Suddenly, the shop floor is where the action is.
Confronted with a dramatic increase in foreign competition over the past decade, American companies have fought back in many ways. Shoe manufacturers have screamed for tariffs. Garment makers and electronic-components companies have moved their operations offshore, hoping to match foreign competitors' low labor costs. Some consumer-electronics companies have stopped making television sets and videocassette recorders entirely, turning themselves into marketing-and-distribution organizations for products made in Japan. The echoes of these strategic moves can be heard in the national debates over protectionism, industrial policy, and the decline of America's manufacturing base.
Amidst all the noise, a few companies have responded quite differently to the new world economy. Instead of joining the Japanese or the Taiwanese, they are looking to beat them. And instead of hiding behind protective tariffs, they are doing whatever is necessary to meet the competition head-on. Unlike the other strategies, this one hasn't made many headlines, and it hasn't occasioned many debates in Congress. But there are signs that it has taken root, and that it is beginning to spread (see "Made in USA," INC., March 1985).
The key to the new strategy is manufacturing. "There's no doubt about it," avers Hal Mather, an Atlanta-based operations consultant who logs a quarter of a million miles a year advising his clients. "There's been a profound change in management's perception of the importance of manufacturing."
"In the past," agrees Joseph D. Romano of A.T. Kearney Inc., another operations consultant, "manufacturing was considered a cost center and therefore a liability. Now, because of the substantial savings that improved operations can bring, it's being regarded as a profit center -- and is getting much more attention from management."
The most visible example of a company with a new approach to production is General Motors Corp. GM has invested in computer-vision companies and has campaigned to establish a common computer language for the factory floor. Its newly formed Saturn Corp., for which it has earmarked some $5 billion, will develop heavily computer-integrated facilities."The whole area of manufacturing engineering has never before enjoyed the level of respectability and acclaim that it pressently does," says a GM spokesperson. "That's where the money is being spent, and that's where the talent is going."
A sampling of other companies, large and small, reveals similar priorities:
* Hewlett-Packard Co. has always been a leader in manufacturing -- but, says William Boller, manufacturing manager for HP's Data Systems Division, "It's only been within the past few years that we've realized that excellence in manufacturing had to be applied companywide." HP has increased its commitment to automation, introduced Just-in-Time inventory controls, moved toward kanban, or "demand-pull" production, and committed itself to new quality standards. "Before," says Boller, "HP encouraged innovativeness; now we're more willing to exchange information, to discuss developments, to borrow technology. Major things get picked up across the company pretty quickly."
* Fireplace Manufacturers Inc., a small, Santa Ana, Calif., company that produces fireplaces for the home-building industry, found itself facing competitors that undercut its prices by as much as 50%. A sales-driven company until then, FMI realized that new manufacturing efficiencies were its only hope for survival. With the help of operations specialist Kiyoshi Suzaki, then with the consulting firm of Theodore Barry & Associates, the company made low-tech improvements that brought major payoffs: in less than a year, machine setup times were reduced from an average of two hours to an average of 15 minutes, inventory was cut by 52%, and scrap rates dropped from 20% to 9%, representing a one-year savings of $300,000. Direct labor productivity rose by 28%. "We might well have seen a loss last year," says company president Willard P. Harris, "if it hadn't been for the changes we made in manufacturing."
* Inmed Corp., #125 on INC.'s 1984 list of the 500 fastest-growing privately held companies in America, began as a distributor of medical and surgical supplies, but has moved into manufacturing at a time when many of its competitors seem to be shying away from it. "We're emphasizing manufacturing both domestically and internationally," says Roland Petersen-Frey, chief executive officer of the Norcross, Ga.-based company. With 1984 sales of $35 million, the company earmarked a hefty $5 million to improve its manufacturing processes in 1985, including $3.5 million for automated cotton-bale-opening equipment at its South Carolina cotton mill and $1 million for its Indiana latex operation.
By itself, a sampling of companies doesn't make a trend. But signs of a renewed emphasis on manufacturing are showing up elsewhere as well. In the consulting business, a bellwether of business trends, such operations consulting firms as A. T. Kearney, Theodore Barry, and Rath & Strong are now booked solid months in advance, and are signing up new clients as quickly as they can identify and steal qualified consultants from other companies. "In the past year, we've grown 65% in terms of sales and number of employees," says Lawrence A. McKay, a senior vice-president with Barry, "and this year we're estimating growth in excess of that." Adds Kearney's Romano, "Most manufacturing consulting companies are running full-tilt-out."
These days, moreover, old-line manufacturing firms are competing for talent and business with Big Eight accounting firms."New products such as manufacturing consulting are the faster-growing areas [in accounting]," says Arthur Bowman, editor of Public Accounting Report. The chairman of Coopers & Lybrand, Bowman adds, recently confided that he needed engineers as much as he needed accountants. In the competition for talent, Coopers lured William Wheeler, one of its partners in manufacturing-consulting services, away from Rath & Strong Inc., while Arthur Young stole Kiyoshi Suzaki from Theodore Barry.
