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Toward a New Era i U.S. Manulaeluring The Hee///or ~ Manufacturing Studies Board Commission on Engineering and Technical Systems National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1986 Vision

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National Academy Press · 2101 Constitution Avenue, NW · Washington, DC 20418 . NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the board responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors accord- ing to procedures and approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The National Research Council was established by the National Acad- emy of Sciences in 1916 to associate the broad community of science and tech- nology with the Academy's purposes of furthering knowledge and of advising the federal government. The Council operates in accordance with general policies determined by the Academy under the authority of its congressional charter of 1863, which establishes the Academy as a private, nonprofit, self- governing membership corporation. The Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in the conduct of their services to the government, the public, and the scientific and engineering communities. It is adminis- tered jointly by both Academies and the Institute of Medicine. The National Academy of Engineering and the Institute of Medicine were established in 1964 and 1970, respectively, under the charter of the National Academy of Sciences. This work is related to Department of the Navy Grant N00014-85-G- 0094 issued by the Office of Naval Research. The United States Government has a royalty-free license throughout the world in all copyrightable material contained herein. Library of Congress Catalog Card Number 86-50832 International Standard Book Number 0-309-03691-7 First Printing, September 1986 Second Printing, February 198 7 Third Printing, May 1987 Fourth Printing, October 1987 Printed in the United States of America

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Manufacturing Studies Board ROBERT B . KURTZ ~ Chairman), Senior Vice President (retired), General Electric Corporation, Fairfield, Connecticut GEORGE S . ANSELL,* President, Colorado School of Mines, Golden, Colorado ANDERSON ASHBURN, Editor, American Machinist, New York, New York AVAK AVAKIAN, Vice President, GTE Sylvania Systems Group, Waltham, Massachusetts DANIEL BERG,* Provost, Rensselaer Polytechnic Institute, Troy, New York ERICH BLOCH,$ Director, National Science Foundation, Washington, D.C. (formerly Vice President, Technical Personnel Development, IBM Corporation, White Plains, New York) IRVING BLUESTONE, Professor of I`abor Studies, Wayne State University, Detroit, Michigan BARBARA A. BURNS, Manager, SysteCon, Division of Coopers & Lybrand, Duluth, Georgia CHARLES E. EBERLE, Vice President (retired), Engineering, The Procter and Gamble Company, Cincinnati, Ohio ELLIOTT M. ESTES, President (retired), General Motors Corporation, Detroit, Michigan

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DAVID C. EVANS, President and Chairman of the Board, Evans and Sutherland Computer Corporation, Salt Lake City, Utah W. PAUL FRECH,* President, Lockheed Georgia Company, Marietta, Georgia BELA GOLD, Fletcher Jones Professor of Technology and Management, Claremont Graduate School of Business Administration, Claremont, California DALE B. HARTMAN, Director of Manufacturing Technology, Hughes Aircraft Company, Los Angeles, California MICHAEL HUMENIK, JR.,l Director, Manufacturing Process Laboratory, Ford Motor Company, Detroit, Michigan ROBERT S. KAPLAN, Professor of Industrial Administration, Carnegie-Mellon University, Pittsburgh, PennsyvIania, and Professor of Accounting, Graduate School of Business Administration, Harvard University, Boston, Massachusetts JAMES F. LARDNER, Vice President, Component Group, Deere and Company, Moline, Illinois M. EUGENE MERCHANT,* Director, Advanced Manufacturing Research, Metcut Research Associates, Inc., Cincinnati, Ohio ROY MONTANA, General Manager, Bethp age Operation Center Grumman Aerospace Corporation, Bethpage, New York , THOMAS J. MURRIN, President, Energy and Advanced Technology Group, Westinghouse Electric Corporation, Pittsburgh, Pennsylvania ROGER N. NAGEL, Director, Manufacturing Systems Engineering, Lehigh University, Bethlehem, Pennsylvania PETER G. PETERSON, Peterson, Jacobs & Co., New York, New York RAJ REDDY, Director, Robotics Institute, and Professor of Computer Science, Carnegie-Mellon University, Pittsburgh, Pennsylvania DAN L. SHUNK, Director, Center for Automated Engineering and Robotics, Arizona State University, Tempe, Arizona WICKHAM SKINNER,* Graduate School of Business Administration, Harvard University, Boston, Massachusetts 1V

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BRUCE THRASHER,* Director, District 35, United Steelworkers of America, Atlanta, Georgia STEPHEN C. WHEELWRIGHT, Professor, Graduate School of Business Administration, Harvard University, Boston, Massachusetts EDWIN M. ZIMMERMAN, Member, D.C. Bar, Washington, D.C *Term expired before project completion Deceased Resigned v

