improve sustainability though its Next Generation Strategy.”a  Continue to encourage lean manufacturing.b  Significantly improve its collection and analysis of performance data.c  Take into account lessons from U.S. and international best practice.d  Identify best practices, and measure the relative accomplishments of individual initiatives and center activities.e  Use its resources to leverage maximum beneficial outcomes for the U.S. manufacturing sector rather than focus on reaching the maximum number of manufacturers.f  In order to refine the MEP to better serve its mission: o Single provider contracts should be used sparingly, should require a detailed justification, and should have clear deliverables and metrics, and be closely monitored. o NIST MEP should be more flexible in the management of the funding of MEP centers.g o The fixed federal match of one-to-two from the states and centers should be changed to a match approach with more flexibility for NIST management and the centers.h The Findings and Recommendations outlined in Chapter 8 spell out these issues in greater detail. However, these are actions that NIST should take to enhance the effectiveness of MEP. _____________________ a See Recommendation 4. b See Recommendation 3. c See Recommendation 5. d See Recommendation 8. e See Recommendation 5. f See Recommendation 2. g See Recommendation 7. h See Recommendation 7.

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SUMMARY 7 o NIST-MEP should be more flexible in the management of the funding of MEP centers. The fixed federal match of one-to-two from the states and centers should be changed to a match approach with more flexibility for NIST management and the centers.11  NIST-MEP should significantly improve its collection and analysis of performance data12 o MEP should develop both in-house and external data and the analytic capacity to provide ongoing and independent evaluations of its new initiatives. o MEP data and analyses should identify best practices, and measure the relative accomplishments of individual initiatives and center activities. The centers should be given considerable latitude and be viewed as laboratories for new initiatives, where rapid and effective assessment in turn leads to the adoption and transfer of best practices.  Take into account lessons from U.S. and international best practice. o Any effort to establish programs to further support manufacturing should thoroughly assess existing U.S. resources, organizations and institutions already engaged in applied research and should take into account lessons from U.S. and international best practice.13 11 See Recommendation 7. 12 See Recommendation 5. 13 See Recommendation 8.

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