What Some Dogs Do

Like a dog chasing its tail, some manufacturing companies seem to be constantly sniffing out the happy feeding grounds of cheap labor and low compliance costs. At least that’s the way it looks as the general media report that more and more American companies are packing up for China and other parts of Southeast Asia. Just last week the remains of the once-stupendously-productive J & L Steel Plant in Cleveland were sold to a Chinese firm; the Chinese bought the whole place! For years, other companies in metalworking and manufacturing in general have been moving some of their operations out of the U.S. to more attractive lands like Mexico, Taiwan, and now China — all with unimaginably cheap labor and environmental and safety regulations similar to ours in 1850.

Yet, this run for the management dream lands of pennies-for-workers and zero-for-social-costs (like pollution and safety) is short-term at best and may be counter to management’s other dreams as well.

I’m still all in favor of a Secretary of Manufacturing for the United States, and numerous industrial groups agree that such a Cabinet post would do wonders for public education and therefore public policy about our all-important factory sector. However, there’s still a need for some re-thinking on the part of some of our industrial managers. Other countries — Japan and Germany come to mind — seem to have little trouble competing with us in everything from laptops to luxury cars. Yet, their labor and social costs are significantly higher. How come?

There’s another way to cut costs that doesn’t involve shipping tons of production equipment overseas. It’s called technology, particularly automation technology, and it has made it possible for everyone from Mercedes to Toyota to produce top notch products at competitive prices — anywhere the workers are educated properly on the most advanced and productivity enhancing tools. In other words, the real global competitiveness race is straight down the high tech highway, not in circles like some dogs are wont to do.

No, I’m not saying that cheaper labor isn’t a special advantage. In the short term, it can make or break a company. Nor am I saying that the social cost burden on industry is trivial. Some of those costs are indeed outrageous. Both these issues are mighty weighty matters and need to be addressed (by the new Secretary of Commerce, of course) and are being discussed. In fact, leveling the playing field has been a Commerce Department task for years. They’ve helped. Yet, cheaper labor in faraway places is never a real solution — if only because those workers catch on pretty quickly, and we’re on the move again. Pollution and safety compliance costs? Who really thinks anyone, anywhere wants the world to stay unclean, ugly and unhealthy? The tail catches the dog eventually. Here are a couple other suggestions that seem to make more sense to me.

Just last month, the Chairman of the Association for Manufacturing Technology (AMT) in McLean, Virginia, Lawrence J. Rhoades, noted that the country should begin now to invest in a "coordinated national program sized sufficiently to provide a manufacturing technology infrastructure." Such "infrastructure" investment would "be focused on innovators and ... include research centers and companies that will exploit innovative manufacturing techniques."

Mr. Rhoades, president of Extrude Hone Corporation, Irwin, Pennsylvania, was testifying before the House Science Committee on behalf of continued funding for the Commerce Department’s Advanced Technology Program (ATP) and its Manufacturing Extension Partnerships (MEP). He also strongly supports institutions like the Center for Manufacturing Sciences, Ann Arbor, Mich., an organization like many in Germany and Japan and other countries. More info on his testimony can be found at amtonline.org.

From another source came a suggestion that the advanced technologies that are more and more characteristic of the high tech sector are now being found on factory floors. "The engine that runs the production line is becoming the information itself, and this shift is taking place across all discrete industries," says a new study from ARC Advisory Group, Dedham, Mass. The study, called the Collaborative Discrete Automation Study (CDAS), points out that some $115 billion in automation systems on the plant floors of America now is nearing the end of its productive life. What about replacing it? And with what?

"It has become increasingly evident that the manufacturing enterprise cannot continue to operate as a group of independent functional organizations that have separate goals, processes, methods, technologies applications and systems," said Dick Slansky, principal author of the new study. The CDAS vision of the factory of the future suggests an information-rich and information-integrated industrial world where IT melds with production systems that will allow management to assume a major real-time role in terms of the entire supply chain — including customer satisfaction.

All countries can share in that future. We, the leaders of today, should be ashamed if we are not the leaders of tomorrow simply because of what some dogs do now and then.

George Weimer, contributing editor [email protected]

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