Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 75
Corporate Attitudes Toward
Introducing
the New Manufacturing Technology
From the engineering community, symposium organizers heard about
persistent frustrations with the failure of firms to adopt beneficial new
manufacturing technologies. The objects of these frustrations were
frequently nontechnical considerations, such as senior managers unable
to recognize the benefits of the new technology, financial analysis
techniques such as return on investment (ROI), or hurdle rates that
favor quick yield investments.
The ferocity of these expressions and their sincerit~persuaded
symposium organizers that both an obligation and an opportunity
existed to air these subjects in a format that would enlighten participants
on the cause and effect of these nontechnical considerations. In the
spirit of the symposium, it was hoped to pass beyond the complaints
to some constructive debate and, in particular, to examine how, if at
all, education could improve the present situation.
Participants were asked to address:
· Corporate planning and changing manufacturing systems;
· Investment criteria and the introduction of new technologies;
~ Management decisions and realization of the full potential of new
manufacturing technologies; and
0 How to develop the appropriate team of manufacturing profes-
sionals.
James F. Lardner, Jack N. Behrman, Michael I. Callahan, and Wickham Skinner
participated in the panel discussion, which was moderated by Robert A. Frosch.
75
OCR for page 76
76
LARDNER I BEHRMAN I CALLAHAN I SKINNER
The panel discussion included four persons who have recent firsthand
experience with the nontechnical aspects of changes considered in the
technical/production operations of manufacturing firms.
Planning for Change in the Smokestack Industries
JAMES F. LARDNER
I am most familiar with the smokestack industries of the "rust
bowl," which are among the most troubled American manufacturers.
I will address primarily their problems of corporate planning for
changing manufacturing systems. Significant problems are faced by
these corporations when, in planning for the future, they must deal
with major changes in manufacturing systems.
Based upon my experiences and observations, the continued pursuit
of optimization of each of the specialized fractions of the manufacturing
whole is producing an increasingly negative result. Reintegration of
all elements of manufacturing should be the true goal of corporate
management when creating new or renewing existing manufacturing
systems. Accepting this as a goal, however, is an act of faith. In part,
the reason is that establishment of a certain critical mass of new
technology is required before the corporate bottom line is noticeably
affected. Even the most enthusiastic chief executive officer must be
concerned when he realizes the resource commitment and investment
required to attain this critical mass. It is, however, absolutely essential
to achieving results. We need to be more willing to accept this fact
and to recognize the consequences of what happens if we do not.
When introducing new technologies, commonly accepted investment
criteria are increasingly recognized as major obstacles. We currently
operate in an environment in which discounted cash flows and internal
rates of return are considered fundamental to evaluating investment
decisions. In the industries with which I am familiar, the direct labor
content in end products has been reduced to an almost insignificant
amount as a result of years of concentration on making labor more
productive.
James F. Lardner, vice-president for government products and component sales of
John Deere and Company, has served in managerial positions for Deere and Company
in Mexico and Brazil and as assistant general manager for two manufacturing works,
manager of the plant and production engineering department, and director of manufac
. . .
tunng eng~neenng.
OCR for page 77
PANEL DISCUSSION: CORPORATE ATTITUDES
77
Thus today, when looking for areas that can provide major increases
in productivity, only two remain: (1) using fixed assets much more
intensely than we have been able to do so far, and (2) controlling
indirect labor costs both blue and white collar. Although it may not
be readily apparent, much of the activity of these workers involves
structured decision making requiring little intellectual input and of a
highly repetitive nature. Manufacturing information systems, computer
technology, and programmable automation have demonstrated an
ability to substitute for people in this activity, and it is important that
management recognizes that most of the future savings will be here.
This opportunity to improve productivity and reduce overall man-
ufacturing costs has been obscured by current cost accounting systems
which do not deal adequately with "indirect costs." This suggests a
real need to replace our present methods of analyzing manufacturing
costs with new and better analytical systems.
There is an interesting difference in the way North American
management and Japanese management approach the problem of
increasing productivity. Apparently, something in our American culture
demands theory to legitimize the action we take. This factor is
particularly evident with design groups which have techniques for
measuring what they are doing and then evaluating the results against
a theoretical optimum. Unfortunately, no significant amount of re-
search-based knowledge exists in manufacturing nor is there much of
a theoretical basis for measuring the present results against optimum
to evaluate alternative plans for change.