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Staff of the Manufacturing Studies Board GEORGE H. KUPER, Executive Director JANICE E. GREENE, Sl;aff Officer GEORGE D . KRUMBHAAR, JR. ,* Staff Officer THOMAS C. MAHONEY, Staff Officer MICHAEL A. MCDERMOTT, Staff Officer DENNIS A. DRISCOLL, Staff Associate LUCY V. FUSCO, Staff Asmstant DONNA REIFSNIDER,l Staff Assistant MICHAEL S. RESNICK, Staff Assistant CAROLYN CASTORE, Staff Officer: Committee on the Role of the Manufacturing Technology Program in the Defense Industrial Base (on Intergovernmental Personnel Administrative Exchange from the General Accounting Office) GERALD I. SUSMAN, Project Director: Committee on the Elective Implementation of Advanced Manufacturing Technologies (on leave from The Pennsylvania State University through December 1985) MARGARET DEWAR, National Research Council Fellow on leave from the Humphrey Institute, University of Minnesota through August 1985 Employed through August 31, 1985 I employed through May 17, 1985 V1

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Preface U.S. manufacturing has entered a new era, created by the convergence of three important trends: · the rapid spread of manufacturing capabilities worldwide; · the emergence of advanced manufacturing technologies; and · growing evidence that appropriate changes in traditional management and labor practices and organizational structures are needed to improve the competitiveness of U.S. manufacturing op erations. The responses of U.S. manufacturers to these trends will determine their long-term competitiveness and the future prosperity of the U.S. economy. Relatively few domestic manufacturers have devised effective responses to ensure success in the new manufacturing environ- ment. Despite encouraging signs in certain industries during the recent economic recovery, the challenge from foreign manufactur- ers has continued to grow stronger in both the United States and foreign markets, the rate of investment in U.S. manufacturing re- mains disappointing, and the use of advanced technologies which U.S. manufacturers claim as a competitive advantage and new managerial practices is at best only comparable to their use by our competitors abroad. Unless U.S. manufacturers make progress · ~ V11

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soon, implementation of new practices, technologies, and strate- gies may be too slow, risking continued declines in competitive ness. One aspect of the problem is that information on new de- velopments in manufacturing is not sufficiently available to the manufacturing and policymaking communities. Recognizing this need, the Manufacturing Studies Board (MSB) of the National Re- search Council has produced this vision of the developments that are shaping the new manufacturing environment. The Board com- prises experts from industry, labor, and academe who have had direct experience in the development and implementation of ad- vanced manufacturing technologies. This report draws on current research, personal experience, and knowledge gained from several past MSB studies on specific developments in manufacturing. The report presents a broad view of what the MSB believes will be necessary to maintain a competitive U.S. manufactur- ing sector and some of the major considerations manufacturers and government policymakers will face in implementing these ap- proaches. A general report describing the future manufacturing environment and emphasizing the manufacture of discrete parts was determined to be the best way to represent realisticaDy the opportunities and issues confronting most manufacturers and gov- ernment policymakers. Although the vision presented here is just one of many possibilities and is conditional on many factors in many fields, it is an optimistic scenario that effectively illustrates many of the relevant issues. A major difficulty in presenting a report of this nature is the diversity of manufacturing. The technological needs, challenges to management and labor, and competitive situations of the many industries that constitute U.S. manufacturing are quite different. This diversity makes it virtually impossible to provide specific show to" recommendations for either the private or public sec- tor. Consequently, the report does not present an unplementation manual or specific policy recommendations, but it does indicate a need for change and areas that should be addressed. The report originated as a technology forecast, but through continued discussion the Board realized the inadequacy of such an approach. Recognizing that human resource and management ·. ~ vail

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issues will be far more important to future manufacturing com petitiveness, the MSB has tried to emphasize that, despite the enthusiastic claims of technology developers and vendors, technol ogy alone will not improve competitiveness. Without changes in corporate culture, organizational structures, and human resource management, new technologies wall not produce the results needed for competitive manufacturing. These changes are far more di~- cult than plugging in a new machine they require creative think ing, new attitudes, and a willingness to embrace change. These factors represent the critical barriers to improved competitiveness. These adjustments wiD not be made simply or quickly, but their benefits can be profound. This report presents a vision of what those benefits can be and the imperative need to real ize them. In writing it, the MSB hopes to make knowledge of current and future developments more available, to stimulate na tional discussion of the related issues, and to help ensure that U.S. industry is a world leader in the new manufacturing era. Robert B. Kurtz, Chairman Manufacturing Studies Board 1X

