"Made In America"

“Manufacturing has long been viewed as an essential pillar of a powerful economy. It generates millions of well-paid jobs for those with only a high school education, a huge segment of the population. No other sector contributes more to the nation’s overall productivity, economists say. And as manufacturing weakens, the country becomes ever more dependent on imports of merchandise, computers, machinery and the like — running up a trade deficit that in time could undermine the dollar and the nation’s capacity to sustain so many imports.” By LOUIS UCHITELLE, Published in the New York Times on July 20, 2009

THE SIX ENDEMIC WEAKNESSES

This was part of an article about the closing of a 57-year-old family printed circuit manufacturing business (Bartlett Manufacturing) in Cary, IL.  This reminded me of an article by MIT published nearly two decade ago (1990) after an MIT Commission looked into the loss of industrial performance in the US compared to Japan.[#]  The commission spent a year and a half conducting 600 interviews on three continents.  The Report exploded the view that “It’s a Government problem”, instead, it found six endemic weaknesses in the US:

1.      The first weakness was found to be the out-dated strategies, most notably mass production.  The pattern of production we cling to is that gigantic wheel with cogs that must keep turning no matter what, to produce large numbers of undifferentiated goods.  The workers are highly specialized and the relationship between manufacturers and suppliers is distant, adversarial and litigation-bound.  Compare that to the modern system of “lean” production, which is smaller, more nimble and can change models without shutting down the plant.  This produces a diversified set of products tailored to individuals, and tailored to a ‘broadly’ trained workforce that has flexibility to adjust quickly.  The landscape of mass closing of GM and Chrysler plants in the US and Canada attest to the ‘failure’ of this old manufacturing philosophy. 

In the same vein is our parochialism to believe that everything worthwhile lies within the USA.  This blinds us to ‘better technologies’.

2.      The second weakness was short time horizons.  Consider our electronics industry.  After WWII we were producing 96 percent of the consumer electronics we use; today we produce less than 2 percent of the consumer electronics we use.  The commission called this “not sticking to our knitting.”  There is a ‘mis-calculation’ of Return on Investment, where jobs and taxes are ignored.  Part of this short-term orientation is the high cost of capital - - maybe 50 percent to 100 percent higher than in China.   Financial ‘tools’ play to high a role in consuming available capital and the ‘quick profit’ to heady a reinforcer in our short-term horizons.  The commission cited seven factors besides the high cost of capital, which are responsible.

3.      The third weakness was the technology difficulties in going from invention to product.  The US invented transistors, color television, the VCR and mobile phone. Yet only a trickle of these products is made here today.  Of the products we do make, many have defects.  Our automobiles now have 30 percent more defects in the first six months after they are sold than Japanese automobiles, or Japanese / Korean automobiles build here in the USA.  Two-thirds of our industrial R&D funds go toward inventions while one-third goes toward the processes of making these products.  Our foreign competitors reverse the numbers.  Maybe we have forgotten Juran and Deming, but inventing only starts the cycle of “Continuous Improvement”.  Our old adage, “if it ain’t broke, don’t fix it” hardly will achieve daily, relentless, gradual improvement.  We favor the inventor and think a career in manufacturing spells drudgery, while the Asians see manufacturing as an opportunity to ‘create the next, better product”.

4.      The fourth weakness was the neglect of our human resources. We pioneered mass education, but today we rank between 15^th and 18^th in high school literacy and numeracy.  This is happening at the worst possible time – when we need our work force to be able to read and understand more complex manuals of instruction.  On-the-job training is also inadequate.  Between $50 billion and $150 billion a year is spent on on-the-job training that goes primarily to teach people the basic functions the high school didn’t teach them.  Whatever is left is used to create specialists rather than making them capable in a broad sense to be flexible at their work.

5.      The fifth was a failure of cooperation.  Our companies have large, deep hierarchical organizational structures (sometimes twelve layers deep), while other newer companies use a much shallower structure maybe three layers deep.  This shortens feedback between designers and makers by 2X.  This pattern is repeated by large numbers of suppliers whom we deal with like adversaries instead of having a few suppliers treated as partners in a common effort.  Some of this might stem from the current trend to ‘overpay’ CEOs, where the current ratio between hourly worker and CEO compensation is 400X and being reworded by Boards to layoff workers rather than fixing product development or manufacturing efficiency and quality.

