The coming industrial revolution

Like a sword of Damocles, the factory of the future hangs over smokestack America. This vision of future manufacturing, replete with robots and sophisticated computer-controlled machinery, goes by a number of names. Some, such as the lights-out factory or the untended factory, carry a heavy emotional charge. Others, like computer integrated manufacturing, or CIM, are dryly descriptive. By whatever name it is called, the concept clearly foreshadows radical changes in the way the United States, and other industrialized nations, produce the basic goods on which a large portion of their economies depend.

Computer integrated manufacturing is an umbrella term that describes a host of manufacturing techniques glued together by sophisticated computer technology. To its advocates, CIM represents the future revitalization of the nation's basic manufacturing. Increased productivity, they contend, will unleash a rising tide of wealth which, in the words of John F. Kennedy, ''will lift all ships.'' But for the men and women on the factory floor and the labor unions that represent them, these new technologies constitute a threat to existing jobs and familiar routines.

Neither view is clearly wrong.

There is little doubt that the highly automated factories made possible by current computer technology can vastly increase manufacturing productivity, creating more wealth in the process. But it is not clear just how effectively such systems will be used. Even more perplexing is the question of how such additional wealth will be distributed throughout society.

Likewise, there is little doubt that factories in the future will use fewer people to produce more goods. What is unclear is whether the economy can and will create new types of employment to offset those lost to automation on the factory floor. A technical memorandum from the congressional Office of Technology Assessment last year looked critically at methods used to predict the effects on employment of advanced automation and found them all to be unreliable.

Despite uncertainty regarding the social impact of CIM, its advocates have an almost irrefutable argument. US manufacturers, they say, have no choice. The economic advantages of these advanced methods are so overwhelming that American companies, as one consultant to the computer industry once said, must either ''automate, emigrate, or evaporate.''

The Japanese are leading the world in these techniques. According to current estimates, imported goods have already meant the loss of about 2 million jobs in the US. In an increasingly interdependent world, failure to automate aggressively could bring a snowballing loss of jobs.

''In the current competitive environment, companies will either reduce their employment by 25 percent or 100 percent,'' asserts Thomas G. Gunn, a CIM guru at the consulting firm Arthur D. Little Inc. ''The Japanese have changed the rules of the game, and we either play along or pick up our marbles and go home.''

CIM is so complex that Dr. Gunn requires a two-hour, rapid-fire slide presentation to cover its basic elements. These include computerized control of parts and material inventories; product design on computer terminals rather than blueprints; remote control of machine tools, robots, and other automated materials-handling equipment; and computerized testing methods.

According to Gunn, no company has yet constructed a factory that embodies all the elements of CIM, but several in Japan are coming close. The potential gains in production efficiency are tremendous. For instance, a Yamazaki factory that invested $18 million in these advanced techniques reported savings of $6.9 million in its first two years of operation. And a Toshiba factory in Nagoya that makes room air fans doubled its profits and substantially improved the quality of its product by using 11 robots, Gunn reports.

Advantages go far beyond lower costs, he contends. CIM is a strategic tool that can confer significant competitive advantages on the international market by allowing companies to develop new products much more quickly and with substantially higher quality and reliability. This is important, he says, because more and more industries are following the path of rapidly changing tastes blazed by the fashion industry.

Underlying all the fancy new equipment, however, must be a bedrock of basic manufacturing methods pioneered by the Japanese, called the Toyota Production System. Its inspiration comes from stocking methods developed in US supermarkets. It involves a highly disciplined approach to production in which inventories for parts and materials are kept at their the lowest possible levels. It is also known as Just in Time (JIT) manufacturing.

Gary Flack manages a Hewlett-Packard manufacturing plant in Greeley, Colo., which just adopted these techniques. ''The good news is that the Japanese system is easy to duplicate. The bad news, for many US businesses, is that, if the Japanese don't get you, the Americancompanies that adopt JIT will.''

