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From the Desk of Jack Healy

The New Generation of Manufacturing

By Jack Healy, Director, MassMEP

While there have been reams of data produced on the loss of manufacturing jobs over the last few years, little has been said on the deterioration of the large manufacturing firms (companies with more than 500 employees) throughout the country. Historically, large manufacturing firms (LMF’s) have been the drivers of American industrial capabilities for over a century. As the large manufacturing firms reconfigure, merge, and move, we have seen negative effects throughout the entire manufacturing community.

While large manufacturers represent only a small fraction, 1.4%, of total manufacturing establishments nationally, they account for two thirds of the entire national manufacturing payroll — contrary to what we see in Massachusetts.  Whether because of global competition, outsourcing, or mergers, manufacturing in Massachusetts has a decidedly different structure. The LMF community in Massachusetts now accounts for only 32% of the total manufacturing payroll in the state. This compares to 40% in the year 2000, and 56% for the same group nationally. This deterioration has been especially acute over the past few years, as indicated in the following table.

% Change 1999 – 2004
Manufacturers Over 500
Total Mfg. Establishments
– 38 %
– 10 %
Total Employees
– 46 %
– 21 %

This loss of LMF’s has been especially detrimental for the remaining 8,200 small manufacturing enterprises (SME’s). Larger firms, through their purchased parts, R&D, and other purchased services, have driven the economy for many of the SME’s. The effects of this contraction are felt nationally throughout the entire manufacturing supply chain as well as in the state community through the loss of revenue in salaries and taxes. The continuation of this contraction will not lessen as LMF’s have numerous options for enhancing their competitive advantage by using global suppliers.

What remains now is the challenge for the remaining SME’s in Massachusetts to reposition and to renew themselves to the new opportunities caused by these changes.

Working with 94 SME’s who have provided the leadership, passion, and support necessary to turn their factories into learning organizations,  Mass Manufacturing Extension Partnership (MassMEP) is successfully providing the training that is helping them join the new generation of manufacturers.

MassMEP trains over 10,000
people each year in Lean Manufacturing

This same group of clients who implemented Lean were surveyed by an outside firm one year after their implementation. They reported nothing but favorable impacts. In fact, 87% of these manufacturers stated that they have become more competitive as a result of the implementation of Lean Manufacturing methodologies.

Increased Sales, Lower Costs
These clients also reported an average increase of $966,000 in sales, as well as an additional increase in retained sales of $898,000 that otherwise would have been lost.  This average overall sales benefit of $1,558,000 combines with an average cost savings of $364,000 in just the first year. We can comfortably say that these firms are on the road to becoming part of the next generation of manufacturing

As was pointed out recently in American Machinist Magazine, "A historical moment in manufacturing has passed in April: Quarterly sales reports for car companies noted that Toyota Motor Corp. sold more cars than General Motors Corp., making Toyota the leading car company in the world."

The fact that Toyota surpassed General Motors comes 20 years after Lean manufacturing was called the ‘Machine that Changed the World’ in the famous study and book produced by James P. Womack, Daniel Jones, and Daniel Roos. The authors pointed out that Lean manufacturing was superior to mass manufacturing, and predicted in 1987 that Lean manufacturing would displace mass manufacturing globally.

Indeed, it has — Lean manufacturers are the new generation.

For an opportunity to learn how to join the new generation of manufacturers, call Mike Prior at (508) 831-7020.


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