The Japanese use anecdotal observations and just plain pragmatism
to determine how to move a product through a factory faster using
fewer resources. If we operated like the Japanese, we would simply
eliminate all of the wasteful practices that result from poorly designed
and managed manufacturing systems. We need to understand, for
example, that the "just-in-time" system is not an inventory reduction
program but a manufacturing and quality improvement program.
Thinking in broader concepts must invade every American board room
and senior management group because there is not time to wait for
research to justify actions that are needed to improve American
manufacturing efficiency.
Identifying and developing a suitable team of manufacturing profes-
sionals to deal with problems in the factory may be an easier challenge
than changing the perceptions of top management. Based on our
experience at Deere and on my observations of other companies, the
basic elements for much better manufacturing performance already
exist. In my company, we have begun to use the long-discussed
OCR for page 78
78
LARDNER I BEHRMAN I CALLAHAN I SKINNER
techniques of matrix management and multidisciplinary project teams
in design and manufacturing projects to solve problems on the shop
floor and to address the challenge of just-in-time manufacturing.
New technologies require a new kind of organization and manage-
ment. This demands acceptance of the principle that leadership of the
project will be determined by the competence, knowledge, and skills
essential to the project at each stage rather than management-designated
authority. Although this principle is difficult to establish in the tradi-
tional management structures found in manufacturing organizations, it
is fundamental to success. We have found so much good, solid
understanding of manufacturing coming out of such projects that we
may not have to wait for the results of some of the research we are
presently trying to persuade universities to undertake. If universities
hope to contribute to the ability of American industry to compete in
global markets, they must direct their attention to research which
deals with the basic elements of the manufacturing system and how
they fit into the whole of manufacturing.
Engineers and the Application and Transfer
of New Technologies Abroad
JACK N. BEHRMAN
I will describe a number of considerations that engineers, in particular
plant managers and manufacturing officers, must have in mind when
considering the application and transfer of new technologies. In doing
this, I will emphasize the significance of foreign investment and foreign
licensing by U.S. companies in the application of the new technologies.
Opportunities to apply an innovation in foreign manufacturing
significantly increase the attractiveness of expenditures for research
and development. These opportunities arise in the ability to invest
abroad in manufacturing to serve either the home, host, or third-
country markets (or a combination of these), or in the ability to license
new technology to foreign companies for their use and sale abroad.
Any of these routes increases the return on investment from application
of new technology and thereby enhances the probability of a positive
corporate attitude toward introducing new manufacturing techniques.
Jack N. Behrman is Luther Hodges Distinguished Professor of Business Administration
at the University of North Carolina. Dr. Behrman has served on the faculties of several
universities and as assistant secretary of commerce for domestic and international
business during the Kennedy and Johnson administrations.
OCR for page 79
PANEL DISCUSSION: CORPORATE ATTITUDES
79
However, these same opportunities may be served with a lag that
is, really new technologies are introduced first in the home market,
where they are tested and modified for worldwide market application.
In the meantime, the existence of foreign opportunities means that
present (and recent) technologies can be moved offshore, where they
can continue to serve relevant markets profitably.
TRANSFER OF MANUFACTURING TECHNOLOGY ABROAD
The attitudes of U.S. corporate managers to transfers of manufac-
turing technology abroad depend on four major factors: (1) their own
corporate orientation to such transfers, that is, what they are willing
to transfer overseas; (2) the kind of industry they are in; (3) the markets
that they anticipate serving; and, (4) the policies of host and home
government. All these factors are influenced by the economic effects
that the technology and its transfer will have on a number of other
factors.
The primary long-term effect of international transfer of new tech-
nology is that it shifts the location of industrial activity. This has
important political and economic impacts both abroad and in the United
States. A relocation in the site of production shifts many of the benefits
of production and trade as well. Even if the production location is not
shifted within a foreign country or among foreign countries, product
lines may shift.
We are now finding that the new manufacturing technology demands
a product design that allows parts to be produced in different locations
around the world. We are facing therefore a new economic effect from
the technology: changing linkages among subsidiaries across national
boundaries that alter the degree of integration or separation of pro-
duction activities.
