. It is tough for manufacturing to compete for talent because of this smokestack stereotype. Although most of us were neophytes regarding advanced manufacturing, we expected to see wonders rather than drudgery.

After all, this was advanced manufacturing. And in many respects our expectations were fulfilled.

We saw chip fabrication lines - as antiseptic as operating rooms - whose life cycle is four years. We saw auto plants as clean as cafeterias where robots outnumbered human workers. So much for dirty.

We repeatedly saw production runs of single units . We also saw long production runs in process, but the trend was clearly toward rapidly reconfigurable production and shorter, customer-responsive runs. The dull stereotype is therefore also outdated. We saw plants where the latest technology is hand fitted in buildings that are not much altered from fifty years ago. So our preconceptions of what ‘advanced’ means were challenged, too.

Opportunities for increasing profit are deeply explored. The relentless way in which profit incentives drive technological innovation in the private manufacturing sector explains much of the widening gap between that sector and the defense sector, in the use of automation technology ,process engineering and best management practices. Enterprise resource planning, lean manufacturing practices, just-in-time inventory control models, and the outsourcing of non-core capabilities were commonplace in the firms visited.

Reliance on web-based capabilities as well as ERP(where usually man becomes the slave of system as many different busniess models have the same path, criteria and rules) some which link manufacturers with their customers and suppliers, and others uniting global networks of production units, was a notable trend. and an understanding that successful manufacturers integrate people, processes and technology to rapidly turn materials into finished products that address customer needs. As problematic as manufacturing is, we report rapid consolidation of advances in materials, processing, management and information. We see renewed productivity and new marvels. That is the ascending baseline.

DEFINITION. Advanced manufacturing is not an industry but a series of processes. ‘manufacturing’ has been defined as “science and technology, process development and production, to make a component and manage it through its life cycle,” while their definition of ‘advanced manufacturing’ excludes ‘production.’ It’s a reasonable research view. What’s left?

• Materials organization

• Computational organization

• Research and development prototyping: Hardware, Models, Processes

• Process development, including unique production equipment One could argue that science and technology plus process development is undeniably advanced but not (at least not necessarily) manufacturing. Laboratory researchers acknowledge the fact that what they mean by ‘production’ is traditional industrial ‘manufacturing’. On the other hand, the third and fourth ‘advanced’ subcategories - prototyping and process development - can be accomplished on factory floors as well as in laboratories. Costs of such research can then more readily be recovered from revenues associated with products, leading to greater economic efficiency. In the perspective of industrial consultants, what is ‘advanced’ has everything to do with production, but focuses outside of milling, joining and assembly processes traditionally associated with the term ‘manufacturing’. In this view, ‘advanced’ manufacturing leverages information technology in the supply chain by generating an integrated approach toward supply chain ‘synthesis’ (vice ‘management’) oriented to developing positive ‘flow’ rather than ‘links.’ ‘Warehousing’ gives way to ‘materials handling integration.’ Of course, from fabrication managers in high technology industries, one also hears that manufacturing applications and technology come down to the unchanging two basic components for production--people and materials. CURRENT CONDITIONS.

Advanced manufacturing occurs in many widely differentiated sectors of the economy.

We observed manufacturing management and production practices in the auto, pharmaceutical, electronics and electrical equipment assembly, jet engine, construction equipment, and semiconductor sectors. In the defense sector, we observed manufacture of helicopters, munitions, aircraft and ships. The behavior and strategy of the observed companies varied greatly. Some were clearly struggling to make any revenue and profit, while a few were expanding and producing at near capacity. Most were looking for new products or product differentiation, strategic alliances and partnerships, or novel marketing strategies to pull ahead in the current economy. Additionally, all were focused on cost-cutting efficiencies to improve their ability to compete. Such endeavors include out-sourcing or alternatively increased vertical integration, supply chain integration and Enterprise Resource Planning (ERP), and just-in-time and lean manufacturing. . Manufacturing employment consists of almost entirely high-skill, technology-intensive jobs with wages well above the service sector. The notion of poorly educated blue-collar workers laboring in dangerous jobs in dank, smoke-belching factories is a bygone image. Reality is more likely to be clean rooms and pharmaceutical laboratories, and brightly lit, clean, environmentally friendly production facilities employing advanced automation, robotics, and information technology. This is particularly evident in companies’ efforts to acquire both ISO 9000 (quality) and 14000 (environmental) certifications.

