Foreign Competition Viewed as Only One Factor in the Decline of U.S. Manufacturing Jobs

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News articles on the elimination of manufacturing jobs in the U.S typically focus on foreign competition in the form of low worker wages. They fail to take into account the effect in recent years of industry moving from mass manufacturing to lean manufacturing.

According to Stephen H. Martin, publisher of The Oaklea Press and editor of the highly popular book on lean manufacturing, “Lean Transformation: How to Change Your Business into a Lean Enterprise,” news and magazine articles that lament a decline in the number of domestic manufacturing jobs tell only a portion of the story because they tend to focus on jobs leaving the U.S. and heading overseas.

Martin said, “It’s true that in the new, global economy, out sourcing to other countries has become commonplace. What the authors of these articles fail to recognize, however, is that workers’ salaries are only a small part of the manufacturing cost equation. And they overlook that the elimination of jobs isn’t all to foreign countries. You see, the waste inherent in the old mass manufacturing system is enormous. Lean manufacturing simply requires fewer people to produce a like amount of goods. That’s a major reason so many manufacturing jobs have been eliminated.”

For more than ten years, now, manufacturing companies around the globe have been changing the way they work. Most people employed in service industries may have barely noticed, but this transformation has resulted in huge benefits for almost everyone, Martin said. It’s a primary reason labor productivity has been up about 4% annually in recent years and the prices of manufactured goods have remained steady, or even dropped.

So-called lean manufacturers do not build goods to forecast and store them in warehouses waiting for them to be sold, tying up capital and taking up huge amounts of space. Like Dell Computer, they wait until they have an order in hand, and then they assemble a product quickly, using continuous flow, lean manufacturing techniques.

Mass manufacturing typically generates enormous amounts of inventory in the form of work-in-progress––inventory that takes up expensive space and ties up capital. Building to forecast means gambling corporate dollars by making products without being certain someone will buy them. And it requires investments in warehouses to store them. When forecasters are wrong, goods often are sold at a loss––if they are sold at all. Imagine, for example, how much less a product in the electronics industry is worth six months to a year after it is made.

Lean manufacturing eliminates this waste. For a variety of reasons, a lean operation typically turns out higher-quality products than a mass manufacturing cousin. It almost always requires 25% to 40% less direct labor. It uses about half the floor space because no room is required for work-in-progress. Warehousing costs are cut to the bone because finished-goods and parts inventories are normally reduced from several months’ to only a few days’ supply.

Many American manufacturers caught onto this in the early to mid 1990s and have now adapted to the new way. These companies are able to compete in the global marketplace no matter in what country or location their products are assembled. Dell Computer, for example, builds products all over the world, including the United States, as does Toyota.

Martin said that in the last five years more and more domestic manufacturers have begun converting to lean manufacturing, which accounts for sales of more than 50,000 copies of his book. He said the biggest problem they run into is easy to identify but difficult to overcome. It is often the real reason behind the closure of a plant. People in middle management and in supervisory positions must shift from a “command and control” mentality to that of “team leader.”

Martin said, “If they don’t (change the way they operate), the lean model won’t work. Those who have been operating in the command and control mode all their lives usually find this difficult. For many it may be impossible. Often, top management may find it quicker and easier to scrap a factory and start over somewhere else, perhaps in another country or another state, than to spend time and money teaching old dogs new tricks.”

He went on to say that studies show that workers in a lean enterprise are happier with their jobs than those in traditional businesses. “Why wouldn’t they be?” he said. “They are no longer viewed or treated as unthinking robots. Because the hierarchy has been eliminated and no supervisor is breathing down their necks, they must use their heads, make decisions, and solve problems in consultation with other team members. The only downside––and whether it is a downside depends on your point of view––is that there are fewer of them. When a factory is fully lean and operating at its former capacity, it often will have 40% fewer employees. Unfortunately, this part of the story is all that normally makes it into print.”

The Oaklea Press was founded in 1995 and specializes in books that help executives increase the productivity of the businesses they run. For more information visit http://www.LeanTransformation.com.

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