5.07.2008

Technology is Not a Threat to Manufacturing

I’m frustrated by a column appearing on Forbes.com, which offers some valuable insights into manufacturing today while simultaneously putting forth some incorrect and misleading statements.

The column, written by Kevin O’Marah, chief strategist at AMR Research, is entitled “The Real Threat to U.S. Manufacturing.” O’Marah argues – correctly in my view – that free trade agreements, currently under attack by many politicians, are not the problem their critics make them out to be.

He focuses on BMW, and its “bustling” plant in South Carolina, and Caterpilllar, as examples of companies with U.S. operations competing successfully in global markets.

The difference is not really foreign ownership, or even non-union workforces, but rather strength in the face of competition. There is no need for protectionist policies when manufacturing sees itself as part of a global value chain…

Protectionism is rising as the economy falters and politics takes center stage. As companies like Caterpillar and BMW show, however, there is not necessarily a link between free trade and job losses…

All the ingredients are there for Americans willing to learn and change. NAFTA has nothing to do with it.

I agree with all of that. But O’Marah also talks about what he perceives as the true threats to manufacturing.

One, he says, is labor unions. I’m no defender of unions, and sometimes they can be an obstacle to implementing the kind of lean transformation necessary for competing in today’s markets. However, I think O’Marah may be going a bit far when he says that unions “are political bodies interested more in votes than wage increases.” You can draw your own conclusions.

My real beef with O’Marah is when he says the other major threat to manufacturing is technology. Consider his statements:

Twenty-first century manufacturing is about an automated, integrated manufacturing process. Manufacturing automation will take over one manual task after another--first in the United States, then China and then eventually everywhere…


The implication is clear: Old-fashioned factory work need not be done by people.

For supply-chain professionals and manufacturing engineers, decisions about jobs are all part of an equation, and the math often says robots are better than people. Where cheap labor offers a lower cost, jobs are created, but this changes as wages rise and technology replaces manual work. This dynamic holds true from Japan and Korea to China and Eastern Europe, all of which have seen huge capital investment gradually replace workers…

The threat to our traditional manufacturing employment base comes not from Mexico, or even China, but from a volatile mix of technology whose productivity beats human labor and unions who think more like political parties than economic agents.

First, it is clear that O’Marah is talking about manufacturing jobs disappearing, not the actual companies.

More importantly, he is, for the most part, wrong. Yes, technology does often improve productivity, so that fewer workers are needed to perform the same work. However, he clearly thinks we are coming closer to the “lights-out” factory, where virtually all work is done by robots. That has been talked about for decades, it hasn’t happened yet, and it’s not going to happen.

It seems to me that some of the information O’Marah provides undermines his own argument. Have BMW and Caterpillar thrived by replacing workers with robots? I don’t think so. Like most successful companies, they have developed strategies built on the skill and expertise of their workforce – as well as technology – aimed at providing value for their customers.

Technology and improved productivity need not be threats to manufacturing jobs. The best companies (which do make clever use of technology) maintain jobs, and even add them, by growing their business. And they do that by becoming lean, intelligent competitors who understand their customers and the marketplace.

4 comments:

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