Many companies reduced R&D investments due to the soft economy. However, a few recognized the opportunity by increasing investment in new technologies and facilities to be positioned for the recovery. productivity and Information Technology. Information technology and information management systems are credited with the strong economy-wide growth and high productivity (> 3% per annum) of the mid and late 1990s. High productivity was especially important to the manufacturing industry where it generally equated to lower unit costs in production, and therefore, increased revenues and profits. In fact, manufacturing productivity averaged a 4.3% growth rate over the period 1996-1999. Although productivity had fallen precipitously during 2000, data from the fourth quarter of 2001 and the first quarter of 2002 indicate that productivity is rebounding. Availability of Skilled Labor. The majority of companies visited expressed concern with their ability to hire skilled labor. Given the recession, none noted any shortage of applicants. However, almost without exception they were frustrated by applicants’ lack of specific skills required for their industry. Most stated that applicants lacked the mechanical aptitude, knowledge, and technical background in basic math and sciences to propel their company in this highly competitive globalized economy. In the case of defense companies, the pool of qualified applicants was further reduced by drug testing and security requirements. A few companies placed equal emphasis on an applicant’s ability to perform in a team environment or alternatively, with minimal supervision. Job tender statistics such as 2 in 30, 1 in 60 or even 1 in 100 were commonplace among the companies visited. To address the skills shortage, many companies developed targeted education and training outreach programs to improve basic skills and enlarge the pool of potential applicants. Partnerships, to include internships, were developed with local high schools, trade schools, and colleges and universities to educate and train students for employment. In some cases, companies developed their own in-house training and certification programs for specific skills, such as welding and pipefitting. These companies screened initial applicants for “employability” and then placed them into in-house training programs prior to assigning them to a manufacturing activity. No statistics were offered to validate the success of these initiatives, nor was there any quantification of return on investment, but all felt these managerial practices were both necessary and profitable in terms of “growing” the basic employee skills for their industry. Automation and Robotics. Many companies sought to mitigate manpower shortfalls while simultaneously improving productivity and reducing costs by increasing the levels of automation and robotics in their manufacturing processes. High-speed machine tools under computer numerical control (CNC) continue to revolutionize manufacturing. More capable bits and cutters, and multi-axial machines, allow machining of ever larger components without repositioning. Variability continues to drop and quality and labor productivity to rise. Linked by the web, quality can be remotely controlled, which leverages engineering expertise. We saw robotics commonly employed for repetitive tasks such as auto body welding. This did substantially reduce manpower requirements on the floor as one or a few employees could operate and oversee several robotic manufacturing cells. However, the remaining employees needed even greater technical knowledge and skill. Not only were they expected to set-up and oversee robotic cells, but in many cases they were the first line of maintenance should the robots break down or the line stop. Employees who were capable of meeting these new challenges became that much more valuable to the companies and in return, could command higher levels of compensation. Aging Workforce. Many of the companies visited faced the related issue of an aging workforce. The situation was particularly acute in defense and unionized facilities. Managers at one defense aircraft company quoted the average age of their manufacturing workforce to be 55 years; those at a defense munitions plant quoted their workforce at between 48-52 years. By contrast, those at a commercial, non-union semiconductor facility estimated their manufacturing workforce to be between 26-30 years. The effects of aging are compounded when companies outsource their personnel surge requirements. U.S. firms often obtain surge workers as temps through manpower companies. In Japan, expatriate third generation Japanese descendents, recruited abroad for the purpose, can fill the gap. In both systems, a cohort of young, second-class workers are cycled in and out, and trained, yet are not expected to count on a career, advancement, or even a permanent position. An aging workforce is a very experienced and skilled group of employees with comparatively higher levels of pay and benefits. This two-edged sword engenders higher relative levels of productivity with concomitant higher direct labor costs. An even greater concern is that their knowledge will be lost when they retire. Without the ability to systematically transfer knowledge to younger employees and facing the difficulty in hiring skilled labor, these companies may soon be facing a shortfall in their manufacturing capabilities. All of this places a fundamental limitation on a company’s ability to surge production. Most of the companies visited had significant excess capacity with facilities that could accommodate expanded production if required. However, to surge with a new manufacturing line or extra shifts would require an increase in manufacturing personnel which for the reasons cited above would not appear practicable in the short term.

