Strengthening the link between innovation and production in U.S. manufacturing

In their book, “Advanced Manufacturing: The New American Innovation Policies,” William B. Bonvillian, lecturer at the Massachusetts Institute of Technology, and Peter L. Singer, policy advisor for MIT, address the shrinking manufacturing industry, ways to breakthrough legacy barriers in industry, and innovation challenges in U.S. manufacturing.

At the crux of the authors’ argument in support of advanced manufacturing, as a way to revive U.S. manufacturing, is the notion that the way the U.S. innovates has deviated too far from production and manufacturing and actually bringing that innovation to market. The authors have vastly researched the factors that led to the U.S. loss of its global manufacturing dominance, how to bring innovation back to manufacturing through new production paradigms and enabled by advanced manufacturing.

What is advanced manufacturing?

The Office of Science and Technology Policy (OSTP) report, entitled, “Ensuring American Leadership in Advanced Manufacturing,” defined it as the manufacture of conventional or novel products through processes that depend on the coordination of information, automation, computation, software, sensing and networking, and/or make use of cutting-edge materials and emerging scientific capabilities.” This was from 2011, and the U.S. was still recovering from the economic crisis at the onset of the Obama administration.

At the start of the Great Recession with General Motors and Chrysler in bankruptcy, not to mention the collapse of the financial sector, government efforts early on focused on short-term stabilization efforts, the bailouts. The problem was these short-term measures couldn’t really offset long-term under-investment in innovation, argued Bonvillian and Singer. Rebuilding American industry on the back of advanced manufacturing long-term, the authors said, would require a structural response to a system problem, and the new administration recognized the problem.

The Obama administration had a new plan to pursue high rates of productivity growth as a policy solution, and the new strategy would focus on advanced manufacturing and innovation in the production system.

The Postwar U.S. was not focused on manufacturing

How did manufacturing get left out of the U.S. innovation system? It can be argued that U.S. manufacturing won the second world war. “The United States simply supposed manufacturing would always be with us; it was outside the innovation agenda. This is a critical point for understanding the subsequent history of U.S. manufacturing’s decline,” the authors said. The U.S. was a global leader in manufacturing and production, but where the U.S. was lacking at the time was in early-stage research, so the federal research and development (R&D) system focused on science and the development of new technology fields. Manufacturing was nowhere on the agenda, assumed it would always dominate, and a production focus was eventually left out of the U.S. innovation system.

The U.S. should have learned the innovation lesson from Japan

In the 1970s and 1980s, Japan did not miss the connection between innovation and production. “As Japan reindustrialized in the postwar period, it undertook major innovations in production, using manufacturing as a means to bring it to the frontier of international technology and economic competitiveness. This approach was not new: it was the same technique the United States had employed in competition with Britain in the nineteenth century on its way to industrial and then economic supremacy,” Bonvillian and Singer said.

Japan also made other important changes. Influenced by the writings of Edwards Deming and led by Toyota, they built quality into every step of the production process. This new quality-based manufacturing paradigm put Japanese firms ahead in the auto and consumer electronics sectors, and the U.S. was left scrambling.

It finally dawned on U.S. industrialists and policymakers in the 1980s that Japan had launched a new kind of manufacturing system, “heavily innovation-oriented around quality in production.” The U.S. political system was forced to react, and it did with a series of new federal programs (Bayh-Dole Act, Manufacturing Extension Partnership, Small Business Innovation Research program, Advanced Technology Partnership). But something else saved the U.S. from losing its global dominance to Japan: “The political need to respond with new manufacturing policies in the United States was swept away by the success of the innovation-induced information technology innovation wave,” the authors said. The information technology (IT) wave transformed the 1990s into one of the strongest growth spurts in recent U.S. history.

China becomes global leaders in manufacturing

However, that success did not last forever, and the IT revolution was only possible in the first place because of government supported technology development through the Department of Defense to develop electronic computer, semiconductors, supercomputing, software, personal computing, and the Internet. Yet in 2011, China passed the U.S. in net output as a share of the world output. The book details how the U.S. lost this title and how it might regain its manufacturing dominance.

