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The Challenge to Manufacturing: Summary of a Workshop The easy exchange of goods and services in world markets, made possible by the availa- bility of good communications and reasona- bly inexpensive transportation, has become an increasingly important and essential factor in the economies of many nations. Exports in 1986, as a fraction of gross domestic product, reached 27 percent for the Federal Republic of Germany, 13 percent for Japan, 25 percent for Canada, and 5 percent for the United States. World trade grew sevenfold between 1950 and 1986 at a time when real world gross do- mestic product was only quadrupling. A prin- cipal consequence of this transition to global markets has been the loss of assurance that local manufacturers had of their participation in their local market. Foreign companies, some with the advantage of inexpensive labor, have found it easy to compete in the U.S. market. However, this experience has been neither the only nor the predominant course of domestic competition. Many firms have been supported by national policies that encourage exports. Most critical, however, is the fact that many nondomestic firms have learned how to offer products to American consumers at a price and level of quality that domestic producers find difficult This summary of a workshop held on 25 March 1988 was prepared by W. Dale Compton and Morris Tanenbaum. to match. It is estimated that 70 percent of current U.S. manufacturing output currently faces direct foreign competition. This new competitive environment is challenging the existence of many U.S.-based companies and industries. Whereas foreign competition was once viewed in terms of the more traditional labor and raw materials intensive "smokestack" industries, such as steel, glass, and automo- tive, it is now evident that it also extends to the "high-tech" knowledge-intensive indus- tries. The positive trade balance in sectors previously dominated by the United States, for example, aircraft and complex electronic equipment, has been declining since 1985. As a sector, high-technology manufacturers expe- rienced a negative balance of trade in 1986 for the first time in history. In addition, although the relationships and interdependencies between manufacturing and other economic sectors, such as the serv- ice industries and agriculture, are becoming increasingly clear to many observers, there are some who do not yet recognize this im- portant synergy. That manufacturing is a core part of the U.S. economic infrastructure and central to the nation's future economic well- being is a thesis that needs to be continually transmitted to national policymakers. Although the situation described above is critical, it should not be assumed that manu- facturing is disappearing from the scene. In fact, the contribution of the manufacturing sector to the gross national product appears to have remained nearly constant since the 1950s, with only modest fluctations about an average of 22 percent. This figure should not instill false optimism, however, as there is more reason to believe that statistical correc- tions would result in a lower figure rather than a higher one. The challenge that exists is how to ensure that U.S. manufacturing sector remains vital and healthy. This is particularly necessary for those industries that have broad applicability and impact other industries, such as comput- ers, semiconductors, telecommunications, software, and machine tools. Success in meet- ing the challenge of global competitiveness
will be a critical factor in determining the capability of the United States to remain a vital economic and political force in the world. In attempting to affect and control the forces that influence our capability to compete in the world marketplace, we must recognize the distinct role that each of the major sectors of society play. Industrial managers must be committed to continuous improvement in product quality and productivity, as well as innovative function. The labor force must be well trained and committed to efficient pro- duction of a high-quality product or service. The government must be sensitive to the need for stability, predictability, and fairness in the economic, regulatory, and financial environ- ments. The education system must be moti- vated and able to produce an adaptable and technically competent work force capable of meeting future challenges, not past ones. No one sector of society can, by itself, create a new competitive attitude and position for the United States. It will clearly require coordi- nated action by all segmentsâindustry, labor, government, and the educational community. Understanding the roles and responsibilities of each sector is an important first step in dealing with this complex set of issues. There can be no question that industry has the prin- cipal responsibility for designing, developing, and producing the products and services that are to be offered to world markets. It is the responsibility of industry to produce a spec- trum of high-quality products and services that will appeal to a broad group of consum- ers at home and abroad. Industry must organ- ize itself to recognize changes in current mar- kets, to anticipate emerging new markets, to improve productivity, and to reduce signifi- cantly the time taken to bring a new product or service to market. The environment within which industry operates to accomplish these tasks is and, we must continue to assume, will be influenced in a major way by the actions of both govern- ment and labor. This