From the first day of the switchover, production costs dropped and productivity increased at Mr. Flack's plant. Now costs are 30 percent below what they were two years ago using conventional US methods, and the plant is turning out products worth three times the value in less than two-thirds of the space. The real benefit of operating at the lowest possible inventory level, he explains, is that manufacturing problems quickly become apparent and require immediate solutions: ''If we run out of parts, we shut down the entire line. It's hard to sit there and watch the workers walk out. But it puts the problem squarely in management's lap. It breaks down management's traditional response to problems, which is to blame them on the direct labor.''

Flack's biggest problem has been employee response. In the past, workers assembled entire units by themselves, working at their own pace. Now they are part of an assembly line and are under peer pressure to perform as a member of a team. ''The change has been hard on many of our workers, particularly the older ones,'' the manager acknowledges.

Despite these problems, Flack argues that JIT, while challenging to the workers, also enriches their jobs and gives them more responsibility. ''We have this image of people on the line that they are not intelligent. This is a stereotype which has become self-fulfilling. But give them a challenge, and they can think,'' he contends.

Dave Burror is the head of Logitek, a Detroit company that puts together automation systems primarily for the automobile industry. US automakers are clamoring for CIM systems, he reports. But at the same time, they are concerned about the social implications. They are aware of the fact that the biggest enemy of the factory of the future is ''a guy with a hammer'' who doesn't support the new technology.

The burly Mr. Burror maintains that concern over CIM's effect on unemployment is overblown. Those potentially disadvantaged by the new technology are the older factory workers, but their seniority makes their jobs relatively secure, he says. Those most likely to be affected are future high school graduates headed for factory jobs instead of college. And these young people are the most easily retrained for new types of jobs.

In the past few years, with the economic recession and high levels of unemployment, there has been considerable concern over the factory jobs that may be lost through an invasion of robots and computers. The aging of the US population, however, suggests a period in the future when there may be a much smaller labor pool supporting a large retired population. In this case, ''Where will we get the people willing to stand beside the machines?'' asks Gunn at Arthur D. Little.

Despite considerable publicity over the factory of the future, its advocates are frustrated because progress towards automation is extremely slow in the US. ''CIM is a missionary sale to CEOs (chief executive officers). Most don't even know it is out there,'' Gunn acknowledges.

The reason for this, explains Steven Wheelwright of the Stanford Business School, is that in most US companies, manufacturing is at the bottom of the corporate totem pole. To typical US business executives, manufacturing is ''beat to fit, paint to match: If you never hear from them you must be doing something right,'' he summarizes. Further, most US businessmen view their labor in terms of energy, rather than intelligence, and conceive of quality control as a police function, rather than grounded in the workers' attitudes.

This degree of neglect has been possible because American companies have not competed on the basis of manufacturing, Dr. Wheelwright explains. Despite the success that a number of Japanese companies, and a handful of those in the US, have had in capitalizing on improvements in manufacturing techniques, about 85 percent of American manufacturers take a basically defensive view toward the factory. ''These people don't want to be out front. They just don't want to be behind,'' Wheelwright summarizes. These are the companies least likely to prosper in the future, he suggests.

For an example of why this is so, Wheelwright cites the experience of General Electric's dishwasher division. Several years ago, Jack Welch, now GE's CEO, okayed a $38 million plan that made use of a new plastic tub and liner, plus JIT , automation, and a new view of labor. In 1981, GE was the nation's leader in dishwasher sales, with 33 percent of the market. By 1983, its market share increased to 40 percent. Today the number of service calls made on new machines is down by 33 percent, production costs are 12 percent lower, and reject rates have dropped from 10 to 3 percent. Moreover, worker productivity has risen 35 percent and attitudes on the plant floor are highly favorable, he reports.

While this is an example of the kind of competitive advantage that companies taking an opportunistic view toward manufacturing can realize, only a minority of the nation's companies seem to understand this, Wheelwright observes.

Those who cling to the old preconceptions will be ripe targets for takeovers, observes Hewlett-Packard's Mr. Flack, with a gleam in his eye. ''You could make a lot of money, very fast, by taking over companies, converting them to JIT, and then selling them,'' he says, with obvious relish.

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