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Challenge to Manufacturing: A Proposal for a National Forum. (1988)

Chapter: The Paradox of American Manufacturing

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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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Suggested Citation:"The Paradox of American Manufacturing." National Academy of Engineering. 1988. Challenge to Manufacturing: A Proposal for a National Forum.. Washington, DC: The National Academies Press. doi: 10.17226/18604.
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The Paradox of American Manufacturing Leo E. Hanifin We are faced today with a paradox: We are a nation at risk and a nation prospering. The para- dox is a glaring combination of a building crisis within conflicting signs of a strong economy. The foreign competition is eating our lunch, yet we can still sit down to a gour- met dinner. Thorough examination of both sides of the paradox is necessary before any real understanding of the state of manufactur- ing is possible. There are many indicators that seem to dem- onstrate that our national economy is quite healthy. Unemployment is very low. Interest rates are low. Performance of many corpora- tions was better than expected at the end of 1987. The plunge of the dollar has allowed us to begin to reverse the trade imbalance trend that has hobbled our economy over the last decade. Factories are operating at well over 80 percent of capacity. Many economic prog- nosticators have stated that we have with- stood the most severe blow that the markets (stock and global) can deliver and come back strong. Perhaps all this arm waving about the impending doom, driven by the downfall of manufacturing, is just that—arm waving! However, a closer look at other indicators of competitiveness show that the country may not be all that healthy. For many years, we have observed that the U.S. rate of productiv- ity growth has lagged that of many other industrial nations. In each of these years, many dismissed this as a consequence of our tremendous lead in absolute productivity, the development of the emerging industrial na- tions and the rebuilding of those nations deci- mated in World War II. These rationalizations no longer hold; we have now been surpassed as the leader in absolute productivity. We are even beginning to feel individually the impact of our competitive failings. Our stan- dard of living, in terms of average wage, has dropped substantially. Many believe that higher paying industrial jobs are being re- placed by lower paying service economy positions (Young, 1985). [Others believe that the employment gains are in higher paying jobs (Economic Report of the President, Feb- ruary 1988).] Regardless of the salary levels of new jobs, our workers in manufacturing are being paid less; as of the early 1980s, the average wage in most Japanese manufactur- ing industries surpassed the average in the same American manufacturing industries. (This comparison was based on an exchange rate of 140 yen to the dollar; the comparative buying power of U.S. workers has been fur- ther eroded by the dollar's devaluation (Scott, 1985). So, if competitiveness is defined as the ability of a country's corporations to effectively de- liver high-quality goods in the global market- place without a reduction in the standard of living, we are not competing effectively. Because of this paradox—the trend toward crisis within a prospering economy—it is very difficult to elevate the concern of the public and the policymakers for critical issues in manufacturing. However, the paradox has not gone completely unnoticed. John Young, in writing about the findings of the President's Commission on Productivity, suggested that "What this country needs is another Sputnik," or even better, "to have the Japanese launch a Toyota into space." The paradox of conflicting signs creates a dangerous situation. Human nature encour- ages us to focus on either the positive or the negative signs and to employ only the infor- mation or data that support the chosen view. To do so would mean that we would either conclude that all is well and ignore the crisis 12 HAN1FIN

or conclude that all is lost and ignore the op- portunities. In fact, we must reconcile our- selves to the fact that the paradox is real and we face a situation that is both a problem and an opportunity. A closer look at some key indicators further reinforces this seeming contradiction. Five key indicators of our com- petitive position are growth, jobs, trade, in- come, and productivity. Growth can be measured in terms of either absolute sales or market share. As an ex- ample, a five-year analysis of the semiconduc- tor market (Figure 1) shows that the two larg- est American suppliers, Texas Instruments and Motorola, had substantial growth in sales over the last five years (63 percent and 100 percent, respectively). However, some foreign competitors grew by several hundred percent, dropping the American producers from the top two spots in market share to fourth and fifth. As a broader measure of recent growth, sales continue to grow in the manufacturing sector, with factory orders consistently increasing for all but 3 of the past 18 months (Figure 2). As another measure of its strength, manufac- turing has maintained a consistent fraction (20 to 25 percent) of the U.S. GNP for the past 35 years. However, its impact on jobs has decreased dramatically during the same pe- riod. In fact, an analogy with agriculture is appropriate; while the employment in both have decreased dramatically, both remain critical elements of America's economic foun- dation. Although unemployment is at record low levels, and manufacturing employment is quite strong, many criticize the income levels for our current jobs. "A 1986 report prepared by the Joint Economic Committee of Congress concluded that if only one parent worked in the average two-parent family of the 1980's, annual family income would decline, after adjustment for inflation, by one-fourth" (Mor- rison, et al., 1988). One of the most disturbing measures of the state of manufacturing is its contribution to the nation's trade deficit. It not only contrib- utes the largest share of the deficit, but exhib- its disturbing trends in terms of industrial FIGURE 1 Worldwide semiconductor sales ($ millions). 1982 1987 Texas Instalments $1305 Motorola $1219 NEC $ 879 Hitachi $ 879 Philips $ 797 SOURCE Dataquesl Inc NEC Toshiba Hitachi Motorola $3193 $2939 $2781 $2450 Texas Instilments $2125 FIGURE 2 Factory orders. NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR 1986 1987 1988 $Billions 165 175 SOURCE US DepartmentolCommerce 185 195 205 215 THE PARADOX OF AMERICAN MANUFACTURING 13

