Just In Time -- The Business Of Staying In Business

Conventional wisdom says you should always seek more than one doctor's opinion, especially when the news isn't very good. That way of thinking certainly can be applied to the state of manufacturing in the United States.

For instance, if the health of the U.S. manufacturing industry is measured solely by the number of people employed, then the current prognosis isn't very encouraging. The latest figures from the U.S. Labor Department indicate that manufacturing employment declined by 34,000 during the summer.

But if you seek a second opinion -- in fact, if you just consult a different set of figures from the same agency -- you'll discover that manufacturing productivity is up by 2.6% and output is up at an annual rate of 5.1%. This is very good news, but it's also a bit disconcerting if you conclude this simply means that fewer people are doing more of the work.

For clarity, I consulted John B. Byrd III, president of the Association of Manufacturing Technology (AMT). He explained that these two manufacturing yardsticks -- employment losses and productivity gains -- are in fact symptoms of the same condition: the increased competitiveness of U.S. manufacturing within the larger global economy. And the key to that competitive edge is technology.

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"Automation," Byrd notes, "is the difference between the winners and the losers." Acknowledging that job losses are a political hot potato, particularly during election years, Byrd points out that this is a natural result of progress. Just as farming jobs have almost vanished, percentage-wise, from the U.S. workforce over the past century while agricultural productivity has advanced greatly over the same timeframe, a similar sea change is taking place within manufacturing. We no longer have the luxury of building our companies simply by adding more people to the payroll. To stay competitive against global competitors like China and India, whose labor force dwarfs the United States' in terms of sheer numbers, U.S. manufacturers need to concentrate on increasing the technical competency of their workers rather than simply seeking out cheaper offshore labor.

Simply throwing money at technology, of course, is no panacea, especially if you don't recognize exactly what the problem is. "Whenever you're in doubt about what to do, just ask your customers. Whatever they tell you, that's the right answer," suggests Carlos Cardoso, president and CEO of Kennametal Inc., a manufacturer of metal cutting tools.

As Cardoso sees it, "The global economy is a high-speed train that no politician can stop. If your customers are in China, then you need to have a production facility in China -- not because of cheap labor, but because that's where the market is. If you have global customers, then you have to start thinking like a global manufacturer."

Cardoso, who once worked for Confronting Reality author Larry Bossidy when he was at Honeywell/Allied Signal, believes that every successful manufacturing company shares the same three traits:

1. A clear vision and strategy that everyone in the company understands
2. The right processes in place to drive that vision to results
3. The right people to implement those processes

In short, while your customers are demanding that you build your products better, faster and cheaper, the key to doing that profitably -- which is the main point of being in business -- is to remain as competitive and productive as possible. In that spirit, then, hiring the best people, not just the most people, has become the new standard operating procedure for many U.S. companies.

David Blanchard is IW's editor-in-chief. He is based in Cleveland. Also see Chain Reaction: David Blanchard's new blog about supply chain management.