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Unformatted text preview: MEGR 2180 MEGR 2180 Course Introduction Manufacturing and its Importance and its Importance Man Manufacturing
Latin— Latin—manu factus– made by hand factus– Manufacturing Manufacturing is the backbone of any industrialized nation Generally the higher the level of Generally, the higher the level of manufacturing manufacturing the higher the standard of living Major Contributor to Growth Major Contributor to Growth
Rest of economy Transportation/public utilities Manufacturing 22% Wholesale trade Software* Services Finance/insurance /real estate Retail trade
SOURCE: U.S. Department of Commerce Source: U.S. Department of Commerce, Federal Reserve Hard Hit in Recent Years
Quality Index (Q2-2000 = 100) 2000-2001 Recession impact 106 104 102 100 98 96 94 92 90 88 86 99 00 01 02 19 20 20 20 Manufacturing Production Overall U.S. GDP 20 03 US Manufacturing Share - GDP and Employment
Data Source: US Dept of Labor, NAM GDP calculations using 1982 constant-weighted price index 35% 30% 25% 20% 15% 10% 5% 0%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
Mfg Share of US Employment Mfg Share of US GDP Productivity Economic Economic labor distribution
Zysman 2003: • Manufacturing Still Matters • Not evolution from manufacturing to services, but reorganization of manufacturing Edgar 2003: 2003 • US manufacturing productivity increase is 2.78% per year for the past 50 years • This has reduced direct labor costs in manufacturing,and increased jobs due to trade Why Manufacturing Is Important Why Manufacturing Is Important
Manufacturing Manufacturing is the engine that drives American prosperity. It is central to our economic security and national security. Manufacturing:
Growth Every $1 Growth - Every $1.00 in manufactured goods generates an additional in manufactured goods generates an additional $1.43 $1.43 worth of additional economic activity - more than any other economic sector. Innovation Innovation - Manufacturers are responsible for almost two-thirds of all twoprivate sector R&D which ultimately benefits other manufacturing and non private sector R&D, which ultimately benefits other manufacturing and nonmanufacturing activities. Trade Trade Balance - The United States is the world's largest exporter; 62 percent of all U.S. exports are manufactured goods, double the level of 10 years ago. years ago. Productivity Productivity - Over the past two decades manufacturing productivity gains have been double that of other economic sectors. These gains enable Americans to do more with less, increase our ability to compete and facilitate higher wages for all employees. Reward Reward - Manufacturing compensation averages more than $54,000, the highest in the private sector. Tax Tax Base - Manufacturing has been an important contributor to economic growth and tax receipts at all levels of government, contributing one-third neof all corporate taxes collected by state and local governments. Manufacturing Manufacturing Impact Hi Highest Multiplier Effect Eff Outsourcing Jobs Outsourcin
2.6 2.6 million manufacturing jobs lost recently lost recently “economic “economic downturn, or a systemic, structural change?” “… see, we told you free trade meant loss of manufacturing jobs” “That giant sucking sound” That giant sucking sound used used to be NAFTA moving jobs to Mexico. Now it’s Mumbai” “It’s all global now, and “It all global now and It besides, besides, the high paying jobs are IT and skilled services…” “Free “Free trade is great, it’s just not a level playing field, just fix this” “Barriers “Barriers NOT the answer – NAFTA & Uruguay Rnd meant $1,300$1,300-2,000 to the average U.S. family from cost savings and higher wages “The crisis is over-rated – overwithout the recession would the globalization trend be so noticed? noticed?” U.S. U.S. is still the world’s largest manufacturer, and U.S. firms are multinational are multinational Not so simple… A global perspective Not so simple global perspective
Is it better for America to buy BMW made in Is it better for America to buy a BMW made in South South Carolina or a Ford made in Canada? IT IT services RCA is headquartered in Indianapolis but RCA is headquartered in Indianapolis but manufacturers manufacturers in Shanghai China is this better than Mitsubishi headquartered in Tokyo and manufactures in Tijuana Mexico? from IBM but performed in India, IBM pe in India or or from Infosys in Atlanta but staffed by H1b workers living and spending their pay in the US? Manufacturing Manufacturing is Global Source: Cassidy 2003 The The challenge of expensive labor is not a new one There There are many historical examples of labor based production addressing the labor-based production addressing the challenge challenge of increased labor costs Reaping of Wheat
Reaping = Cutting -Early reaping was done by hand reaping was done by hand -Egyptians used a flint blade -Europeans and Americans used the Sickle and later the Scythe Sickle, and later the Scythe -By hand with a sickle, a worker could cut about 0.3 acres per day scythe the worker could -Using a scythe, the worker could cut about 1.5 acres per day -Backbreaking labor - Often involved the entire involved the entire
population of a town (men, women, children, elderly) Threshing Threshing = detaching grain from stalks detaching grain from stalks -Threshing was done by hitting the wheat with a flail -Best workers hit twice per minute -The process could take months Winnowing of Wheat Winnowing = separating the grain separating the grain -Winnowing was done by throwing the wheat into the air with a pitchfork or from basket or from a basket -The breeze blew away the chaff Combine “Combines” reaping, threshing and winnowing winnowing First combine 1838 Early combines were pulled by up to 16 horses Stereo, air conditioning, comfortable seat, pressurized cabin pressurized cabin Often farmers contract combining to spread the bi th cost of equipment How How can the US Compete?
“America must never compete in the battle to see who can pay their workers the to see who can pay their workers the least, least, and it will take sustained innovation to ensure we don have to to ensure we don’t have to.”
[Mehlman, Dept of Commerce] “Productivity and Advanced Technology are Productivity and Advanced Technology are the the only Sustainable Competitive Advantage and SPEED is the currency Advantage, and SPEED is the currency most most important today.”
[Molnar, Cummins] Cu Manufacturing has always changed Manufacturin Manufacturing Manufacturing Matters: Process enables Product
A commonplace example… from the Wall Street Journal LCD LCD flat panel displays - disruptive technology reshaping TV market Barrier Barrier to large (30” and greater) was Manufacturing Process Industry Industry leaders Sony and RCA/Thompson did NOT invest in LCD Mfg Process, thinking issues were insurmountable LCD Mfg Process, thinking issues were insurmountable Sharp Sharp & Matsushita increased precision, increased precision, and and developed new process for placing crystal substance between glass Process Process now takes 2 hours (versus 5 da days) for 30” screen fo 30” sc Manufacturers perform the largest Manufacturers share of R&D ...
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- Fall '08