FIGURE 3 U.S. trade balance. 1980 1981 I Total Manufacturing SOURCE U S Department ol Commerce 1982 1983 1984 1985 1986 High-Technology Manufacturing » "AW RGURE 4 U.S. manufacturing productivity growth. J 4 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 SOURCE U S Bureau ol Labor Slalislics mix. Figure 3 shows that over the past four years, high-technology industries have changed from the positive balance of the manufacturing sector's trade deficit to a con- tributor to that deficit. Many of these mixed signals can be linked directly to the productivity of U.S. manufac- turing companies. Although direct labor pro- ductivity is no longer the best measure of competitive strength, it does provide valuable insight. As with other measures of the health of the manufacturing sector, the recent pro- ductivity comparisons are inconclusive. Dur- ing the 1970s, U.S. productivity growth was not competitive, languishing at about 1.4 percent. Recent years have been more encour- aging, with average annual rates of 3.5 per- cent over the last decade, and with manufac- turing productivity growth rates of more than 4 percent in the mid-1980s (Figure 4). These rates are still less than many industrialized nations. Nonetheless, recent advances in pro- ductivity may provide an element of opportu- nity. A window of opportunity exists for the American manufacturing community, and for the nation. Recent improvements in trade, wages, sales, and employment all fuel our optimism, and provide necessary resources for further improvements in our competitive position. However, the recent improvements should not be taken as the first signs of an overall victory in the competitive struggle. Rather, they are transients that are more im- portant in their provision of this window of opportunity. The core elements of our com- petitive weakness still remain. These include both the cultural and environmental struc- tures that enable competition, and technologi- cal and managerial capabilities that provide competitive weapons. It is critical to the nation's future that we understand these is- sues and seize the opportunity while the re- sources necessary for change still exist. Even without the existence of seemingly con- tradictory signals, manufacturing is, by its very nature, extraordinarily complex. The effectiveness of U.S. manufacturing compa- nies is dependent upon a broad range of envi- ronmental, technical, and managerial re- sources and capabilities. These factors are derived from and influenced by the compa- nies, their industries, and their nation. 14 HAN1FIN

THE ENVIRONMENT There are a number of important trends that characterize U.S. manufacturing today and into the 1990s: • Intense competition will continue, increas- ingly, from foreign firms. • Product and process technologies will con- tinue to evolve rapidly, providing not only differentiation of strategy but corporate strength in virtually every manufacturing industry; product and process life cycles will generally become shorter. • Trade, capital and knowledge formation, and the economic structures will have a pro- found impact on the ability of corporations to compete internationally. To be effective in this environment, each manufacturing enterprise must have several critical resources: • Management able to understand the envi- ronmental issues, grasp the strategic implica- tions of emerging technologies, and provide the leadership and flexibility to respond to both. • A technically skilled and highly motivated work force able to support product and proc- ess technologies and work cooperatively with management. • A technical staff with the knowledge and ability to work as a team on complex prob- lems. • The capital necessary to continually change product, process, and facilities in response to emerging technologies, demands of the mar- ketplace, availability of resources, competitive forces, and evolving corporate strategy. America has a great many resources that pro- vide competitive advantages to our manufac- turing firms. However, there are four environ- mental issues that significantly inhibit the performance of American manufacturing firms and, therefore, require some attention. They are the public image of industry and manufacturing, our primary and secondary educational systems, the American philoso- phy of work, and the financial environment. Manufacturing's Image Since World War II the image of industry and manufacturing in this country has steadily fallen. As affluence spread across the nation, the idea of working in a factory lost its ap- peal. No self-respecting mother advised her son or daughter to become the very best fac- tory worker or manufacturing engineer that he or she could be. Dad (and maybe Mom, too) worked in the factory so that their sons and daughters could go to college and not have to work in a factory. Their children be- came doctors, lawyers, or accountants, and the nation's brightest and best stayed away from the factories. During this period, the nation's concern turned from manufacturing or industrializa- tion toward other issues, such as health and the environment, or space and defense. In- dustry was portrayed in the media as the "polluter of the biosphere," "the abuser of the worker," and the "purveyor of shoddy prod- ucts." Popular writings, such as The Silent Spring, emphasized the need to attend to environmental issues, but no similar concern was expressed about competitive industriali- zation. Although the loss of the priority and prestige of manufacturing was not unique to this country, it was certainly much more severe here than in other nations. In still other na- tions, the priority on industrialization re- mained high, leading to comparative advan- tages in public policy and the quality and scale of human resources dedicated to manu- facturing improvements. There are signs that the image of manufactur- ing is improving, but, in general, there is not an appropriate appreciation of the dignity, the challenge, the value, and the necessity of indi- vidual contributions and national competence in manufacturing. Education Quality To possess a strong manufacturing sector, the nation must have a technologically competent work force and engineering force. This is especially important if we are to exploit our technological advantages to balance other disadvantages, such as comparative labor rates or cost of capital. A Nation at Risk, the 1983 indictment of our educational system, confirmed what many had suspected. Our nation's primary and secondary educational THE PARADOX OF AMERICAN MANUFACTURING 15