CHALLENGES AND RESPONSES. manufacturers need to address several challenges in order to maintain competitive advantage. Adapting to the increasing effects of globalization and commercializing advanced technology requires constant fine-tuning. Adaptability is the key to generating and sustaining a competitive advantage in a global market. “Manufacturing in the information age will bring new ideas and innovations to the marketplace rapidly and effectively. Individuals and teams will learn new skills rapidly because of advanced network-based learning, computer-based communication across extended enterprises, enhanced communications between people and machines, and improvements in the transaction and alliance infrastructure.” The National Research Council (NRC) report from which this quote is drawn noted several grand challenges to the future of advanced manufacturing, which we used as a baseline for our study. The following paragraphs discuss our view of the challenges facing advanced manufacturing based on our domestic and international travel. In this new age, one key to the success of an advanced manufacturing firm is the ability of its senior leadership to leverage information to maintain a competitive advantage. Concurrency. The first challenge is to achieve concurrency in all operations. That is, manufacturers should plan, develop, and implement in parallel, vice sequentially. Concurrent processing will bring together all elements of a product process from “cradle-to-grave.” Increased use of networked processes and equipment will be required to transfer information and experience. This will make it possible to reduce product time to market, promote innovation, and improve quality. In order to meet this challenge and realize these improvements, manufacturing industries should address several items:

(1) Development or purchase of intelligent collaboration systems. Information sharing is the biggest priority if companies want to plan, develop, and implement in parallel. Without real-time information flow, successful concurrency is not possible. Collaboration hardware and software is an enabling tool to meet this challenge.

(2) Identification and acquisition of technologies to convert information into knowledge for effective decision-making. The vast quantities of information available now and in the future are becoming overwhelming for decision makers. Firms should use technology to assist in converting information to knowledge for management use.

(3) System synthesis, modeling, and simulation for all manufacturing operations should be accomplished. In order to achieve concurrency, it is necessary for all operations to peacefully coexist and to share information on a timely and accurate basis. However, some tradeoffs may have to occur. Understanding each system process and being able to model and simulate the process allows for understanding the existing complex interactions. Use of models and simulations would allow management to try new proposed operations to improve efficiency and competitive advantage.

(4) System development to provide the ability to achieve concurrency (once the processes and interactions between them are understood). Companies should identify, develop, and/or acquire adaptable, readily reconfigurable, integrated equipment, processes, and systems. Flexibility will be the key to maintaining competitive advantage in the future for advanced manufacturers. Flexible systems and processes, designed for rapid change, will provide advanced manufacturers the edge they need to rapidly respond to a changing market while maintaining concurrency in their processes. Human/Technical Integration. A second challenge is to integrate human and technical resources to enhance workforce performance and satisfaction. Even though technology is rapidly improving and automation is becoming increasingly popular, firms cannot fully remove humans from manufacturing. During both domestic and international company visits, we saw that humans still do some tasks that machines cannot (usually that require specific dexterity), while machines handled tasks that humans cannot (movement of heavy objects – although usually with human guidance). However, we also viewed several processes where humans performed routine and often repetitive tasks where the use of technical resources could have improved the process. Therefore, better integration of human and technical resources is necessary to further improve manufacturing operations.

