BALANCE OF PAYMENTS

Lean On Me

Thu. Jun 26, 2008


What do Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., their parties' presumptive nominees for president, have to learn from a factory that produces a million toothbrushes a day? A lot, and it has nothing to do with teeth care. It's about the potential for manufacturing in America instead of China.

In the campaign, in the spirit of such straight talk, both presidential candidates have echoed the words of Bruce Springsteen's foreman in "My Hometown," telling his manufacturing workers that "these jobs are going, boys, and they ain't coming back."

Such tough-minded realism might sound presidential, but it's old thinking. U.S. manufacturing is far from dead. Production and exports are up. And U.S.-based factories are finding ways to compete with China through lean production, a management revolution that can transform American industry.

Voters don't need McCain and Obama to throw in the towel on manufacturing. They need vision. They need to hear the candidates challenge American industry to make the changes necessary to insure their competitiveness for years to come.

"Contrary to what we have come to believe," said James Womack, chairman of the Lean Enterprise Institute, a Cambridge, Mass., educational institution, "we are the world's largest manufacturer and will continue to be because of a combination of the dollar going down and rising transport costs."

Manufacturing output has increased 11 percent in the last year. U.S. exports of manufactured goods are also up over 12 percent.

Moreover, U.S. manufacturers consider the United States the most desirable country for expansion of their businesses over the next three years, according to a recent survey of 321 North American manufacturing executives released in mid-June by the National Association of Manufacturers, The Manufacturing Institute, the Canadian Manufacturers and Exporters and Deloitte Touche Tohmatsu. And 57 percent of U.S. manufacturers predicted they will become more globally competitive over the next five years.

Nevertheless, manufacturing employment continues to suffer. U.S. manufacturers employ 341,000 fewer people today than a year ago and the sector has its fewest jobs since 1950. U.S. manufacturing employment will never rebound to levels seen in the post-war era. Even the Chinese are making more today with fewer workers.

But manufacturers all across America are demonstrating ways to stanch the bleeding of jobs through lean manufacturing that organizes production in a manner proven to rely on less capital, time and material than the traditional system of mass production.

The Oral-B toothbrush plant in Iowa City, Iowa, is a case study on how this can be done. Manufacturing toothbrushes would seem to be one of those activities that should have migrated long ago to low-wage locations in Mexico or China.

And, at the beginning of the decade, Gillette, Oral-B's parent company, was considering just such a move.

But, this week, Oral-B celebrated 50 years of doing business in the American heartland, thanks to lean manufacturing. The company was able to keep its operations in the United States by rigorously attacking its total costs: not just the cost of production, but the cost of inventory, low quality and transportation.

It cut waste at every opportunity through reducing inventory, scheduling just-in-time delivery of parts and, most important, through a management and labor commitment to constant improvement of the production process.

The results were telling. From 2001 to 2004 costs were reduced 18 percent and productivity improved by 55 percent. Employment was also cut by 38 percent. But most jobs were saved because production stayed in America.

Oral-B's experience is far from unique. The manufacturer of Toyota truck beds, the largest printer of Braille books in the United States and countless other firms have strengthened their competitiveness in the face of foreign competition through lean manufacturing. The challenge is to build on these success stories.

Thanks to a weak dollar and high transportation costs, American manufacturing will be on the rebound for the next few years. The next administration will be tempted to sit back and enjoy this gift from the economic gods. That would be a mistake.

"Our standard of living depends on how efficiently we produce things," warned Womack. If U.S. manufacturers simply ramp up domestic production in the same, old inefficient manner, consumers will pay more in the short run and production will flee abroad again once the dollar and oil eventually readjust. "Any old manufacturing is not something we ought to be pursuing," said Womack. "What we ought to be doing is brilliant manufacturing."

The bad news is this won't be easy, because neither management nor labor is inclined to change. The good news is a renewal of American manufacturing will not require major new government programs.

But it will require the next president to believe that manufacturing in the United States has a future. And he will need to be willing to use the bully pulpit of the White House to challenge American manufacturers to take advantage of the window of opportunity over the next few years to become lean producers and to commit themselves to constant improvement over time.

It's a worthy goal. One candidates McCain and Obama should embrace.

by Bruce Stokes

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