systems have severe shortcomings and are in need of substantial reform. Beyond the gen- eral issues of excellence and quality of teach- ing, and the levels of expectations, there are several other serious shortcomings that di- rectly affect the ability to create a competitive work force and an adequate pool of individu- als pursuing careers in engineering and sci- ence. For example, as of 1983, calculus was available to 60 percent of all American high school students, yet only 6 percent completed a course in calculus. Thirty-five states re- quired only one year of math and one year of science for a high school diploma (National Commission on Excellence in Education, 1983). At the same time, other industrialized nations are teaching statistics to students in grade school, regardless of whether they are des- tined to become laborers or leaders. These shortcomings have not been alleviated in the last five years. Today, less than 10 percent of our high school students take physics. This means that 90 percent of our young men and women may lose the option of a technological education and career before they are old enough to appreciate its value. This loss is further compounded by the demographics of a "baby bust" that is shrinking the college-age pool and further amplifies the relative short- age of engineers and scientists. The Worker and the Labor/Management Relationship In America there is a whole set of social trends and phenomena that undermine the work ethic, the ability and willingness to work as part of a team, and a cooperative relationship between labor and management. Today there is a much greater emphasis on consumerism and spending rather than sav- ing, on materialism rather than contribution to society. From the time our children can understand, television tells them that their primary purpose on earth is to consume. Is it any surprise that when a company asks them to contribute, to excel, to invest themselves in the well-being of the company, the response is a lukewarm, "What's in it for me?" Manufacturing is a complex undertaking that often requires teams to bring together diverse sets of functions and skills. This is true whether efforts are focused on a single, com- plex device, such as a robot with vision or advanced controls and mechanisms, or on the whole factory with all its engineering and management challenges. Our society under- mines an individual's willingness and ability to work as a team member through its em- phasis on heroes and individual performance and recognition rather than teamwork. The glorification of the individual is epitomized by the single-handed conquests of such char- acters as Rambo. This, and the vestiges of the "me generation," all contribute to the individual's desire to be recognized as the "most valuable player," rather than as a sup- porting player on a winning team that has created something of value. Such a philoso- phy is an impediment to manufacturing management's creation of a participative spirit among the work force. It also impedes the ability of technological leaders to bring together diverse knowledge and human re- sources on a team so that they can apply ad- vanced systems and technical concepts. It is clear that other countries have institutional- ized teamwork to a much larger degree than we have. Finally, adversarial labor/management rela- tionships with the concomitant decrease in cooperative spirit is a significant handicap to American manufacturing companies. One manifestation of this adversarial relationship is the incremental restrictions on job classifi- cation and work rules negotiated over se- quential contract settlements. These have severely hampered the ability of management to respond to competitive situations and to the evolution of advanced manufacturing processes. It is management's role to bring workers into every step of the operation and ins! i11 in them a vested interest in the well- being of the company. It is the responsibility of labor leadership to be open to new struc- tures and rules that are fair and equitable and provide greater flexibility and avenues for their membership to contribute as responsible and committed team members. All these fac- tors—work ethic, teamwork, and labor/man- agement relations—must be transformed from the barriers they currently are into ad- vantages if companies are to achieve manu- facturing excellence. 16 HANIFIN

Financial Environment: The Short View In the 1985 report by the President's Commis- sion on Productivity, it was stressed that "there is a definite correlation between the nation's level of investment and its growth and productivity." Compared with manage- ment in other countries, the managers of American manufacturing companies operate on a very short time line, which drives capital investment down. This is the result of two factors: the financial environment and the American school of management. The financial environment in this country has a profound and negative impact on competi- tive investment by American manufacturing companies. The cost of capital in America is twice as high as in Japan. The high cost of capital and the intense scrutiny of public cor- porations require managers to invest only where there is clear evidence of short payout periods for capital investments and no danger of red ink (even for one quarter). This often results in sporadic investments that are nar- rowly focused, typically producing minor business improvements, rather than cohesive investments leading to some revolutionary alteration in the way the company does busi- ness or performs in the marketplace. How- ever, even with the high cost of capital, such revolutionary improvements are, in many cases, still available to manufacturing compa- nies. These include dramatic improvements in time-to-market for new products, quality levels, or responsiveness to customers' needs. Because these improvements are typically difficult to quantify, they are seldom used in traditional justifications for capital invest- ments. It has been reported that a new theory now being explored would support invest- ment on the basis of a combination of both financial measures and nonfinancial indica- tors such as those just mentioned (National Research Council, 1988). The reluctance to make long-term invest- ments is further reinforced by an executive work force that is vertically and laterally mo- bile and has short-term rewards and yard- sticks. This, and the general attitude of risk avoidance in the executive suite, create disin- centives to long-term objectives and revolu- tionary change. In particular, the possibility of investing in new technologies is often elimi- nated before it is given serious consideration. TECHNOLOGY It has often been said that technology is our greatest advantage in the manufacturing arena. Technical knowledge and its applica- tion to products and processes are indeed critical to our competitive success. To exploit technology, we must simultaneously accom- plish several interrelated objectives: • Ensure that our base of knowledge and generation of new knowledge are in the right areas to provide an advantage to the manu- facturing enterprise and capitalize on emerg- ing manufacturing concepts. • Ensure the adequacy of the engineering work force in both scale and quality, espe- cially in the critical technical and systems areas. • Learn to better exploit our inventions and innovations through implementation in com- mercialized products and "floor-ready" proc- esses. • Integrate design and manufacturing func- tions to create more responsive companies through improved time-to-market, product customization, and simultaneous engineer- ing. Technical Knowledge During the last several decades before the 1980s, there was little effort directed at manu- facturing education and research at U.S. universities. That prompted the President's Commission on Productivity to judge that perhaps the nation's greatest weakness in technology is its failure to devote enough at- tention to manufacturing applications (Young, 1985). However, in recent years, there have been substantial increases in manufac- turing research and education. The results from university labs in the United States and abroad and from industrial R&D centers, are providing new opportunities in manufactur- ing (Hanifin, 1987). The greatest potential for improvement in products, processes, and overall performance in manufacturing are derived from the following areas: • Materials: New materials are emerging with remarkable mechanical and electrical proper- THE PARADOX OF AMERICAN MANUFACTURING 17

