American Manufacturing Can Bail Us Out

Dec. 8, 2008
Without Enabling the Companies Below $500 Million, the American and Global Economic Recovery Is Simply Not Possible

Read Charlie Gifford's blog... Hitchhiking Through Manufacturing

By Charlie Gifford, 21st Century Manufacturing Solutions LLC

We all know the American economy is in trouble. That’s old news. The question now is what do we do about it. Politicians and economists of all stripes have their pet solutions, but in the end, we must look to American manufacturing to dig the world out of the hole we’re in. This is the bottom line: Americans need higher paying jobs to support the global economy.

The individual manufacturing worker must dramatically (not incrementally) increase his or her productivity and value to the business (again)—and must be rewarded or punished accordingly.

How? American manufacturing plants must be able assume a new pull role in the global supply chain. They must be able to reconfigure resource setup and metrics to match changing market demand. The 21st-century American manufacturing plant and its workers must become a profit, not a cost center, driving the creation of global markets. The profit margin and compensation must be determined based on the maturity of the product, customer and market, not on some Wall Street hypothetical that starves plants with short-term metrics and forces managers into destructive short-term decisions.

Achieving this requires leaving the beaten paths of the last few decades. Major global manufacturers now must invest in their American plants to enable and secure their entire global supply chains. They must develop technology-based, adaptable knowledge workers, who explicitly know their supply chain roles and are compensated (or not) based on their performance metrics. Yes, this requires unions to wake up to global reality.

Looking at the plant worker in isolation is no longer possible. The compensation of the 21st-century knowledge worker must be based on performance to the profit contribution margin of the company. These requirements need alignment to (or creation of) the metrics from the market potential, supply chain, plant capabilities and financial expectations. This is currently a black art, but it must be demystified immediately.

Most American managers and executives are overly obsessed with efficiency and cost of the isolated process, not the actual effectiveness of the plant workflows and capabilities within the globally distributed supply chain.  They manage by department metrics, not process metrics.

The U.S. manufacturing base is currently far too linear, manual and monolithic. It hasn’t been truly modernized since the buildup for the Vietnam War., with the exception of some improvement during the 1980s. Many companies have moved linear manufacturing overseas to lower the labor costs of their monolithic, make-to-stock product lines. 

However, old-fashioned retooling is not the answer. American investment should not be in equipment, as many monolithic thinkers believe! Significant investment must be made in intelligent, knowledge-based manufacturing systems to support adaptive manufacturing for diverse, make-to-order product lines.

Presently, more than 85% of plants still are paper-based, with disparate, stand-alone solutions for production, quality, maintenance and inventory management. We must cross Moore’s Chasm and mature manufacturing IT technologies and methods now!

Current manufacturing operations management (MOM) systems, unfortunately, are very departmentalized, and based on dissimilar information models with custom interfaces and reports and misaligned metrics.

The resulting manufacturing communication breakdowns not only reduce the efficiency of the make-to-stock plant, but also make the effectiveness of changeover for make-to-order financially unjustifiable.

Another major constraint is that the emerging MOM solutions are based on workflow configurations. However, the MOM price must come down, so these solutions are available to American Tier 2 to Tier 4 mid- and small-market suppliers, so that the big guys stop moving their operations and their suppliers overseas. Any government bailout of the auto industry must support this goal or it fails. Without enabling companies below $500 million,  American and global economic recovery isn’t possible. But it’s truly impossible without some real leadership, vision, cooperation and courage from American manufacturing executives.

In addition, American workers must become knowledge workers that seamlessly interact with adaptive manufacturing systems. The bottom line here is that systems don’t make plants more efficient or even effective—flexible people and workflow processes do it.

For this to actually work, manufacturing organizations must consolidate the all their manufacturing IT systems into one new, autonomous MOM architecture and organization. It must exclusively control and optimize manufacturing operations, workflow. metrics, construction and supply chain connections, as well as oversee design, implementation and ownership of the life cycle.

To make adaptive MOM solutions truly assessable to the 250,000 mid- and small American manufacturers, the following risk-sharing methods should be applied:

  • Performance-based contracting with software vendors and system integrators;
  • An application service provider model for adaptive operations;
  • Adoption of application leasing programs to move fiscal capital expenditures to monthly operations expenditure.

We need leaders with real courage who are not afraid of risk and who understand that small failures and post-event analysis are part of the path to success. Effectiveness, not efficiency, is the key 21st-century manufacturing in America.

You, as process control engineers, plant managers or COOs, need to protect your jobs now by finding the courage to make a brave decision to drive adaptive manufacturing business processes, operations processes, organizational change, skill set upgrades and systems proactively into your companies before it is too late.   Your challenge, should you choose to accept it, is to become an agent of change.