The initial transfer of technology has several secondary impacts. It
shifts the capital equipment used, the site of producing the capital
equipment, and the investment required. In turn, these decisions
determine the labor skills required to apply the technology; the
employment resulting from the technology; the trade patterns that will
result, not only in terms of the trade of components, but also of the
final product; and, finally, the willingness of the host country to permit
that technology to flow in continually from outside, as distinct from
attempting to generate it internally. These broad effects, which must
be taken into account, will alter the way in which the technology is
transferred, or what technology is transferred.
OCR for page 80
80
LARDNER I BEHR1kIAN I CALLAlIAN I SKINNER
Specific decision criteria for a company looking at technology abroad
begin with the market to be served. If it is the domestic market in the
host country, say Mexico or Brazil, the company will then transfer
the technology appropriate to the consumption or industrial needs in
that country. If the host country is to be used as a base for sales in a
regional market, say Southeast Asia or Latin America, then total
market demands in the region and the level of the market in terms of
sophistication or growth are of concern. If a particular location is to
serve the international market, as out of Singapore or Taiwan, that
market, which is generally at the highest level of technological demand,
then determines the kind of technology going into the host country.
Now the company must face the question of political and economic
uncertainty in the host country the greater the uncertainty, the less
likely a corporation will transfer high or new technology. The corpo-
ration does not want to lose the technology, nor does it want to prepare
would-be competitors. High-technology transfers therefore motivate
the corporation to control the transfer of technology to the foreign
subsidiary through either investment, a precise licensing contract, or
a tight contractual relationship.
In response to relatively low levels of control or certainty in the
host country, corporations increase their so-called "mobile activities"
investment that is, the ability to pick up the operation and move it
somewhere else fairly quickly and at low cost. If little control and
certainty exists in the host country, corporations seek ways to reduce
the impact of losing even what control there is. One way to increase
certainty is to link the activities in any one country with activities in
another. In this way, if production in country A is taken over by the
government, it is not particularly valuable to the government.
Product lines with rapidly changing technology are largely capital
goods, industrial goods, or more sophisticated goods. Thus high
technology is primarily introduced in and moved among the advanced
countries. The developing countries are trying to pull high technology
into their orbit. Brazil, for example, is going to buy or develop its own
technology and produce and sell its own electronics. It is literally
restricting the number of customers who can be served by foreign
affiliates. No matter how much technology relative to informatics has
been transferred into a Brazilian subsidiary, it will simply not be used
to serve the local market. The Brazilians are not satisfied with merely
obtaining mass consumption goods, or low-technology goods, even if
they could sell them worldwide. They are concerned about the
prospects of remaining backward or technologically dependent. Even
if a U.S. company transfers technology and helps the Brazilians adopt
OCR for page 81
PANEL DISCUSSION: CORPORATE ATTITUDES
81
it, it still stands to lose the investment through the kinds of creeping
controls Brazil has imposed.
Another factor affecting a company's decision to go overseas with
technology and what technology to transfer is the absorptive capacity
of the host company or country, if a new company is being set up.
Absorptive capacity includes the user's ability to know: (1) what
technology he needs, (2) how to get it, and (3) how to retain manufac-
turing engineers able to operate it and to instruct labor. In some studies
we have made of technology transfers, the ability of the user to identify
and to learn how to absorb the technology has been the critical fault,
not the ignorance of the licenser or the investor in how to construct
or to transfer the technology.
From the standpoint of corporate strategy, no company prefers to
manufacture abroad. All prefer to produce at home, where the culture,
economy, politics, work habits, and management orientations are
known and presumed more "predictable." From this solid base,
companies can then serve foreign markets through exports. It is also
preferable to develop the technology at home, in-house, but since it
cannot all be done this way, some is imported as needed and some
exported as demanded. These exchanges are minimal or lead to
interlocking arrangements (cross-licensing and patent pools), as was
the case in the l910s, 1920s, and 1930s.
The closing of markets in the 1930s, which continued after World
War II, led companies to consider offshore manufacturing or licensing
for manufacture abroad. The major trade-off is the loss of control,
however, and companies prefer 100 percent ownership through in-
vestment. Licensing of technology can result from the desire not to
expose the company to substantial capital risk through foreign invest-
ment, the small size of the market abroad, or the host governments'
insistence on licensing as compared to investment (as in Japan in the
l950s and 1960s). Licensing can also occur when the licensee has
complementary technology wanted by the licenser, or when the licensee
is to become a supplier of intermediate materials or components at a
lower cost than available to the licenser at home.