ties. These materials include composites, ce- ramics, semiconductors, and superconduc- tors. They not only offer dramatic opportuni- ties for product development and perform- ance, but also provide opportunities and chal- lenges to manufacturing. In many cases, there can be no new product without a new proc- ess. As such, education and research in manu- facturing and design of such materials are in- separable. • Computing: The advent of new concepts in computer hardware and software, such as parallel processing, will provide exciting new capabilities for the factory floor. Control sys- tems that embody extraordinarily complex phenomenological models of the process will be able to provide real-time adaptive capabili- ties at an affordable price. • Systems: Many of the critical issues in manufacturing competitiveness lie in integra- tion of all functions of the manufacturing enterprise. The challenges range from the development of small manufacturing cells to corporate-wide information and communica- tions systems. Today's factories exist with distributed computers often with disjoint analysis systems and overlapping data bases. There is a need for better understanding of factory communication systems, data base structures and knowledge formats (including geometric representation), and control archi- tectures. • Flexible Automation: Flexible automation can enable corporate responsiveness. Flexible automation is a necessary, but not sufficient, element in the drive toward rapid product changeovers, shortened time-to-market, and just-in-time production. Appropriate sched- ules and interfaces between design and manufacturing are also required. • Statistical Process and Quality Control: In the complex environment of manufacturing, the judicious use of statistical methods permits the definition of causes of variation and em- phasizes the areas of greatest need and op- portunity; they separate the signal from the noise. However, measurement of variation does not reduce variation; understanding the causes of variation is necessary to do so. Pro- found knowledge of the phenomenon in question is necessary to accomplish process improvements. Other techniques, such as the Taguchi method and Quality Function De- ployment, seek to set priorities for quality features, reduce variability and sensitivity to variation, and further define relationships between design and product life cycle. To effectively compete in many industries, we must focus on these five areas of technology, create new knowledge, and then disseminate and apply it. The next section, on research and development, will discuss the creation of new knowledge in the United States. The sec- tion on manufacturing education discusses the dissemination of knowledge, and the next two sections, Design/Manufacturing Integra- tion and Invention vs. Exploitation, discuss the application of knowledge. Research and Development In general, the nation's R&D funding struc- tures and philosophies are poorly suited to the support of technological developments important to competition in the civilian manufacturing sector. As stated in a recent report to the National Academy of Engineer- ing (1988, p. 42): Federal participation in the development of technology downstream from basic re- search has generally been considered only when the case has been made that a crisis exists, as when the semiconductor or ma- chine tool industry was in danger of ir- reparable damage from overseas competi- tion. Federal response has frequently been to turn to the Department of Defense (DOD), rather than a civilian agency such as the Department of Commerce, to act as the federal focus for justification and funding, even though the civilian sector may be the intended principal beneficiary of the pro- gram. The emphasis on defense-oriented R&D is reflected in the following statistics: • Current research sponsored by all defense agencies, including the Defense Advanced Research Projects Agency and the National Aeronautics and Space Administration (NASA), is about $33 billion. • Current basic research supported by civil- ian agencies is less than $3 billion (Presiden- tial Commission on Industrial Competitive- ness, 1983). 18 HAN1FIN

Principal competitors, such as the Federal Republic of Germany and Japan, spend about 2.5 percent of their GNP on nondefense R&D. In comparison, the United States spends 1.8 percent of its GNP on nondefense R&D (Council on Research and Technology, 1988). In some cases, defense spending does directly address critical manufacturing issues. Sema- tech and the National Center for Manufactur- ing Sciences both focus on research agendas that are important to manufacturing. Also, these agendas were defined through dialogs involving broad constituencies of experts in the target areas. Conduits for the dissemina- tion of resulting knowledge have also been planned in both cases. In other cases, research objectives are defined by groups, often small groups, with mission orientations. The result is that too often new knowledge that can be used only on specific applications, and may have little transfer or use to the commercial manufacturing sector. For example, many of the DOD- and NASA- funded efforts in robotics deal with mobility and navigation, the areas deemed least im- portant in a recent Robot Industries Associa- tion survey of American manufacturers (Hanifin and Ruggles, 1988). Such funding has drawn many American universities' robotic research programs into this area. Civilian funding sources, especially the Na- tional Science Foundation (NSF) and the Na- tional Bureau of Standards (NBS), have dra- matically increased their attention to manu- facturing in recent years. However, the scale of their efforts still pales in comparison with defense efforts. Many of the NSF Engineering Research Centers concentrate on manufactur- ing research. NBS hopes to extend their knowledge conduit from their Advanced Manufacturing Research Facility (AMRF) to industry through a series of Technology Transfer Centers. The NSF will soon launch a new Strategic Manufacturing Research Initia- tive. However, this agenda, defined by about 100 experts from industry, academia, and government, will be supported by only $2 million dollars (Woo, 1988). Nearly half the country's $125 billion R&D expenditures come from industry. Although most are spent internally, the support by in- dustry for university research had risen to $375 million in 1986. This level of support is 5 percent of university research support, up from a low of 4 percent in the 1970s. (In 1960, industry support represented 8 percent.) Much of this increase reflects new forms of partnerships between universities and indus- try, sometimes with the encouragement and support of state and federal governments. The continued evolution and growth of such partnerships offer an attractive means of en- suring that resources are focused and pro- grams operate in ways that result in both academic rigor and industrial relevance. Manufacturing Education Once the i.ew knowledge described above exists, the next step is its transfer and incor- poration into American manufacturing com- panies (unless it was created there). The ob- jective clearly is to provide adequate numbers of engineers with the knowledge of advanced manufacturing technology and systems. This can be accomplished in two ways; either by educating new engineers who seek careers in manufacturing, or by delivering new technol- ogy and knowledge to the current engineer- ing work force. For many reasons we need to do both. Manufacturing Curriculum: Manufacturing, by its very nature, is an interdisciplinary area of application. An engineer working in manu- facturing requires knowledge of a broad spec- trum of technical disciplines, including elec- trical, materials, industrial and mechanical engineering, as well as systems and program- ming knowledge. There is also a need for an understanding of a variety of social and managerial areas. One approach to satisfying this interdisciplinary need is to develop a manufacturing engineering curriculum that touches upon all the areas important to manufacturing. This, however, is a disservice to the student, and his or her ultimate em- ployer. Such an education is so broad and shallow that the student is trained in tech- nologies rather than educated in the underly- ing disciplinary principles. Because they can- not understand the phenomena that underlie the new technologies, such shallowly edu- cated people will become lost as technologies change. Also, they will not have the discipli- nary depth to drive the evolution of new tech- nologies. THE PARADOX OF AMERICAN MANUFACTURING 19