6.      The sixth and last weakness has to do with government.  When they started the study, they were told the government was to blame for everything, that was not the case.  They did find that the U.S. government and U.S. industry functioning as two totally independent entities, each oblivious to the other’s aspirations, needs goals, and purposes.  The CRATR Program was intended for individuals and companies to take advantage of US Gov’t Laboratories, but that is not achieving its goals.  Foreign governments have their laboratories actively involved in creating business opportunities and IP that will enhance their businesses and create jobs.

 

The MIT Commission identified three trends in this nations industrial performance for the early part of the 21st century: First, we will be going more international.  The ownership, the location of the company, and the technologies it uses, will all be international.  Second, people will expect more sophisticated products.

Third, technology will play an even more important role tomorrow. 

They identified three technologies as dominant in the 21st century: information sciences, life sciences including biotechnology, and material sciences and technologies.

Finally, the MIT Commission took the six weaknesses, the three trends, and the best practices patterns they observed all over-the-world, and produced five imperatives, which, if pursued by government, industry and the educational institutions of this nation, will give us back our productive edge.

THE FIVE IMPERATIVES

·                The first imperative is to focus on producing well the new ways.  By this they meant putting production ahead of finance.  Finance is important, but a CEO MUST understand his products and the production processes it employs.  “LEAN’ concepts need to be adopted and supported (you can download a free E-book on LEAN Mfg. Concepts from http://hdihandbook.com).  Managers need to become very knowledgeable of their products, their competitors, and their core competencies.  Boards need to embrace more than “compensation” and focus on the products the company produces and those production means.

·                The second imperative is to cultivate a new economic citizenship.  We must stop viewing the workforce as a cost-factor to be minimized, and start to regard it as a precious asset to be nurtured and cultivated.  Flexible manufacturing and flexible products need flexible workers.  Responsible workers involved in doing so much more must be rewarded more with the profits of the company-and this is what the best companies in the world do.

·                The third imperative is to blend cooperation and individualism.  In professional sports, the most successful teams have a blend of individualism and cooperation.  When you combine the American tradition of cooperation with our individualism, the results will be stronger than either.

·                The fourth imperative is for us to learn to live in a world economy.  We must learn foreign languages, cultures, practices and especially, technologies.  That means benchmarking our products and services against the best internationally, not the company next door or in the next state.  We also must insist that our goods are treated as fairly abroad as foreign goods are treated here.

·                The fifth and final imperative is to provide for the future, to invest in the broadest sense for the education of our children.  We must insist on educating our children in the best way possible.  I had the advantages of the “Sputnik Scare” and “the missile gap” creating new emphasis on science and math when I was going to school.  The result, “landing on the moon in this decade-1969”.

 

“The imperatives presented by the MIT Commission are not a menu from which to pick a favorite.  They must all be used effectively to regain our international competitiveness.  There are no shortcuts!” [#]

 

 

“One tactic for strengthening the manufacturing sector, in the administration’s view, would be a shift in tax policy. The research and development tax credit, which is now subject to renewal by Congress, would be made permanent, encouraging much more R. & D. among manufacturers, a senior Commerce Department official argued. And foreign taxes paid on profits earned overseas would not be deductible in this country until the profits were repatriated, a restriction that might discourage locating factories abroad,” wrote Uchitelle.  The goal is to arrest manufacturing’s dizzying decline. It “was the pillar on which we built the middle class,” said Thea Lee, policy director for the A.F.L.-C.I.O., “and it is hard to see how you rebuild the middle class without reviving manufacturing.”

 

Finally, it would not be right to let the whole Apollo moon landing 40th anniversary go by without a comment, right? After all, everyone else has an opinion on what it meant and what it means. So please indulge me, here’s my take:

I am NOT going to go over what an accomplishment it was, what it taught us technically, what it taught us about what we can do with a major commitment (people, money, priorities). Many others have covered that.

But here’s my dilemma: as someone who has read and owns many books and seen documentaries on the Apollo project, and admires it beyond mere words, I am nevertheless troubled by all this anniversary-celebration business.

Here’s why: too much celebrating of the past means that the engineering accomplishments of the present are taken for granted. It’s almost as if the Apollo celebration has that “yes, those were the days” atmosphere. Back then, engineers and astronauts were honored and respected by society; today, it’s another story.

# This was from a talk given by Michael L. Dertouzos on March 30, 1991 before the Commonwealth Club in San Francisco.

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