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Executive Summary Manufacturing has entered the early stages of a revolutionary period caused by the convergence of three powerful trends: The rapid advancement and spread of manufacturing ca- pabilities worldwide has created intense competition on a global scale. The emergence of advanced manufacturing technologies is dramatically changing both the products and processes of modern manufacturing. Changes in traditional management and labor practices, organizational structures, and decision-making criteria represent new sources of competitiveness and introduce new strategic op portunities. These trends are interrelated and their effects are already being felt by the U.S. manufacturing community. Future com- petitiveness for manufacturers worldwide will depend on their re- sponse to these trends. Based on the recent performance of U.S. manufacturers, ef- forts to respond to the challenges posed by new competition, tech- nology, and managerial opportunities have been slow and inade- quate. Domestic markets that were once secure have been assailed by a growing number of foreign competitors producing high-qual 1

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2 ity goods at low prices. In a number of areas, such as employment, capacity utilization, research and development expenditures, and capital investment, trends in U.S. manufacturing over the last decade have been unfavorable or have not kept pace with ma- jor foreign competitors. There is substantial evidence that many U.S. manufacturers have neglected the manufacturing function, have overemphasized product development at the expense of pro- cess improvements, and have not begun to make the adjustments that will be necessary to be competitive. These adjustments represent fundamental changes in the way U.S. manufacturers perceive their competitive advantages, devise competitive strategies, and manage and organize their operations. One response that is beginning to gather momentum among U.S. manufacturers is the implementation of advanced manufacturing technology. Indeed, technology, wisely applied, can improve costs, quality, flexibility, and responsiveness, but the effects of technol- ogy on these areas can be complex. ~ade-offs between improving flexibility and responsiveness on the one hand and reducing costs on the other will continue; technologies that are poorly applied may not have the effects intended; and many barriers to their smooth operation remain. Effective implementation of new tech- nology demands a clear definition of the business's strategy and a clear understanding of the role of advanced technologies in sup- porting that strategy. Managers must recognize that many of the perceived advantages of new technology can be achieved with new management techniques, more effective planning, better coordina- tion across corporate functions, efforts to reduce set-up times and speed changeovers, and simplified part designs to enhance pro- ducibility. Having made effective operational and organizational changes, the company can eliminate many of the problems that are often associated with the introduction of new technologies. Ef- fective efforts in these areas also should help managers focus new investments on appropriate technology that can produce dramatic benefits. These required organizational changes, however, will be diffi- cult for many manufacturers to implement. They require creative initiatives from managers, the cooperation and involvement of em- ployees, and major changes in the relationships at every level of

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3 the manufacturing corporation. A fundamental cultural and at- titudinal shift will be required on the part of both workers and managers. Manufacturing wait need to be thought of as a system, with extensive integration, cooperation, and coordination between functions, to achieve competitive goals. Flatter organizational structures are likely to become the norm and traditional hierar- chical relationships are likely to fade as the distinctions between managers and workers blur. Workers will have more responsibil- ity and greater job security and be more active participants in the manufacturing system. Because the successful implementation of this cultural revolu- tion in the factory depends on thousands of individual initiatives, change is likely to be gradual. In many cases, there will be strong resistance from both managers and workers who have a stake in traditional practices and structures. However, as competition in the new environment intensifies and the requirements to maintain competitive advantage with quality manufactured goods become clear, the benefits and the necessity of implementing these changes will be increasingly apparent. These changes imply that the factory will provide a much different working environment and play a different role in the macroeconomy. For example, manufacturing will provide fewer job opportunities for unskilled and semiskilled workers, but the jobs that will be created are expected to require greater amounts of skill and training and thus to be more challenging and reward- ing. Many manufacturers will have sufficient flexibility built into their production processes to be less affected by shifts in demand, which could moderate business cycles substantially. These and other effects will require that government officials and the general public adjust their image and expectations of man- ufacturing. Although the technological and managerial changes necessary for future competitiveness will be the responsibility of the private sector, the government can play an important role in encouraging and supporting these private initiatives. Policymak- ers must recognize the continuing importance of manufacturing, the need for changes to ensure future competitiveness, and the many repercussions government policies have on the ability of U.S. manufacturers to meet competitive challenges. In addition, some

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4 specific government activities, in trade, education, research, and defense, will be affected by developments in manufacturing and will need to adapt accordingly. For both government and industry, circumstances will vary tremendously. It is not possible to predict the specific strate- gies, technologies, management practices, and policies that will be effective in every situation. Instead, the Manufacturing Stud- ies Board has described likely developments in the technology and human resource practices of future competitive manufacturers, as wed as likely repercussions for government policies. By defining the direction in which U.S. manufacturers will need to move, and by raising some of the issues that they are likely to confront, the Board hopes to stimulate debate and involvement of a broad talent base on an opportunity of major national significance: accelerating the changes necessary to maintain the competitiveness of future U.S. manufacturing.