A more appropriate approach is to educate engineers in a discipline and then teach them the application of their knowledge to manu- facturing in two ways. First, focused manu- facturing courses, such as robotic mechanisms or welding metallurgy, can be incorporated into the departmental curriculum. Second, engineering students must be taught to com- municate across disciplinary boundaries and work effectively on interdisciplinary teams. This can be accomplished through capstone experiences in product and process design that require knowledge and participation in a number of disciplines. A growing number of universities are taking this approach, effec- tively teaching systems integration and team- work through various manufacturing systems curricular sequences and interdisciplinary research center structures (Hanifin, 1988a). Decrease in Numbers of American Technical Stu- dents: The demographics of a shrinking stu- dent population and reduced interest in a technological education provide critical chal- lenges to the need for engineers in manufac- turing. The growing need for greater numbers of engineers in manufacturing is emphasized in reports of national panels, such as Educa- tion for the Manufacturing World of the Future (National Academy of Engineering, 1985), and by the relative performance in this area by our principal competitors, especially Japan and the Federal Republic of Germany. In Ja- pan, engineers constitute 40 percent of the workers in the shop, compared to 10 percent for the United States (Lewin, 1988). One way to respond to this need is to consider addi- tional resources, such as foreign and foreign- born engineers. A recent study by the Na- tional Research Council (1988) indicates that we cannot accomplish our educational and research programs in American engineering schools without foreign-born individuals among faculty and graduate students. If we are to create a flow of new knowledge and engineers into manufacturing, we must con- sider these foreign-born students and engi- neers as a national resource in the tradition of the American melting pot. They are usually the brightest from their countries, and most would like to remain in this country. Although the effective use of foreign stu- dents, engineers, and scientists can have a positive impact on our needs for technical skills, it does not answer the underlying ques- tion, "Why are so few of our young people willing and able to pursue technical educa- tions, especially at advanced degree levels?" Once we answer this question, we may be able to attract and prepare more U.S. students for technical careers. Lifelong Education: It would be impossible and unwise to try to replace our engineers in in- dustry with new graduates. The experiential base in manufacturing is a critical corporate and national resource. However, if our engi- neers are to contribute throughout their pro- fessional lives, they must have the desire and the ability to educate themselves continually in new technologies. Even during their uni- versity education we must teach people how to learn continually and not just to prepare for exams. Further, we must make this con- tinuing education available to them in the most stimulating, appropriate, and conven- ient form. One mechanism to accomplish this goal is satellite delivery of educational pro- grams directly into the workplace. The Na- tional Technological University and a number of other individual universities are already using satellite delivery for continuing educa- tion in manufacturing. Design/Manufacturing Integration One critical issue in manufacturing today is the degree and effectiveness of the linkage between design and manufacturing. Over the years, corporations have developed a high degree of functional separation through the development of organizations assigned to specific domains of responsibility, such as product design, manufacturing engineering, and quality control. This separation has led to several detrimental effects on many corpora- tions. First, many product design engineers have lost touch with manufacturing, resulting in product designs that place a priority on product function and performance without adequate attention to the product's manufac- turability. Also, in most American companies, the definition of process occurs sequentially with the definition of product, being initiated only after the final product design is released. This creates a longer lead time for the trans- formation of design information into manu- facturing and process definition and also inhibits the ability of manufacturing engi- neers to affect the design with respect to its manufacturability. Because the largest propor- 20 HAN1FIN