The decision as to the mode of overseas ties is seldom made on the
basis of technology alone. The kind of technology transferred tends
to be dictated by the market size and sophistication, its growth and
change, the ability of the affiliate or licensee to utilize the technology,
and the capacity (scale of) production. The ability of the foreign labor
force to apply given technologies is a critical limiting factor, and the
company's ability to reshape, unbundle, or modify the technology so
that it can be applied by less skilled workers has been a strong
OCR for page 82
82
LARDNER I BEHRlklAN I CALLAllAN I SKINNER
contributing factor in the move of many companies overseas-espe-
cially into low-wage countries. Many companies have developed
technologies and designed products so that processes and components
can be rebundled and produced in diverse locations and then brought
together in several places for assembly.
Technologies have not been a significant factor in decisions to invest
overseas in advanced countries, for U.S. companies have simply
applied the technology appropriate to the foreign market. New tech-
nologies give the developer a differential advantage in foreign markets,
but the existence of such technologies does not drive the foreign
investment decision. It does, however, sometimes drive the host
government's willingness to accept such foreign investment (when it
would prefer that the investment be made by local companies).
Application of a given technology abroad opens opportunities for
still newer technologies, whether from within or outside the company.
This happens because new markets are opened to the company,
expanding its ability to shift production and processes. Its total scale
is larger. Further, if the application abroad is through a licensee, the
company can develop or adopt new technologies quite readily, since
it will continue to receive royalties on the older technology as long as
it is used by the licensee. The company is not, itself, locked into the
older technology. Even where the investment is direct (its own), and
the operation abroad is for production of a component (e.g., semicon-
ductors), the company's capital is so small compared to the value of
production that any shift in technology can be adopted abroad if
workers are trainable, or the production can be moved back home if
the new technology requires higher-level skills.
Only when the technology requires huge capital expenditures for
equipment in place (e.g., petroleum refining) does the application of
technology abroad tend to lock in the mode and scale of production
as well as its location. Even here, new arrangements for contracting
versus direct investment have increased the flexibility of such U.S.
companies around the world.
EDUCATION OF MANUFACTURING ENGINEERS
Engineers need to be aware not only of how economics and politics
affect the transfer of technology abroad but also how technology
selection and transfer affect corporate structure, organization, own-
ership, location of production, integration, flexibility, and other factors.
For example, the company transferring high technology very likely
OCR for page 83
PANEL DISCUSSION: CORPORATE ATTITUDES
83
wants to control the technology. It will therefore organize activities
between itself and the host country, or the subsidiary and the parent
company, in such a way that it keeps control not only organizationally
and financially, but marketwide and technically in terms of ties with
the R&D center. In other words, the company simply fans out from
the center and maintains a high degree of integration.
Low technology is treated in a less controlled fashion and, in fact,
may even be divorced completely from the center. If the foreign
country becomes interested in having that technology itself and
nationalizes the subsidiary, the loss is then small.
The parent company therefore regards ownership as very important
with high technology and less important with low technology. Integra-
tion of the company's activities is much more important with high
technology than with low technology. Thus the type of technology
transferred affects the organization and operation of the business.
Even the nature of the industry matters. For example, the chemical
industry is now much more ready to license technology overseas.
Because a very large investment is required to go into petrochemicals
and because the sector is controlled by governments-even the market
is controlled-licensing becomes an appropriate means of transferring
technology. The chemical companies are willing to do this, but in
electronics the desire is for investment, ownership, and control not
. · .
licensing.
Technology transfer also has a number of impacts on business which
the manufacturing engineer should know and which should be built
into the education. Thus the prerequisite is to complement engineering
and technology skills with an awareness of social, political, and
economic effects. Engineers will then understand management's prob-
lems in looking not only at the market for the product, but also at the
organization and control of the company itself.
Harvard Business Review recently published an article on business
schools and what their jobs are. The association of business schools
is working on how these schools can be part of the solution of the
manufacturing problems question. We are, no doubt, a part of the
problem at present with regard to some of what we teach on methods
of cost control, accounting, and setting financial objectives.