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Acknowledgments This report was conceived and produced by the Manufactur- ing Studies Board over the past 2 years. It was funded by a grant from the U.S. Departments of the Army, Navy, and Air Force, administered by the Office of Naval Research under the direction of the Under Secretary of Defense for Research and Engineering. As with any work of this kind, the report represents the con- tribution of many more individuals and organizations than can be acknowledged in the available space. The Board would like to express its appreciation to all those who have been involved di- rectly and indirectly in what it believes is a consensual process of direction-setting for U.S. manufacturing. A number of individuals deserve special recognition. Erich Bloch, former Chapman of the Manufacturing Studies Board and current director of the National Science Foundation, was instru- mental in the genesis of the project. John Lyons, John Mc- Tague, D. Bruce Merrifield, John Mittino, Everette Pyatt, Don- ald Rheem, William Schmidt, L. William Seidman, and James Spates offered their help and insight during the early stages of the project. Others contributed their time and energy to the re- view and refinement of the report in its various stages of evolu- tion. Gerald Susman and Margaret Dewar reviewed early drafts, providing invaluable critique and insight. Keith McKee, Wick X1

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ham Skinner, John Dunlop, John White, Ralph Gomory, George Heilmeier, and Solomon Buchsbaum greatly strengthened the re- port through their written reviews and suggestions. Many others, including Reginald Jones, James Baughman, George Carter, and Louis Cabot, provided the benefit of their experience and insight. The Board extends its thanks to these individuals and the many others who contributed so greatly to the substantive understand- ing that is reflected in the report and the bibliography. Finally, the Board is particularly grateful to the National Research Council staff. Members of the Manufacturing Studies Board wrote and rewrote innumerable drafts, but the final text was crafted by Staff Officer Thomas Mahoney, whose patience, perseverance, dedication, and insight in this task deserve much of the credit for the clear presentation of a number of compli- cated ideas. Executive Director George Kuper guided and pushed the progress of the report and contributed many of the ideas at its heart. Staff Officers Janice Greene and George Krumbhaar helped draft the many early versions of the report, and Staff Associate Dennis Driscoll conducted much of the research on economic data. Consultants Roger Wright, Scott Garrigan, Catherine Rusinko, and Louis Blair provided valuable support in drafting and review- ing critical elements of the report. Edgar Weinberg conducted the research and wrote Appendix C, which summarizes past reports on U.S. manufacturing, shortly before his untimely death. Ronald Cowen and Kenneth Reese edited the final draft. All this help and support notwithstanding, this report is the product of a hardworking and dedicated group of individuals. It has been my privilege to be their chairman at a time of such personal sacrifice and contribution. Robert B. Kurtz · ~ X11

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Contents EXECUTIVE SUMMARY 1 1 STATEMENT OF THE PROBLEM 5 A Historical Perspective on U.S. Manufacturing, 8 The Current Role of the Manufacturing Function, 9 Recent Performance of U.S. Manufacturing, 11 Other Evidence of a Changed Manufacturing Environment, 16 Stakes for the U.S. Economy, 22 Notes, 27 2 THE ROLE OF ADVANCED TECHNOLOGY IN FUTURE MANUFACTURING........................... Responsiveness, 33 Flexibility, 37 Cost and Quality, 42 Conclusion, 47 Notes, 47 PEOPLE AND ORGANIZATION A Systems Approach, 50 Participation and Ownership, 52 Employment Security, 54 Incentives, Evaluations, and Decision Criteria, 56 Future Focus, 58 · - . x~ .31 49

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Conclusion, 59 Notes, 60 4 CONSIDERATIONS FOR GOVERNMENT Trade, 63 Education, 65 Research, 66 Defense, 68 Conclusion, 69 Notes, 70 5 SUMMARY. 61 APPENDIXES 71 A THE TECHNOLOGY OF FUTURE MANUFACTURING 75 Developments in Manufacturing Materials, 75 Material Handling Technology Mends, 83 Developments in Material Transformation Technologies, 88 Factory Communications and Systems Technologies, 102 Conclusion, 123 Notes, 124 B MANAGEMENT ACCOUNTING IN THE FUTURE MANUFACTURING ENVIRONMENT C A REVIEW OF POLICY RECOMMENDATIONS OF SELECTED STUDY COMMITTEES. PANELS AND COMMISSIONS, 1979-1985 ..... Introduction, 131 Overview of Major Policy Recommendations, 132 Summary of Specific Reports, 134 BIBLIOGRAPHY INDEX. ....126 131 XIV 157 - . 167

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Towar'a New Era in U.S. Maneheturing

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