tion of product cost is determined by design decisions, a sequential and disjoint process leads to high product cost, low quality, and slow time-to-market. Many U.S. companies have accurately identi- fied these critical issues and are employing several techniques to reverse the functional disintegration of design and manufacturing. These techniques include the following: • Design for Manufacturability: A number of explicit techniques have evolved to increase the manufacturability of product designs. Some are focused on specific elements of the manufacturing cycle, such as assemblability. Others seek to increase the overall robustness of the product design, decreasing the sensitiv- ity of product cost and quality to variations that might occur in its manufacture. Other companies have forced an early interaction between the definition of process and product through simultaneous or concurrent engi- neering efforts. • Concurrent Engineering: Concurrent engi- neering is an extension of the interaction be- tween product and process definition. A re- cent workshop on the subject defined it as "a systematic approach that creates a product design that considers all elements of the prod- uct life cycle from conception through dis- posal and simultaneously defines the product and process design" (Hanifin, 1988b). In a few dramatic cases, such as Ford and ITT, the use of concurrent engineering (especially, related quality techniques) has resulted in dramatic improvements in the quality, cost, and timeli- ness of products (Sullivan, 1986; 1987). • Computer-Aided Process Planning: Another concept for reducing the time and difficulty of the transformations between product and process is the generation of computer aids for process planning. These include models of processes, allowing a variety of process and tooling definitions to be evaluated on a com- puter before commitment to a particular proc- ess plan or setting of process parameters. This includes phenomenological models of specific processes, such as injection molding or form- ing and may include corporate-specific ma- chine capacities and capabilities. All of this drives process knowledge back to the design engineer, forcing an early evaluation of manufacturability as the principal objective. It also seeks to capture process and manufactur- ing knowledge from an aging work force of manufacturing engineers. • Feature-based Design: Most CAD systems today create designs through a combination of points, lines, and surfaces. These elements, in and of themselves, have little meaning to a product or process engineer. Rather, product engineers are interested in design features that reflect product functionality. These fea- tures might include "webs" to carry loads, or "shoulders" for bearing surfaces. Manufactur- ing engineers also consider features, such as "pockets" that must be removed, or "holes" that must be drilled. If features are adequately defined in product form and func- tion and processing operations, they can pro- vide an increased level of knowledge within data structures and thereby enable a more effective design and integration of manufac- turing. Invention vs. Exploitation It is a commonly held opinion that much of Japan's competitive success in manufacturing is based on its effective exploitation of the inventions of others, especially those of the United States. In fact, the Japanese have been more effective in implementing many of America's technological innovations on their factory floors than American engineers have been. Our relative preference for invention, as opposed to implementation, has its roots in our "NIH" (not-invented-here) syndrome. It has been aggravated by the movement of engineering schools away from a curriculum of engineering and toward a curriculum of engineering sciences. The balance of invention and implementation can also be viewed in the strategic framework of the positions that countries and their com- panies assume within the product or technol- ogy cycle (Ergas, 1987). The United States has clearly executed a strategy that seeks to cap- ture technological leadership by being the first to discover and use new knowledge. Japan, and others, "counterpunch" by using incremental improvements (especially in their processes) to minimize advantages of inven- tion. Ergas argues that our comparative over- emphasis on creativity does not create com- mensurately large gains in per capita income. Brooks and Guile (1987) observe that the abil- ity of a nation to generate technological ad- vances is insufficient by itself and may not THE PARADOX OF AMERICAN MANUFACTURING 21

even be essential for improving the national competitive position. Regardless of the strategy used, it is clear that U.S. companies can gain a great deal through increased emphasis and ability to implement new technologies, especially on the manufac- turing floor. It is ironic that the deemphasis was, in many cases, justified on a superficial strategy of "Yankee ingenuity." Real Yankee ingenuity was born of craftsmen who de- signed and built their products. Today, it has come to mean the design of products without concern for their manufacturability. Design- ing the next mouse trap has become more important than building it well. Although this need is great, we must be care- ful that the pendulum does not swing too far. Any increase in emphasis on engineering practice and the implementation of technolo- gies should be aimed at creating a balance with engineering sciences and invention rather than replacing or eliminating those. The strengths of American engineers in such areas as engineering analysis, creativity, and entrepreneurship are assets to manufacturing and must not be lost. If we are to compete effectively internationally, we must have both the flow of new ideas and technologies and the capability of exploiting them in our manufacturing companies. This need for a balance of innovation and exploitation was also noted in a recent report of the National Academy of Engineering (1988, p. 27): "The effective exploitation of new technologies may be difficult, but it pro- vides a major opportunity to excel in interna- tional commerce. It is incumbent on industry to join with other sectors of society in the effort to keep the United States in the fore- front of the creation, development, and appli- cation of new science and technology. It is also imperative that government create an environment that facilitates the use of U.S.- created technologies by U.S.-based produc- ers." The Japanese are clearly moving toward par- ity, and then leadership, in the creation of new knowledge. Two indications of their success are their publications and patents. Citations to Japanese articles in engineering and technology have doubled in the period from 1973 to 1986. According to a 1987 report by the National Academy of Engineering and the National Research Council Office of Inter- national Affairs, 'The total number of re- search publications by Japanese engineers surpassed the output of French and West German researchers in the 1970s, and the USSR in the early 1980s." In the mid-1980s the number of Japanese technical publications will probably surpass the British and be sec- ond only to that of the United States. The three top corporate recipients of patents in the United States in 1987 were Japanese companies. With its aggressive Technopolis Strategy, Japan's strength in innovation, linked to commercialization, is certain to in- crease further. This creates another element of our window of opportunity. If Japan succeeds in equaling or surpassing our capabilities in innovation of technology (i.e., creation of new knowledge) before we equal or surpass their ability to exploit new knowledge, the window may be closed forever. MANAGEMENT IN THE MANUFACTURING ENTERPRISE People, finances, and technology are three of the four critical systems in any manufacturing company; the fourth element is management. Management must provide the leadership and strategy if the other elements are to have the optimal impact on the company. Leadership Articles in the popular press often refer to the need for U.S. manufacturing companies to "retain a competitive position" or "become competitive." If a coach or general manager of any professional sports franchise in Amer- ica issued a statement that his goal was to "become competitive," it would be his last statement for that team. In sports competi- tion, winning the championship is the only acceptable goal. Similarly, our manufacturing companies should aim at becoming world champions not just competitors. To attain the goal of being best, the United States needs managers who are leaders as well. Managers in manufacturing companies must expect nothing short of excellence. They themselves can never provide an effort that is "good enough" or expect the company to be "just as good as the competition." Those atti- tudes must be eradicated from the top down. 22 HAN1FIN

