After watching the History Channel’s TV series, “The Story of Us,” which covered U.S. history from colonial times, I realized the importance that innovation and technology played in the country’s prosperous growth. One segment covered the build-up of the manufacturing base that helped the U.S. win World War II and left the country representing one-half of the world’s manufacturing capacity. This capacity then fueled unprecedented economic growth and affluence. Manufacturing was king.
Today, manufacturing is of less-repute. Baby boomers were advised to get a college degree so they wouldn’t have to work in a hot, dark, dirty, smelly plant. In the 1980s, when manufacturing excellence had shifted to Japan, MIT started its Leaders for Manufacturing Program to help bring back some of the shine to domestic manufacturing. Last year, MIT changed the name to the Leaders for Global Operations Program — shedding the word “manufacturing.”
What happened? The affluent United States became a consumer nation enamored of a big-picture concept — Supply Chain Management — and this fostered the perception that manufacturing was just about plant operations. The global Supply Chain Council’s Supply Chain Operations Reference (SCOR) model, launched in late 1996, highlighted four process components: source, make, deliver, and plan. Manufacturing was just one component, covering plant floor processes, not the overall management of manufacturing. In the minds of product companies, the “plan” and “deliver” processes took center stage, while “source” and “make” were often outsourced and off-shored. Manufacturing knowledge went with them.
I cringed when I heard of an apparel company that had outsourced production to China and wanted to move it to Mexico. To set up in Mexico, it had to rely on Chinese managers, having lost the employees who knew how to start up a plant! When oil prices started to rise in late 2004, the U.S. found itself short on petroleum engineers who knew how to drill for oil. A recent Wall Street Journal article, “Some Firms Struggle to Hire Despite High Unemployment,” stated that the gap in finding people to fill jobs “is most notable in manufacturing.”
Over time, the projected long-term rise in oil prices will drive “source” and “make” operations closer to points of product consumption. If they want to be competitive globally, U.S. companies need to regain the manufacturing knowledge needed to move those vital operations around. To do this requires a renewed view of the importance of “Manufacturing.”
Larry Lapide is a research affiliate at the MIT Center for Transportation & Logistics
3 Comments
A great observation, Larry! Most executives within the manufacturing sector understand the importance of clearly branding their product lines and their overall businesses — to maintain control of the message and positively influence perception. Maybe it’s time for these leaders to apply that skill to “manufacturing” itself! The struggle to attract qualified employees really isn’t that different than the struggle to attract customers. Food for thought, for sure!
We need to motivate the next generation and every day, engineers around the country volunteer many hours giving back and reaching out to develop future manufacturing and engineering professionals. As an example, I’ll relate some stories from our local Future Scientists and Engineers of America (FSEA) organization. Some of the things we are doing include squirting rockets and flying pumpkins… more details on my blog post…
http://www.manufacturing-operations-management.com/manufacturing/2010/07/motivating-the-next-generation-of-engineers-and-manufacturers-.html
Hi Larry
Spot on analysis. 25 years ago, when I left school, colleges were lecturing to technicians and crafts people. Technicians received up to second year degree level education over a 5 to 7 year period part time, and 4 years full time. Craft people and technicans learned practical skills that they could use in their daily jobs, or potentially when they became first tier managers, to help others in their companies.
Today, few colleges lecture technicians and craft people. Instead of a structured learnign process, they have problem based learning projects. They try to understand what the problem is, what the need to know to fix the problem, and then ask for assistance – explanations, technical data and guidance. This type of learning relies on their creativity and motivation to experiment, while the formal lecture style of education has moved almost exclusively to the domain of universities. These in turn are charging higher and higher annual fees, and are packed out with foreign students that will take the lessons learnt back home when they finish. The current batch of university lecturers and college teachers shall eventually retire, leaving a knowkedge vacuum that shall then in turn require US and other Western students to travel East to obtain their prized degrees. Certainly on-line learning can be provided to everyone everywhere, however the significant risk is that experience that underpins these modules shall be lost too.
The United States forces large corporations that have a significant purchase spend to dedicate some of that budget to minority owned enterprises. To qualify, companies must be majority owned by women and ethnic minorities.
Your last comment about the “drive (to) “source” and “make” operations closer to points of product consumption” is less to do with petrolium, although this is a factor. Most imports have a cost of transportation of less than 1% of landed cost. Making in China or elsewhere where the unit price is low is a good strategy if the design never changes and the products have a low ‘time cost of money’ – they do not depreciate or are not made obsolete quickly, and do not cost much to store. However, to obtain the low unit price, many thousands or millions of units must be bought. This drives up the total invoice paid. Honda, under Dave Nelson, took the strategy ‘make where you sell, buy where you make’ in order to make just-in-time work. For this reason, we can now see Japanese companies like Nissan, Honda and Toyota setting up ‘transplant’ facilities to produce in America goods sold in America.
Setting up in Mexico – certainly. Just take a drive from down-town Monterrey to the airport. For 20 miles, 30 km, roughly 80% of the factories are Chinese owned. Their approach is simple. Mass produce component parts in China with a low value and price. Export these to Mexico. Assemble to order and distribute to the customer – door to door – within 24 to 48 hours. This approach increases the value add within NAFTA to above the minimum 60% threshold in order to have zero import tax to the US or Canada. They also reduce the value of the stock to its lowest level until it is required. The Chinese companies in Monterrey have applied the Toyota Production System and Honda strategy, within the legal and taxation structure, and are now winning. Recent news that German output increased 40% this year, and that the German government is to tighten their fiscal belt is considered sustainable. German brands look set to profit from the superluxury brand segment in China, where about half of their profit is coming from.
The recent ‘banking crisis’ and sub-prime situation created this dip in economic performance. The manufacturing sector pulled the world out of recession from 1929 through 1989. In 1990, the UK had 26% of the labour force working in manufacturing. Today, this is about 9%. The UK had over 140 vehicle brands before WWII. The last high volume UK brand to produce vehicles was Rover, which was owned for a while by BMW. To paraphrase Clarkson from “Top Gear”‘, “It isn’t that we don’t make good things, it’s just that (British owned companies) make nothing at all”.