Some companies have created a block to diffusion of technology
within the company because of the financial targets they have handed
individual managers around the world. None of these managers is
about to transfer the latest developments in technology which they
made in Belgium, even over to Germany, because each is a profit
center and the Belgians do not want the German profit center to beat
OCR for page 84
84
LARDNER I BElIRMA:J I CALLAlIAN I SKINNER
them. This attitude toward motivating managers comes from business
schools.
What I was suggesting earlier is not that manufacturing engineers
go through the business school courses, but that they understand that
business must face political and governmental issues. Similarly, eco-
nomic impacts, the impacts of technology on company integration,
and the resulting constraints on the transfer of technology must be
heeded as well. Manufacturing engineers must understand all these
effects and contribute to the solution by demonstrating that competition
is not going to be on the profit line, but on the quality and cost line.
Competition around the world these days is based on cost reduction,
not profit maximization. Business schools must recognize this situation,
but this argument must be made repeatedly by the manufacturing
community. This community must show how to raise quality and cut
costs by adopting new procedures. This will help the bottom line, but
that is not the purpose of the company-its purpose is to remain
competitive and survive. Engineers need to recognize and understand
these issues, but I do not suggest sending all engineers to business
school.
Manufacturing Issues
in the Semiconductor Industry
MICHAEL J. CALLAHAN
As probably the only participant from a semiconductor manufacturing
organization, I will briefly describe our industry and some problems
we face in manufacturing which are not much different than those of
almost any industry.
According to the forecasts, the semiconductor industry will more
than double its sales volume by the end of this decade. It has been
and will continue to be in a state of continual technological change
and subject to high competitive pressures. In 1983, for example, there
were 35 worldwide manufacturers of semiconductors, each having net
sales greater than $100 million and not one having greater than 20
percent of the market. In Silicon Valley, a new semiconductor company
seems to appear every month. Many of them make it; many do not.
Michael I. Callahan, executive vice-president and chief operating officer of Monolithic
Memories, Inc., has a degree in electrical engineering from the Massachusetts Institute
of Technology. Prior to joining Monolithic Memories, he served in a number of positions
in both operations and management at Motorola.
OCR for page 85
PANEL DISCUSSION: CORPOMTE ATTITUDES
~5
This rapid growth, coupled with technological c.hange stimulated
primarily by competition, has required enormous capital investments
on a continual basis. Over the last five years, for instance, semicon-
ductor manufacturers have annually invested over 15 percent of sales
in capital expenditures. In the next five years, this number will probably
increase to more than 20 percent of sales. While a significant portion
of this investment is certainly for capacity expansion, we are continually
upgrading existing manufacturing areas. Any manufacturing line in our
business will probably have either replaced or upgraded 90 percent of
its total equipment within a five-year period. These upgrades- are
usually stimulated by improved processes rather than the desire for
increases in raw productivity.
The technology changes made, however, have continually increased
productivity in the industry. Over the last 10 years, the sales per
employee of the semiconductor manufacturers in this country have
more than doubled, and we have tripled the value added per employee
over the same period of time. Thus significant improvements in
productivity were achieved not driven primarily by raw productivity
issues, but by technology change and improvement. Industry manage-
ment, who in most companies have an engineering background, not
only accept change in the process and manufacturing systems, they
encourage it.
U.S. semiconductor manufacturers face very strong competition
from companies in Japan. Success in this competition will depend on
continued capital investments and development of innovative products
and processes; however, this will not be enough. We must further
address the manufacturing processes themselves, placing greater em-
phasis on production issues rather than just on technological change.
We must significantly shorten cycle times in manufacturing processes,
handle small lots of material efficiently, and develop "just-in-time"
delivery systems for ourselves and, most important, for our customers.
A short-cycle time for any manufacturing process significantly
increases the learning rate of the engineering community working on
the manufacturing process and thus drives programs in production
cost reduction. Cycle time reduction is critical to our gaining the
competitive edge for cost and price leadership. Furthermore, the
increased capabilities resulting from process innovations and improve-
ments in manufacturing equipment have put us in a position where we
must customize products for the end-user. Devices are becoming so
complex that we are putting major portions of their systems onto one
piece of silicon. Thus the personality differences between our cus-
tomers' products reside in the components we build, with the result
OCR for page 86
86
LARDNER I BEHRAIAN I CALLAlfAN I SKINNER
that the numbers required of any particular part type of these complex
devices may be relatively low by today's standards.