Manufacturing Strategy Manufacturing, with its array of new tech- nologies and systems, provides an enormous opportunity to create strategic advantages. However, most American manufacturing companies have not developed a manufactur- ing strategy that fits with the corporate busi- ness strategy and drives a selection of techno- logical, human, or systems investments. Skinner (1974) has said, "A factory cannot perform well on every yardstick. There are a number of common standards for measuring manufacturing performance.... These meas- ures of manufacturing performance necessi- tate trade-offs—certain tasks must be compro- mised to meet others. They cannot all be ac- complished equally well...." This implies the establishment of a manufacturing system based on strategy. Conversely, it is also appro- priate that corporations develop strategy based on their current and anticipated manu- facturing strength. Regardless of the direction of cause and effect, it is critical that there be a strategic fit between manufacturing strategy and the manufacturing system. Further, the manufacturing strategy must fit the corporate business strategy. There are a number of factors that inhibit the development of strategy and fit. First, most corporate executives have little understand- ing of technology in general and of manufac- turing in particular. This shortcoming has been the result of the long-accepted concept that good management can be applied to any industry and that knowledge of a particular product and process is not critical. That con- cept has led to the ascendancy of individuals with management, marketing, or financial backgrounds. At the same time, the manufac- turing management has been disenfranchised from participation in the setting of corporate directions. Instead of seeking a strategic fit, many companies invested in technologies that are either quick-fix solutions dreamed up by top-level management, or biased techno- logical choices promoted by articulate tech- nologists who favor their own knowledge base (and understood how to use the account- ing system). Fortunately, these issues of "fit" and the "short view" have been noted by many in- dustrial leaders, and a growing number of companies are responding effectively. One response is to provide the technical leaders of manufacturing engineering and the operations managers with a clear understand- ing of corporate business strategy. They must have not only the opportunity but also a di- rect charge to participate actively in the defi- nition of corporate strategy. Corporate execu- tives must, for their part, be considered "members of the technical staff." It is only then that corporations can expect to have both the strategies and the investments to create business advantages through manufac- turing. For example, a company may wish to com- pete by rapid introduction of new products in an industry characterized by rapidly chang- ing technology. They may also decide that corporate strategy will allow product cus- tomization to meet specific customers' needs. The manufacturing strategy to fit that particu- lar corporate strategy requires highly inte- grated design and manufacturing systems to reduce the time-to-market. The corporate strategy of responsiveness would require a high level of manufacturing flexibility. Invest- ments dictated might include design systems with a high level of attention to design-for- manufacturability, fast, accurate, and possibly automated generation of process definitions and, even the hard and soft tooling require- ments. Such technological investments as direct numerical-control machine tools, robot- ics for flexible assembly and material han- dling, computer-aided design and engineer- ing, and computer-aided process planning might be made. Also required are investments in human capital in such areas as training in design for manufacturability, and mainte- nance and operator training for computer- driven automation. Even after the fit between investment and strategy is accomplished, the strategy must be clearly enunciated and understood by manu- facturing management. Otherwise, machines and systems purchased and installed for one reason might be used for something com- pletely different. For example, in the case just described, a flexible manufacturing system might be used to reduce cycle time and work- in-process in the factory. However, the manu- facturing floor supervisor, thinking that these machines are expensive, might attempt to maximize machine utilization by having extensive queues of work-in-process before THE PARADOX OF AMERICAN MANUFACTURING 23

each machine, thereby subverting the very reason for the capital investment. Once the concept of fit is understood, execu- tives in manufacturing companies can dare to lead, secure in the creation of strategic vision and the selection of investments to support that vision. THE RESPONSE The issues relating to the environment, the technologies, and the management of manu- facturing are indeed ominous. They are woven together in an intricate pattern with many strengths and weaknesses that vary by industry and company. However, if we view the whole cloth, the paradox remains: The challenge to our future is real; the strong economy is real. Clearly, we need to awake to the challenge. When we look closely at the complexity of the situation, even the Sputnik analogy fails. No single event will affect all industries and people. Manufacturing excellence must exist in thousands of American companies, not just in one massive program such as NASA. The response required is a national one from our companies, our government, and our people. Fortunately, the resources for that response exist today: • Although their commitment to their com- panies has been shaken, the workers can do the job. Given the opportunity and the incen- tive to contribute, they will. • The technical position of the United States and the U.S. companies is still strong. • If the issues are presented properly, legisla- tive and corporate leaders will grasp the criti- cal issues and lead in appropriate directions. • When it is clear that teamwork is required, Americans can still form teams that are more effective than any in the world. • The financial strength is there, and the devaluation of the dollar should assist corpo- rate profits, which combined with low inter- est rates will allow capital investment in manufacturing technologies and systems. • Universities are willing and able to create the necessary scale and quality of manufac- turing education and research programs. • In fact, in every issue and challenge de- scribed in this paper, there are good examples of American organizations and individuals who have recognized the critical issues and effectively responded to the challenges or grasped the opportunities. It is incumbent on all of us to identify these cases, study and document the responses, and replicate their effectiveness across the country. Although we have the required resources to respond, we do not yet have the resolve. The challenges are distributed throughout manu- facturing America, and, indeed, nonmanufac- turing sectors as well. In our society, compa- nies compete, countries do not. It is necessary, but not sufficient, that the issues be under- stood by a few leaders within the nation. The issues need to be understood and acted on by large and small companies, by accountants and manufacturing engineers, and by product engineers, boards of directors, and school boards. The response requires action by every manufacturing company and by government and academia to provide a fertile competitive environment. We need to recognize the current situation for what it is: an opportunity to rally in the midst of a battle we are slowly but steadily losing. If we grasp this opportunity, we can, in the next decade, reestablish the United States as the world standard of excellence in manufactur- ing. Further, if we can regain that leadership through a combination of competition and cooperation, we can lead the world to a pe- riod of unparalleled prosperity. The world markets, and individual market shares, can both grow, creating a larger share for all, rather than endure the debilitating competi- tion in which a few gain a larger share of an unchanging market. If we do not grasp this opportunity, we will surely lose the foundation that manufacturing provides our economy. Without that, and the other segments dependent on the manufac- turing base (such as services), the economy will deteriorate, causing the United States to lose its position as the leader of the Western Democratic World. Such an outcome for the United States and the world is untenable. Leo E. Hanifin is director of the Center for Manu- facturing Productivity at Rensselaer Polytechnic Institute. 24 HAN1FIN