environment is deter- mined by the fiscal, regulatory, and legal poli- cies that are promulgated by the government. In addition, the natural aspirations of em- ployees for a stable and satisfying work envi- ronment critically influence the way industry can respond to changing competitive circum- stances. The education system has a dual responsibil- ity in the efforts to achieve competitiveness. It must provide a soundly educated work force that will recognize the need for a continuing educational experience throughout career spans, and the expansion of a research envi- ronment that will facilitate the origination and development of the advanced technolo- gies and related processes that will ultimately be included in and used to produce the next generation of products and services that meet and influence market requirements.Achieving coordinated action among diverse segments of society is a complex process. There is no single body, either public or private, that has the responsibility for accomplishing this goal. There is no broad-based forum involving government, industry, labor, and education perspectives for the discussion of many of the topics in an environment that is knowledge seeking rather than combative. Although there are many data sources, there are very limited opportunities to consider that data from the viewpoint of the major stakeholders and disseminate their conclusions and per- spectives to the policymakers. Recognition of the absence of both this focus and a multisector forum that could discuss the issues that arise as each sector attempts to carry out its obligations led the Science Advi- sor to the President and the director of the National Science Foundation to request that the National Academy of Engineering and the National Academy of Sciences hold a work- shop to explore whether an effective forum could be created that would encourage dis- cussion of the many intersector issues that affect manufacturing. The Academies organized such a workshop on March 25,1988. Representatives of indus- try, labor, government, and universities par- ticipated in an active discussion of the various issues that contribute to the challenges con- fronting the manufacturing sector. This brief report summarizes the workshop discussions and the general conclusions that were devel- oped. As an aid in focusing the discussions, four individuals with broad expertise in manufacturing were invited to offer their views of the problems, challenges, and oppor- tunities for the manufacturing sector. They SUMMARY
were each encouraged to emphasize the is- sues that exist at the interface of the domains of responsibility of the governmental, indus- trial, labor, and university sectors. The consensus of the workshop was that the following topics would be particularly ame- nable to discussion and debate by a group composed of representatives of the four sec- tors. STRATEGIC ISSUES Strategic issues influence the capability of all sectors to support the competitive needs of the nation. These issues include the role and importance of manufacturing in a competitive world; the nature of the policies that influence the level of investment by industry in new plant and facilities; the overall policy of gov- ernment concerning cooperative industry activities, including the development of joint manufacturing activities; the mechanisms by which small business is and can be provided technical support and encouragement for improving its competitiveness; the impact on the national technological infrastructure as both manufacturing and product design of key products and services are being sent off- shore by American firms while foreign firms open facilities here; the interrelationship be- tween manufacturing initiatives that are guided and applied by the Department of Defense and those of the commercial sector. NEEDS AND ASPIRATIONS OF THE EXISTING WORK FORCE The existing work force is being confronted with serious dislocations as jobs are elimi- nated in the traditional industries and re- placed by jobs that require significantly dif- ferent skills. Providing proper incentives, opportunities, and means for timely occupa- tional retraining for these displaced workers is a major issue that must be addressed. The assimilation of unskilled, semiskilled, or inap- propriately skilled workers into the labor force will be increasingly difficult in the years ahead. This problem will require the attention of all sectors of society. THE WORK FORCE FOR THE TWENTY- FIRST CENTURY The work force for the twenty-first century will require an unprecedented degree of adaptability to changing employment de- mands. Continuing education and a regular upgrading of skills will therefore be a requi- site for stable employment. To meet the nation's increasing demand for engineers and scientists, the students must be drawn in- creasingly from the pool of women, minori- ties, and the disadvantaged, groups that his- torically have not participated in these occu- pations to a great degree; the manner in which this cultural change can best be facili- tated needs to be explored. The need to up- grade the elementary and secondary educa- tion system in this nation to satisfy the di- verse and increasingly complex demands of the future work force is critical to achieving and maintaining a competitive position for this nation; attention must be focused on im- proved vocational training applicable to the factory of the future. TECHNOLOGY AS A TOOL IN ACHIEVING COMPETITIVENESS Although technology alone cannot solve the competitiveness problem, there is ample evi- dence that