This is a complete departure from what we have historically regarded
as economies of scale. However, we must learn how to process small
lots quickly and economically at high-quality standards if we are to
remain competitive in the future.
Today, our customers are trying to lower their inventories and
develop low cycle times in their own factories. To be competitive
worldwide, we must generate the capital needed to improve equipment,
not inventories. The Japanese invest higher levels of sales in new
plants and equipment significantly more than we do as a whole. Our
customers want their vendors to deliver products "just-in-time.'? We
could hold inventory for them, but for obvious reasons this is not an
acceptable solution. Better forecasting will help, but in my view,
streamlined, short-cycle-time manufacturing systems are the answer.
Modeling a manufacturing system on a computer terminal while
sitting in an office is not the way to do it. Systems can only be designed
by people who understand the technologies and equipment they are
dealing with, and these individuals are manufacturing engineers.
However, these same manufacturing engineers, who come from all
disciplines, must be taught additional skills and be capable of func-
tioning in a manufacturing rather than a laboratory environment. In
semiconductor manufacturing, engineers need exposure to that part of
the manufacturing discipline dealing with flow optimization.
Why is this taught in the business school anyway? Manufacturing
engineers must be taught how to mode! and optimize flows, how to
manage inventory, and most important, how to manage people. Direct
labor operators are an enormous source of problem-solving information
and often have many years of experience. Probably very few of the
top engineers in my company, or in many companies, have ever taken
a single course in any of these subjects, so we must try to broaden
the training for our engineering students to touch on these and other
subjects.
Just as important, they must view manufacturing as a professionally
and economically rewarding discipline. Good examples of this are our
industry's manufacturing engineers, many of whom have advanced
degrees and work on the manufacturing floor, developing and improving
processes. A good indication of the esteem in which they hold
manufacturing engineering, even though they do it 90 percent of their
lives, is that they are called process engineers, not manufacturing
engineers. If they were called manufacturing engineers, we would have
a hard time recruiting half of them into that profession. We will only
OCR for page 87
PANEL DISCUSSION: CORPORATE ATTITUDES
87
accomplish what we have to in this area when industrial management
and university educators indicate that they regard the manufacturing
discipline and profession as highly as the professions of research and
development and design.
Challenges to be Met
WICKHAM SKINNER
My overall conclusion, after three years of research on the intro-
duction of new manufacturing technology in about a dozen firms, is
that progress is very modest. When one considers the urgent require-
ments for restoring our competitive edge and improving industrial
productivity, it is quite surprising that industry has not moved more
quickly to take hold of up-and-going technologies.
Essentially, there are four reasons why progress is so slow. First,
a lengthy period of tinkering and adjusting is usually required to start
up the equipment, get the bugs out, and handle the interfaces with
other, conventional processes. Second, the vendors serving industry
are very disaggregated. Few turnkey contractors or operators or
producers will put the whole equipment or technology together. Third,
decisions to introduce technology are adversely influenced by our
financial and accounting colleagues. The introduction of new manu-
factur~ng technology typically must be justified on the basis of paybacks
and discounted cash flow. The hurdle rates are high, particularly a few
years ago when interest rates were so very high. New technologies
change the cost mix and subsequently may alter the financial structure
of the business, but the extraordinary fact is that major investments
in new manufacturing technology can seldom be justified by cost
savings and paybacks. Their powerful advantages arise from their
significantly improving the company's strategic ability to compete.
Fourth, in observing how manufacturing management decisions are
made, there is a clear need for champions to introduce changes, bring
them to the attention of top management, and come back with the
money. Many smart manufacturing managers will hesitate to champion
an appropriation at high levels, for it will inevitably mean a big
Wickham Skinner is James E. Robison Professor of Business Administration at the
Harvard Business School. Dr. Skinner's career has ranged from chemical engineering
to production control and project management at Honeywell Corporation to academic
work in business administration.