Bibliography Brooks, Harvey, and Bruce R. Guile. 1987. Overview, Technology and Global Industry: Companies and Nations in the World Economy, B. R. Guile and H. Brooks, eds., National Academy of Engineering. Washington, D.C.: National Academy Press. Business Week. 1988a. Motorola sends its work force back to school. (June 6,1988): pp. 80-81. Business Week. 1988b. Special Report: The productivity paradox, and how the new math of productivity adds up, (June 6). Cohen, Stephen S., and John Zysman. 1987. Manufactur- ing Matters: The Myth of the Post-Industrial Econ- omy, New York: Basic Books. Council on Research and Technology. 1988. National Research and Development Policies for 1988 and Beyond: The CORETECH Agenda. Washington, D.C.: Council on Research and Technology. Economic Report of the President, (Transmitted to the Congress, February 1988), Washington, D.C.: U.S. Government Printing Office. Ergas, Henry. 1987. Does technology policy matter? Pp.191-245 in Technology and Global Industry: Companies and Nations in the World Economy, B. R. Guile and H. Brooks, eds.. National Academy of Engineering. Washington, D.C.: National Academy Press. Guile, Bruce R., and Harvey Brooks, eds. 1987. Technol- ogy and Global Industry: Companies and Nations in the World Economy. Washington, D.C.: National Academy Press. Hanifin, Leo. 1987. Comments on the purported failure of manufacturing technologies. Paper presented at Material Handling Focus '87, Atlanta, Georgia, Sep- tember 19,1987. Hanifin, Leo. 1988a. Manufacturing education and its role in industry's retention of a strong competitive position on the world. Paper presented at IEEE Tech- nology Policy Conference: Manufacturing and the U.S. Engineer, Washington, D.C., March 1988. Hanifin, Leo. 1988b. Notes from the DoD Workshop on Concurrent Engineering — Phase I, Alexandria, Va., May 11,1988. Hanifin, Leo E., and Arthur Ruggles. 1988. "A Study of Research Priorities and Research Activities in Robot- ics "(USA). Final report to Robotic Industries Asso- ciation. (March). Krugman, Paul R., and George N. Hatsopoulos. 1987. The U.S. competitive problem in manufacturing. Business Week (December 5): 80. Landau, Ralph, and Nathan Rosenberg, eds. 1986. The Positive Sum Strategy: Harnessing Technology for Economic Growth. Washington, D.C.: National Academy Press. Lewin, David I. 1988. Washington Window, column. Mechanical Engineering, (March). Morrison, Catherine, E. Patrick McGuire, and Mary Ann Clarke. 1988. Keys to U.S. Competitiveness. A Re- search Report from the Conference Board (Research Report No. 907), New York, N.Y. National Academy of Engineering. 1985. Education for the Manufacturing World of the Future. Washington, D.C.: National Academy Press. National Academy of Engineering. 1988. The Techno- logical Dimensions of International Competitiveness. Report of the Committee on Technology Issues that Impact International Competitiveness. Washington, D.C.: National Academy of Engineering. National Academy of Engineering and National Re- search Council Office of International Affairs. 1987. Strengthening U.S. Engineering Through Interna- tional Cooperation. Report of the Committee on International Cooperation in Engineering. Washing- ton, D.C.: National Academy Press. National Commission on Excellence in Education, 1983. A Nation at Risk: The Imperative of Educational Reform. Washington, D.C.: U.S. Government Printing Office. National Research Council (Manufacturing Studies Board). 1985. "Computer-integrated manufacturing: Barriers a/id opportunities. National Productivity Review, (Spring): 170-179. National Research Council. 1983. International Competi- tion in Advanced Technology: Decisions for America. Office of International Affairs. Washington, D.C.: Na- tional Academy Press. National Research Council. 1986. Toward a New Era in U.S. Manufacturing: The Need for a National Vision. Manufacturing Studies Board. Washington, D.C.: National Academy Press. National Research Council. 1988. Foreign and Foreign- Born Engineers in the United States: Infusing Talent, Raising Issues, Washington, D.C.: National Academy Press. Report of the 1983 Presidential Commission on Indus- trial Competitiveness (Global Competition: The New Reality). Scott, Bruce R. 1987. Competitiveness: 23 leaders speak out. Harvard Business Review, (July-August): 109. Skinner, Wickham, 1974. The focused factory. Harvard Business Review, (May-June). Sullivan, L. P., 1986. The seven stages in company-wide quality control. Quality Progress, (May): 77-83. Sullivan, L. P., 1987. The power of Taguchi method. Quality Progress, (June 1987): 76-79. Woo, T. 1988. Presentation to the DoD Workshop on Concurrent Engineering. Alexandria, Va., May 25, 1988. Young, John A. 1985. Global competition: The new reality. California Management Review 27(3)(Spring): 11-25. THE PARADOX OF AMERICAN MANUFACTURING 25

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