Currently US manufacturing firms are playing catchup with the Japanese. The one area in which we are ahead in software development in CAD, CAE and CIM. The main US problems are:
a. Defective primary and secondary education system: The US does not produce world class high school graduates. The US student only goes to school 180 days versus 240 in Japan. US students in the long summer break forget what they have learned and have to be retaught. US school do not give students much homework; instead they emphasize extra curricular activities such as football. Consequently, US firms must spent billions to teach workers even the simplest algebra in order to implement statistical process control.
b. US MBA students are taught finance. The best until recently the best wanted to go to Wall Street and only the rejects went into manufacturing. Moreover, US managers have a short planning horizon which precludes making the necessary investment to innovate in manufacturing.
c. Accounting for Automation: Until recently, US accounting practice in manufacturing was defective because accountant were placing a value on automation expenditures only for reduction in direct labor. They placed no value on increased quality control and greater flexibility.
d. Poor Management-Labor Relations: Until recently the US management style was top down in that managers gave orders to workers and rarely listened to them. Labor unions created rigid work rules which made reorganizing the workplace very difficult. In addition, executive privileges angered the workers. For example, Japanese executives listen to workers suggestions, eat with the workers in their cafeterias, do not have executive parking lots, and take pay cuts themselves before asking the workers to take a pay cut.
Since the 80s, surviving US manufacturing managers are making a painful transition to world class status in manufacturing. Accounting practice in manufacturing has been upgraded. Manufacturing firm have been reorganized to imitate the Japanese with design teams to obtain better products in much shorter time. Business leaders are now painfully aware that they must work with politicians in order to improve the educational process. Universities are now emphasizing manufacturing. We are talking about a decade or two before significant progress in education reforms will be realized. That is why as a patriotic citizen, it is my duty to get you students to do some work
Innovation in automation is a difficult task for a firm because a major renovation of an old plant is expensive and creating a new plant is very expensive. To achieve an innovation that is achieve sufficiently better performance such that the investment can be considered an innovation requires much practical learning through experimentation to achieve the potential of the new equipment. Because firms need to justify there investments to stockholders they need to achieve better performance within the time span of a year or two. Given the constraints operating on managers, manufacturing innovations are generally a sequence of small advances.
GM through its mistakes illuminated the problems of manufacturing innovations. GM, early in the 80s, set a bold strategy for manufacturing innovation. They are going to make major steps to automate manufacturing operations to achieve two objectives. First, they would leapfrog the Japanese, and second, they would solve their labor problems (rigid work rules and a rigid seniority system) by eliminating labor as a significant factor. After an $40Binvestment the magnitude of GM's mistakes are now apparent. They tried to advance automation too quickly. They implemented production technology that was beyond the state of the art. Because the technology was untried, they had to spend $Bsgetting it to work. Instead of running factories to produce goods to make a profit, they were forced to run the factories as experiments.
To make matters worse GM entered an agreement with Toyota to make Corollas and Prisms(Novas) in an old factory in California. Toyota supplied the managers and GM supplied the workers. The Toyota managers modified Japanese style management, which emphases teamwork, flexibility and good upward communication, to achieve Japanese levels of quality with little automation. Toyota immediately used the acquired knowledge of North American laborers to set up successful factories in Kentucky and Ontario. GM finally wised up and used the new management labor relations in their successful Saturn plant.
Innovations in manufacturing require much more than trying to replace existing equipment with more automated equipment. A major source of innovation in manufacturing is better organization and better use of humans. One example of an organizational innovation is the creation of decisive design teams with executives from all parts of the firm. This greatly reduces the design time are results in market-oriented products which are easier to manufacture. In organizational areas US manufacturing firms are imitating Japanese firms.
Automation will gradually decrease the cost of batch production to the level of mass production and create much greater flexibility in manufacturing. Flexibility is needed to enable suppliers to more rapidly respond to changes in demand. For example, Chrysler spent $160Mto enable an assembly plant to shift between two types of cars. In the limit (several hundred years), you will be able to design an object at home and have the object manufactured automatically at mass production prices.