OCR for page 88
88
LARDNER I BEHRAIAX I CALLAHAN I SKINNER
investment for the company, usually a risky one, and such investments
may not only mean betting a division or a plant, but also a career.
Managers know that once they undertake these efforts, three or four
years of trouble and hardship are needed to make them work better
than the status quo. The result is a very conservative approach on the
part of manufacturing managers.
In looking back at the major changes in industrial history, the gradual
development of textile machinery took 30 or 40 years, as did mass
production powered by coal and oil in the process industries. The so-
called "American system of manufactures," studied very ably by
Johns Hopkins professor David Hounshell (From the American System
to Mass Production 1800-1932, Johns Hopkins, Baltimore, 1985) took
40 years to incorporate interchangeable parts, in spite of the benefits
to the manufacturer. A study by David F. Noble (Forces of Production:
A Social History of Industrial Automation, Knopf, New York, 1984)
shows that 40 years were required for the use of numerically controlled
machine tools to become well established. Thus from a historical
perspective, it has always taken a long time to diffuse technological
change.
But can we say, "Well, that's history. That's the way it'll be." Of
course, we must not. The new manufacturing technology represents
too great a hope for regaining our productive and our competitive
edge. What then can be done to improve the current disappointing
rate of progress?
The present industrial scene is one of considerable pressure and
dissatisfaction. In 30 years, I have never seen more frustration between
top managers and manufacturing managers, as well as more frenetic
activity toward working our way out of our current industrial dilemma.
At top corporate levels, senior executives urgently demand changes,
improvements, and ideas, as well as lower production costs and better
quality from the manufacturing function. But at the factory level,
manufacturing managers complain that they must meet short-term
monthly and quarterly goals and that they are held accountable to
"archaic" accounting systems, the same systems that have focused
for 100 years on minimizing direct labor. And in spite of pressure from
all sides, production managers are skeptical of high-priced, fancy
machines and computerized systems equipment. They see these in-
novations as risky, and they would rather experiment on a small scale
than make massive changes.
The hang-up stems from corporate attitudes. Those few companies
which have made great gains by taking advantage of new manufacturing
technologies did so by demonstrating top level leadership and man
OCR for page 89
PANEL DISCUSSION: CORPORATE ATTITUDES
89
agement commitment. But far more prevalent are those top managers
of manufacturing firms who are neither knowledgeable nor comfortable
with their industry's equipment and process technologies. This is the
major educational problem: the development of technologically com-
petent and confident top management.
The great American industrial leaders of the past, such as Lowell,
Singer, Carnegie, Ford, and McCormick, supplied both corporate and
technological leadership. Today, the top management of American
manufacturing is dominated by marketeers, financiers, controllers, and
an extraordinary number of lawyers. Top management is not supplying
adequate technological leadership. They do not have the judgment
required to make large-scale investments in new equipment and process
technologies which are calculated risks and seldom pay off in dollars
for many years. The fact that production management courses are
seldom included in advanced management programs or seminars
contributes to the persistence of the vacuum of technology at top
management levels.
Ultimately, we should see manufacturing people at the top again in
reasonable proportions, but this requires further breadth and conceptual
skills from manufacturing managers, attributes which are now the
exception and not the rule. Meanwhile, the initiative for new manu-
facturing technology must come from manufacturing management
because corporate attitudes at top levels often reflect technological
illiteracy.
So we have an educational dilemma. Paradoxically, manufacturing
managers need to acquire financial skills and learn to think in a
competitive and strategic mode as effective top managers do, while
top managers need the technological competence and confidence
derived from experience and training in production. Until each acquires
the other's strengths, their own individual strengths become in fact a
corporate weakness, for in their work together they mutually debilitate
and frustrate. Meanwhile, our industrial malaise goes on.
This situation can resolve itself, of course, in Darwinian fashion
over a period of time, but the job of educators is to identify such
problems and speed up the process. In the face of the problem,
however, our present educational curricula for both engineers and
managers have not only failed to identify and solve these problems,
but contribute to them! By typically excluding manufacturing from top
management courses and management education from engineering
courses the problem gets compounded. Since the new industrial
competition is fundamentally based on technology, our education of
managers and engineers is too often failing the country's needs.
OCR for page 90
Representative terms from entire chapter:
manufacturing engineers