(5) Knowledge transfer from an aging work force. One of the recurring trends encountered during our industry visits was the increasing age of the workforce. As noted above, some companies had average workforce ages of over 49 years old. As these older workers finally retire, the loss of knowledge could be high. The manufacturing industry must anticipate this occurrence, and take action to retrieve that knowledge from the older workers and transfer it to a younger work force when required. Information into Knowledge. Advanced manufacturers are dependent on information technology already, and will become more so in the future. This third challenge addresses the need to value, capture, and "instantaneously" transform information gathered from a vast array of diverse sources into useful knowledge for making effective decisions. For organizations to be truly successful in the information era and maintain their competitive advantage, they will have to learn how to “develop knowledge, procure knowledge, protect knowledge, and manage people with knowledge.” In order to accomplish this, manufacturers should provide for:

(1) Synthesis, modeling, and simulation for all manufacturing operations. Once a firm understands all operations and models them, effects of changes to any process or operation can be easily determined and disseminated quickly to all users.

(2) Identification and acquisition of technologies to convert information into knowledge for effective decision-making. As seen by the overwhelming effects of electronic mail on some workers, workers need technology to help deal with the vast amounts of information now available to them. Management must identify technology to collate information from different sources, deconflict that information, and transform it into knowledge useful to a company’s workers.