technology can be an important tool in creating and delivering cost-effective products that will compete in world markets. Ensuring that the technical communities in industry, government, and the universities are properly integrated and that disincentives do not discourage the effective use of technology by industry is increasingly important. Tech- nologies that relate to manufacturing, includ- ing materials, process control, semiconduc- tors, and the software that is needed to con- trol the manufacturing operation must be nurtured and disseminated to the industrial sector; at issue is the best means to ensure the optimum use of limited national resources to develop the critical core technologies deemed necessary to drive national leadership. WORKSHOP CONCLUSION The workshop participants concluded that a Manufacturing Forum, structured in a man- ner similar to the draft charter that is in- cluded as an appendix to this summary, could be an effective means of bringing together the representatives of the various sectors of the
nation to address the types of problems out- lined above. Although a majority of the par- ticipants endorsed the general concept of the Forum and indicated that their organizations would probably be willing to participate, this endorsement was strongly and explicitly con- ditioned on the presumption that the interest would be sufficient to ensure that the proper level of participation would be forthcoming. The participants in this workshop clearly be- lieved that this process would be productive and successful only if high-level policy- makers in each of the sectors participated actively. Without a commitment at this level of participation, the Forum cannot be ex- pected to be productive and effective. Draft Charter for a Manufacturing Forum During the first half of the decade, this coun- try experienced an unprecedented challenge from overseas manufacturers and exporters of goods. Foreign manufacturers, many with facilities in countries having low-cost labor and many with governments whose policies favored exports, created an economic envi- ronment that required a dramatic response by many U.S. companies. Oftentimes the domes- tic companies were faced with the require- ment to restructure or go out of business. The domestic manufacturing industries were particularly challenged by the confluence of a series of events, some of which should have been anticipated and controlled by them and some that were clearly outside their immedi- ate control. Recognizing that future chal- lenges to this industry can be effectively met only by a concerted effort on the part of in- dustry, government, and universities, the National Academy of Engineering and the National Academy of Sciences have created a Manufacturing Forum. The purpose of the Forum shall be to provide a means by which policymakers from govern- ment, industry, and universities can meet to discuss issues that influence the competitive- ness of manufacturing industries. It shall be a device for improving communications. Key issues relating to such matters as technology development and utilization, incentives and disincentives for investment, strategic na- tional plans as they relate to U.S. manufactur- ing industries, current and future trends in the labor force, and long-term educational needs and opportunities for the manufactur- ing sector will be discussed. The Forum shall not conduct studies, provide advice, or make recommendations on specific issues or poli- cies. MEMBERSHIP Membership of the Forum shall be drawn from a wide spectrum of organizations hav- ing a direct involvement in matters relating to the manufacturing industry. Efforts will be made to obtain a commitment from the key operational person from each of the partici- pating organizations. It is likely that member- ship will be drawn from the following organi- zations: Government Agencies Office of Science and Technology Policy, Executive Office of the President Department of Commerce Department of Defense Department of Energy Department of Justice Department of Labor National Aeronautics and Space Administration National Science Foundation Treasury Department Industry Suppliers of manufacturing equipment and tools, including both hardware and software End users of manufacturing equipment and tools Labor Major labor unions Universities Major universities with significent research programs related to manufacturing Universities and colleges with significant effort in retraining of personnel or in continu- ing education SUMMARY
Technical Institutes In addition to the regular membership, the Forum shall avail itself of the advice and counsel of individuals who have particular knowledge and experience in the various matters that come before the Forum. GOVERNANCE The Forum shall meet as a committee of the whole. The Forum shall typically meet in open session where diverse views among the par- ticipants can be freely expressed. Certain meetings of the Forum may be held in closed session, if the Forum members deem that this would enhance the free exchange of views. The Forum shall be governed by a core group, not to exceed seven in number, of Forum members and will be known as the Forum Council. The Chairman of the Forum shall serve as the Chairman of the Council. The Agenda of the Forum will be established by the Forum Council. TENURE The Forum shall operate for a period of two years. At the end of this period, a reassess- ment shall be made of its effectiveness. Con- tinuation of the Forum shall require a strong endorsement of the value of it to the various participants. 10