Overlooked and Underappreciated

Dec. 21, 2004
Modern manufacturing -- not services -- supports U.S. economy

"Far from a diminishing share of the economy, factories in the future could very well account for a growing share of the economy." That provocative sentence caught my eye as I was reading a recent issue of KeyViewpoint, an interesting collection of economic news and comment published periodically by KeyCorp, a Cleveland-based financial institution. The sentence is provocative in part because it seems to be at odds with reality. The fact is that factory jobs in the U.S. have been declining in number since the mid-1950s and that manufacturing employment now accounts for only 15% of all U.S. jobs, compared with 24% two decades ago. The fact is that America has a substantial service economy, iconized for millions of Americans by conveniently located and well-stocked K-Mart stores. Clearly Kenneth T. Mayland, the senior vice president and chief economist at KeyCorp, thought about those things -- and several others -- before he wrote the words with which this column begins. Mayland, for example, specifically acknowledges the 20-year decline in U.S. manufacturing employment. But he makes the important point that manufacturing's share of the U.S. economy, adjusted for inflation, has been roughly constant (17% to 19%) for more than 20 years. Also, Mayland reports that the last time he was in a K-Mart store, most of the things for sale were manufactured items. And Mayland notes, "Manufacturing accounts for a significant portion of the demands for all the credit and other banking services provided by KeyCorp." What's more, Mayland sees technology redefining the economy -- to manufacturing's benefit. "The [I]nternet will undoubtedly allow many . . . manufacturers to build to order and sell directly, thus cutting out the middlemen," he asserts. And, thus, "when [I]nternet commerce catches on, what was formerly accounted as retailing services in the GDP [gross domestic product] accounts will be attributed to manufacturers." As I read and mulled over what Mayland had written, I began to think that even as Mayland was writing about manufacturing as the underappreciated sector of the U.S. economy, he was underappreciating all that is happening in and around factories. A factory, for instance, is no longer a place where sheet metal simply is stamped or electronic components are assembled. A factory these days is a place connected to suppliers and customer by all sorts of sophisticated telecommunications, a place where benchmarking helps translate strategic principles into best practices, a place where failure mode effect analysis and poka-yoke (mistake-proofing) methods are working to improve quality. A factory is a place replete with technologies, from automated guided vehicles and flexible machining centers to advanced management resource planning systems and machine vision. A factory is peopled by natural work teams that handle production scheduling, skills certification, safety reviews, environmental compliance, materials management, and performance reviews. A factory is a place where people are concerned about market results, profitability, and customer retention. I think you get the point. The factory, long the symbol of manufacturing, is much more than a place where things just are made and assembled. Significantly, the same is true of manufacturing. Manufacturing is much more than production. Manufacturing is also administration, and R&D, and sales and marketing, and distribution. Manufacturing is a matrix of activities adding value to each other quickly, deliberately, and globally. Indeed, these days what distinguishes manufacturing communities in the U.S. and around the rest of the world, what makes them truly world-class manufacturing communities, is that they are not simply places where lots of factories are located. They are places where headquarters offices, R&D facilities, sales and marketing operations, distribution centers, and factories work productively. They are places from which manufacturing is contributing a greater share of the economy than is generally appreciated -- and from which manufacturing could contribute even more in the new millennium. *** Please take a few moments to think about the places where your company does business. Do any of them meet the definition of world-class manufacturing communities? If so, I'd like to hear about them (e-mail to [email protected]) -- and so would the other members of the IndustryWeek World-Class Communities team. We're already working on the stories for our next -- our third annual -- World-Class Communities issue. We'd like to have your input. The results will appear on April 5, 1999.

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