(3) Development of new educational and training methods that enable the rapid assimilation of knowledge. Once a firm uses technology to transform information into knowledge, workers must be educated and trained to rapidly respond to what this tells them. That is, the workers need to be educated and trained on how to act rapidly on the knowledge transferred to them in order to take advantage of the technology. If workers cannot react rapidly, the investment in the technology may be wasted. Rapidly Reconfigurable Systems. A fourth challenge to advanced manufacturing is to design, develop, and implement reconfigurable manufacturing enterprises to rapidly respond to changing needs and opportunities. The globalized marketplace changes rapidly. Manufacturers must be able to quickly and efficiently reconfigure their products and processes to take advantage of the changing marketplace and attain or maintain their competitive advantage. In order to do this, manufacturers should address: (1) Synthesis, modeling, and simulation for all manufacturing operations. Once a company understands and models all operations, effects of changes to any process or operation can be quickly and easily determined. When operations must change, companies can use the models and simulations to determine the optimum reconfiguration for the new process. (2) Design, development and acquisition of readily reconfigurable, adaptable, and integrated equipment, processes, and systems. Rapidly changing customer needs, market opportunities, and information technologies drive the need for a company to be able to rapidly reconfigure and respond to changes. It is too costly in terms of both time and money to develop, design, and acquire new equipment, processes, and systems for every change. However, as seen during our industry visits, particularly to machine tool manufacturers, systems and equipment now exist that firms use interchangeably in a process. Flexible fixturing is one example of where interconnected equipment can be rapidly changed out (mixed and matched) to accommodate changing requirements. This equipment can then be immediately reprogrammed via its connectivity to the other machines and be fully ready for the new task. Environmental. Manufacturing of products generally requires transforming of raw materials into some intermediate or finished product. This process also typically produces some form and quantity of waste. With the growing world population and increase in manufacturing products, the strain on the global ecosystem is increasing. Therefore, reduction of production waste and minimization of product environmental impact to "near zero" are big long-term challenges for manufacturing. Manufacturers are striving to develop cost-effective, competitive products and processes that don’t harm the environment. Recycling and reduction of waste were the two most often cited examples of process improvements during our industry visits. However, manufacturers still face significant environmental challenges and should address the following: (1) Synthesis, modeling, and simulation for all manufacturing operations. Modeling of manufacturing processes would provide a cost-effective method on analyzing risks and benefits to the environment of possible process/product changes. A goal would be to create and maintain a database of useful and accurate environmental assessments. This database could prove useful and cost-beneficial for further product/process developments as well as for regulatory defense. (2) Production with Near-Zero Waste. In order to manufacture products with near-zero waste, it will be necessary to understand the product process from “cradle-to-grave.” Only after understanding the entire process can an environmental evaluation be truly creditable. Manufacturers should consider use of advanced technologies in recycling and waste production. Additionally, recycling should be addressed to the maximum extent. The most environmentally successful firms visited were those who had developed recycling programs to use their production waste as resource materials for additional products and processes. The most common application was the use of production waste for energy. This not only reduced required waste disposal, but also provided for reduction of energy consumption from outside sources. (3) Environmentally Friendly Production. A growing trend among visited companies was for meeting ISO 14000 standards for environmental processes. Manufacturers with a environmentally friendly attitude tend to make more efficient use of their resources through product waste re-use, recycling, and more efficient processes that reduce waste generation. One good example is the use of powdered-coat painting of parts. One particular company’s use of powder-coating versus liquid painting of products reduced product waste from seventy-seven 55-gallon drums of hazardous waste per year to five 55-gallon drums of waste per year. Manufacturers with an environmentally friendly production process and attitude are more likely to have a competitive advantage over their competitors by reducing the environmental costs associated with their products. OUTLOOK Economic. Since 1969, “there have been six economic downturns in manufacturing that have lasted, on average, about 10 months. Output fell about 9 percent and employment declined 7.5 percent (employment declined by about 1.5 million) during the typical economic downturn.” One of the most interesting observations made is that every economic downturn since 1969 was preceded by a surge in energy prices. Examples include: the Arab oil embargo—1973, turmoil in the Middle East, Iranian revolution—1980s, Iraq’s invasion of Kuwait—1990, and the energy price spike in 2000. While all sectors of the economy are affected by rising energy costs, the manufacturing sector is particularly vulnerable to surges in energy costs. “Manufacturing makes up 28 percent of the nation’s overall energy demand, more than any other sector.” Fluctuations in oil and natural gas prices create serious challenges in U.S. manufacturing. One such challenge is the difficulty manufacturers face in adjusting pricing strategies to compensate for spikes in energy costs. This challenge generates a rippling effect for employment, overall production, and economic growth in general. The manufacturing sector will remain vulnerable to fluctuations in energy prices in the foreseeable future unless alternative, price-stable, forms of energy become available industry-wide. “Globalization has greatly increased the range and intensity of international political, economic, and social interactions.” Generally speaking, manufacturers are more connected to the international economy than the rest of the U.S. economy—65 percent of U.S. manufacturing output produced in 1999 was for international trade. This is significant in that if the U.S. dollar is strong, the price of U.S. exports in markets overseas will be more expensive, resulting in decreased international demand for U.S. output. “Manufacturing operates in a global marketplace where prices are determined by supply and demand relationships and firms are price takers, not price setters.” This