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Survival Of The Fittest

Small manufacturers adapt to today's evolving markets.

In days gone by, the factory floor was a loud, equipment-laden place with assembly lines clinking and clanging, and belts whirring and groaning. Today, in large part, that world is gone, replaced by the relative silence of computer-driven machinery. The change is indicative of the manufacturing sector's metamorphosis over the past 30 years.

Those changes have had enormous impact, not only on those in the industry, but on the American economy as a whole because, as one academic puts it, "manufacturing is the engine that drives our economy."

According to the U.S. Department of Commerce, in 1992 (the latest year for which figures are available), manufacturing businesses employed more than 18 million people--about 15 percent of the American population. Although this is down from an average of 25 percent between 1960 and 1992, manufacturing nonetheless contributed $925 billion to the nation's gross domestic product in 1992.

Small businesses are a critical part of this sector. Of the 387,000 manufacturers in this country, 381,000 are small or midsized (having under 500 employees); the bulk of those--262,000--employ fewer than 20 people.

But these figures don't tell the whole story, says Wally Hopp, a professor of industrial engineering at Northwestern University in Evanston, Illinois, and co-director of the college's Master of Management in Manufacturing program. "If you look at how many jobs are tightly linked to manufacturing, you'll find over half the jobs in the American economy [about 60 million] are directly related to manufacturing," Hopp contends. "That doesn't even count the indirect effects. That's why I look at manufacturing as the foundation of the economy."

That foundation has undergone a profound transformation; during the 1950s and '60s, U.S. manufacturers ignored some evolutionary changes. The advent of computerized machines and a new understanding of how work flowed led to new philosophies on how factories should operate, explains Uday S. Karmarkar, director of the Center for Operations and Technology Management at University of California, Los Angeles (UCLA). Unfortunately, America was not at the forefront of this transformation.

By the 1970s, the rest of the world had rebuilt after World War II and become competitors. It took 10 years, however, for American manufacturers to realize they were being surpassed in many areas by their foreign competitors. This forced them into copycat mode in an attempt to catch up, says Hopp. "But that had mixed success," he says of the Japanese management techniques that took the industry by storm in the 1980s. "The Japanese did what was right for them, and there were particular reasons why they did things specific ways." Manufacturers that modified the imported systems to fit their own needs did fine, Hopp says, but those who blindly imitated fell on their faces.

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This article was originally published in the September 1997 print edition of Entrepreneur with the headline: Survival Of The Fittest.

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