What's really behind the decline U.S. manufacturing jobs?

Offshoring is not the only reason for the decline in the number of U.S. Manufacturing jobs. It is not even the most significant reason. For almost twenty years now, manufacturing companies around the globe have been changing how they work. Factory automation and a process called “lean manufacturing” has resulted in significant reductions in the number of workers required to produce the same amount of manufactured goods.

The shift from "mass manufacturing" to lean manufacturing had its origins in the 1990 publication of a book called The Machine that Changed the World by James P. Womack, Daniel T. Jones, and Daniel Roos about the Toyota Production System. As a result, smart manufacturers no longer build goods to forecast and store them in warehouses waiting for them to be sold, tying up capital and taking up huge amounts of space. They wait until they have an order in hand, and then they assemble a product quickly, using continuous flow, lean manufacturing techniques.

News articles that lament a decline in the number of domestic manufacturing jobs tell only a portion of the story when they focus production heading overseas. It's true that in the global economy, out sourcing to other countries has become commonplace. What these articles fail to recognize, however, is that workers’ salaries are but a small part of the manufacturing cost equation. And they overlook that the elimination of jobs isn’t all to foreign countries. You see, the waste inherent in the old mass manufacturing system is enormous. Lean manufacturing simply requires fewer people to produce the same number of products.

Old techniques typically require enormous amounts of inventory in the form of work-in-progress—inventory that takes up expensive space and ties up capital. Building to forecast means gambling corporate dollars by making products without knowing for certain someone will buy them. And it requires investments in warehouses to store them. When forecasters are wrong, goods often are sold at a loss—if they are sold at all. Imagine, for example, how much less a product in the electronics industry is worth six months to a year after it is made.

Lean manufacturing eliminates this waste. For a variety of reasons, a lean operation typically turns out higher-quality products than a mass manufacturing cousin. It almost always requires 25% to 40% less direct labor. It uses about half the floor space because no room is required for work-in-progress. Warehousing costs are cut to the bone because finished-goods and parts inventories are normally reduced from several months' to a few days' supply.

American manufacturers that caught onto this have adapted to the new way and are able to compete in the global marketplace no matter in what country or location their products are assembled.

Perhaps the biggest problem to overcome for those shifting to lean manufacturing is resistance to change. People in middle management and in supervisory positions often must change how they do business from a “command and control” mentality to that of a “team leader” mentality, and it can be difficult for those who have worked one way all their lives to change. If they don't, however, the lean model will not work. Often, top management may find it easier to scrap a factory and start over somewhere else, perhaps in another country or another state, than to spend time and money teaching old dogs new tricks.

In traditional, mass manufacturing factories, people typically come in two varieties: managers and workers. Lower-level managers in particular often are assertive, aggressive, and can even be intimidating. They play the role of task master and relish being on a higher plane than the workers under them. That's a reason you probably won't hear about when a plant moves from, say, Seattle to South Carolina.

On the other side of a huge chasm are workers who are generally are regarded by managers as unfeeling and unthinking robots. They typically do one particular job, and only that job, all day long. Naturally, they tend to be extremely frustrated. Chances are, all a robot worker will do is the minimum necessary to keep a paycheck coming.

This “us against them” set up is inefficient and often counterproductive, but in a traditional mass manufacturing business it works because employees are not required to think. But a lean manufacturing operation cannot function this way. Workers must be able to change jobs or tasks, and move from one to another, to meet the day’s production requirement. Because the hierarchy has been eliminated and no supervisor is breathing down their necks, they must use their heads, make decisions, and solve problems in consultation with other team members.

Imagine how much better any business would run, how waste could be eliminated and things would hum along, if everyone felt important and that their contribution mattered. Imagine if they each felt a sense of ownership and responsibility. Imagine if all in a company were considered integral members of the same team and in a position to make a vital contribution. This is the reality of a lean enterprise. But it cannot be achieved if old-line managers are allowed to stand in the way.

Studies show that workers in a lean enterprise are happier with their jobs than those in traditional businesses. And why wouldn't they be? They are no longer robots. The only downside—and whether it is a downside depends on your point of view—is that there are fewer of them. When a factory is fully lean and operating at its former capacity, it often will have 40% fewer employees. Unfortunately, the reduction in workforce part of the story often is all that makes it into print.

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