truism will have more severe ramifications in the future as more and more newly developed countries gain economic power. “The nature of manufacturing enterprises will evolve in response to changes in the technological, political, and economic climate.” Most of the executives we spoke with during our visits would agree that companies providing goods and services to consumers in the future must continue to emphasize the relationship between quality, service, and price. This means that companies must continue pursuing innovative ways to customize products (being agile), reduce product delivery time, and reduce costs consistent with consumer expectations. Human Resources. The manufacturing workforce will be as diverse as the global economy.” People will continue to play a vital role in shaping the future of manufacturing. Competition will be fierce globally and firms able to adapt to meet the rapidly changing needs of the market will prosper. “Expanding productivity growth in the U.S. economy will require workers with higher levels of skills and knowledge to keep pace with the rapid technological changes.” In the future, “sustaining competitive advantages will depend on a company’s ability to value and capture practical know-how or knowledge.” Capturing practical know-how involves capturing the constant parameters used to make decisions. This involves developing knowledge management systems that give a company’s workforce a wide range of capabilities in their manufacturing sector. The primary issues with knowledge systems will be related to a firm’s current and future capabilities. Knowledge management systems will be seen as methods of creating organizational synergy that cannot be easily duplicated by competitors. Processes. The future of manufacturing is moving toward concurrent engineering. Manufacturing is different from other industries (for example, the service sector) in that, generally speaking, there is not a lot of personal contact between the consumer of the product and the people actually producing or assembling the product. And “despite the rapid growth of information technology, firms still spend more money on old-fashioned capital equipment, such as drills and welding machines, than they do on computers, telephones, and other information gadgets.” Information technology will have its biggest future impact for manufacturing in the areas of planning, developing, and organizing. Technological advances in these areas should generate sufficient efficiencies allowing companies to respond to consumer needs, while at the same time reducing production delivery time and costs. GOVERNMENT GOALS AND ROLES. The health of the. advanced manufacturing industry affects both the economic and military elements of national power, and is therefore a national security issue. Consequently, the Government should assume an appropriate role supporting the stability and vitality of this industry. The government should establish and enforce manufacturing policies in three key areas that directly affect the health of the industry: promoting the availability of skilled labor, encouraging manufacturing process improvements, and stimulating the research and development technology base. Success in manufacturing largely depends on the quality and skill of the workforce. A common concern expressed by managers of both domestic and international firms is the shortage of personnel trained in science and engineering disciplines. To ensure an adequate pool of science and engineering workers in the., government policies need to provide better incentives for students to enter the science and engineering areas of study. Given that the. must increase the skilled labor supply, several policies can help relieve the skilled labor shortage. More. students simply must graduate from science and technology (S&T) programs. The government should provide targeted incentives such as tax breaks or interest-free loans to entice domestic students to seek S&T education and training. S&T education is an investment in human capital and is essential to the vitality of a networked economy. The government should work in close partnership with industry to identify emerging skills that merit targeted financial incentives. Furthermore, manufacturers should be rewarded for providing internships to science and engineering graduate students.Government policies should also encourage highly qualified foreign graduate students to stay in the. after graduation. Immigration policies should provide more flexibility for. industry to recruit the best and brightest from other nations. . companies can help to identify and sponsor outstanding foreign undergraduate, graduate and doctoral students. Exemplary foreign students should be given preferred consideration for. citizenship after graduation. The government would have several years prior to graduation to complete any required background checks on foreign students. Another. workforce issue is aging, particularly among union manufacturers. The aging trend will create a major knowledge and leadership void in the next decade as the workforce enters retirement. Young skilled workers are seeking employment in other industries. This demographic trend will make. manufacturers more dependent on immigrants to supplement the shortage of domestic workers. To ensure the. has a sufficient labor force, immigration policies need to provide. firms with greater flexibility to draw from the global workforce. Manufacturing process improvements enhance competitiveness, but they often require significant capital investments. Government policies should provide economic incentives to encourage these investments. Fiscal policies, such as tax breaks for efficient processes or faster capital equipment depreciation schedules, can energize companies to implement process improvements and capital upgrades. Promoting international free trade agreements also gives manufacturers the ability to leverage market forces to improve manufacturing posture. Potential leverage areas are foreign research and development (R&D) efforts and the available pool of well-trained, skilled workers overseas. R&D is the fuel for technology innovation. Since advanced research requires tremendous resources and time before yielding useful products, only governments and large multinational companies have the financial resources to support meaningful advanced research. Government has the greatest influence in this area through policies that sponsor advanced research across a broad spectrum of science and technology areas. Organizations such as the National Institutes of Science and Technology (NIST), National Science Foundation (NSF), and Defense Advanced Research Projects Agency (DARPA) should expand their efforts to develop advanced manufacturing processes. One R&D area in need of government support is flexible manufacturing. Flexible manufacturing will enable the mass customization of products and create new market opportunities in the commercial sector. Flexible manufacturing processes can provide the. advanced manufacturing sector with continued world leadership, while providing DoD with assured access to affordable, customized war fighting systems.