President's Perspective

February 2005

U.S. Must Not Lose Manufacturing Edge

by Lawrence P. Farrell Jr.

In business, competition is the name of the game. Many U.S companies, including major defense contractors, have enjoyed much success in the global marketplace, but there are reasons to be concerned about the future of our nation’s industrial base, particularly when it comes to manufacturing.

The decline in U.S. manufacturing capabilities is not news to many of our readers. Only a year ago, we reported that the manufacturing sector had sustained 37 consecutive months of job losses. More than 2.7 million manufacturing jobs disappeared in the United States during the three-year period beginning in mid-2000.

It’s somewhat reassuring to learn that U.S. manufacturing appears to be on the upswing after two years of dismal performance and waning demand. Significant outsourcing of manufacturing work to China in the commercial segments resulted in the demise of hundreds of small, and in some cases, large manufacturers.

In the defense industry, similar developments have occurred. The trend of outsourcing by large defense primes to smaller shops around the world continues as large primes morph into system integrators rather than manufacturers. Small players can offer lower costs, as they have much lower overhead than primes, but rarely do they have up-to-date technology.

They can make a cost target with their lower overhead structure for a time, but even more significant gains could be made with the adoption of newer technologies, along with a “lean” operating culture that seeks continuous change and improvement.

One area of utmost concern for the Defense Department and defense industry is manufacturing machine tools. In commercial operations, the average age of equipment is 15-20 years. In military depots that age grows to 25-30 years. State of the art equipment would provide an immediate, giant leap in productivity.

Unfortunately, many shops will not make the jump to the more productive advanced technology, mostly for financial reasons.

Another caveat is that while manufacturing technology in-creases productivity, it also eliminates jobs—not unlike the reduction in the number of farmers decades ago with the advent of widespread automation. Additionally, the jobs that remain in our future manufacturing environments will require a higher level of technical skill, aligned with the advanced technology in use.

Foreign competitors, such as China, are jumping on new technology. Its companies are benefiting from an influx of science and engineering graduates. Combine that trend with China’s low labor costs, and it is easy to see why China is becoming the “world’s manufacturer.”

Nonetheless, technology provides a competitive advantage. The ramifications of this are clear in the defense industry. The nation with the most modern industrial base, not surprisingly, will possess the most capable weapons systems. And in order to have the most modern industrial base and leading-edge weapons, a country needs to be a leader in advanced manufacturing.

So maintaining the lead position in manufacturing technology is key to the future of the U.S. defense superiority. A critical underpinning is government research and development support. Manufacturing investments must be supported by the administration, as were semiconductors and nano-technologies.

Without a significant effort, the United States will continue to slip in its overall ability to compete in the global economy and, more importantly, defend itself against next-generation technologies.

Further, we need appropriate development of educational and awareness programs to rekindle the growth of U.S. science and technology graduates.

At the forefront of the push for the development and implementation of new technologies is the National Center for Defense Machining & Manufacturing.

The center works with many defense contractors. According to NCDMM, productivity improvements of 30-40 percent are achievable by improving manufacturing technologies. Gains of 300-500 percent are possible with the adaptation and implementation of advanced machine tools.

Whether it be composite wing skins, titanium aero structures, high temperature alloy engine components, metal matrix composite structures or new ceramic/metallic materials to reduce weight and improve performance (to include, for example, personal and vehicle armor) the manufacturing technology required to effectively produce these components plays a significant role in achieving adequate quantity, quality and cost targets.

The United States must have advanced machine tools, technology and manufacturing capability to remain internationally competitive. As I mentioned in a previous editorial, protectionism is not the answer, but there is a compelling case to be made that both the federal government and the private sector need to step up their investments in manufacturing technology, so that we can remain competitive with economic powerhouses such as Japan, Germany and China.

The state of manufacturing capabilities in the United States today gives cause for concern about the continued vitality of manufacturers that produce second to none weapons and components for the armed forces.

Email me your comments to Lfarrell@ndia.org

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