In short, China was not only resource heavy, with low-cost, low-wage advantages, their enhances in productivity also gave them the comparative advantage, Bonvillian and Singer argued. The trade relationship with China also negatively influenced a large number of labor-intensive industries in the U.S. with many blue-collar jobs disappearing.

From 2000 to 2011, China’s global manufacturing output grew from 5.7% to 19.8%. “Most have assumed China’s rise is the result of low production costs from cheap labor and cheap parts. There is also an assumption in the United States that manufacturing must naturally migrate to low-cost producers and that the knowledge required for production processes is relatively trivial and readily replicable—neither is true,” the authors said. China has instead established a new link between process innovation and manufacturing.

Small to medium-sized firms remain largely out of the U.S. innovation system

The authors stated that the U.S. still has the world’s strongest innovation system, as long as we can point it in the right direction, so to speak. “Although the major U.S.-based multinational manufacturing firms fund most of the nation’s technology development stage and thus have the capacity to keep up on the innovation front, the majority of the U.S. manufacturing sector belongs to the 250,000 small and midsize firms lacking this capacity,” Bonvillian and Singer said. Small and midsize manufacturers represent 86% of U.S. firms, produce 46% of private sector non-farm output, employ more than half of our manufacturing workforce, and contribute a third of goods exported. But they’re largely outside of the innovation system. “Extending the innovation system to reach this sector would help fill a serious gap in manufacturing capability. It is therefore a key element in an advanced manufacturing innovation strategy,” the authors suggested.

Economics has an imperfect understanding of manufacturing

The book does a deep dive into of how economic theory explains manufacturing. It’s a story of competing economic growth theories that in the end doesn’t bring us to a conclusive answer for industry. But there are a few important things to take away from this lesson in economics. First, “there is widespread consensus that innovation and new technologies are the primary drivers of growth,” the authors said. “However, modeling how new ideas and technologies are generated in and enter the economy is far from complete. This gap has created significant problems for understanding manufacturing. The gap has significant policy implications, especially if production is viewed separately from the innovation process.”

And economists love their complex models. Out of the social sciences, economics dominates, and as a result, has the most influence on national policy discussions. The authors suggested that part of this dominance is because economics builds on “something resembling the lawlike inner structure of scientific explanation.” Its mathematically elegant models look more like physics than social sciences.

The problem with all this lies in economic models’ inability to model the innovation system and productivity growth. “This has meant that economics continues to have an imperfect understanding of manufacturing,” the authors said. 

The Advanced Manufacturing Institutes aim to fill the gaps in U.S. innovation

The federal government has focused on advanced manufacturing for more than a decade, as detailed at the start of this article. The Obama administration recognized the importance of innovation in the production system and its connection to advanced manufacturing. The administration also had help from MIT, tasked with determining how robust of a manufacturing sector was needed to support an innovation economy. The project was named “Production in Innovation Economy” or PIE.

OSTP was also simultaneously completing its report, which argued that federal investments in advanced manufacturing could revive U.S. global leadership in manufacturing. Other reports and working groups focused on key manufacturing topics and filling the gap between R&D supported by the government and the product development role of industry. This new focus on manufacturing ultimately created 13 Advanced Manufacturing Institutes.

“A key goal of the ‘manufacturing innovation institutes’ was to fill a gap in the U.S. innovation system for manufacturing by creating a space where advanced manufacturing could evolve through a collaboration between industry (both small and large firms), universities, and government,” the authors said.

Many of us in industry know that we are inching closer to a precipice that involves a new kind of smart production, using sensor technology and data analysis, which is also a focus of several of the Advanced Manufacturing Institutes. “Modern firms have begun embedding sensors in different stages of production that generate much data, but the remaining lack of connectivity prevents full use of such data in making improvements. Could an entirely new level of connectivity between IT systems, with additional sensors and data analysis capabilities, enable a new kind of smart production that is perceptive, solving problems at every step?” the authors asked. Yes, it certainly could, and many companies are on their way there.

The institutes focus on many different technology areas. While the participant mix is complex, the general goals for all the institutes include “to create new production technologies, processes, and capabilities; to serve as proving grounds to test new technologies and related processes; support efforts to deploy new production innovations; and build workforce skills to enhance production and processes for the emerging technologies.”

Many of these facilities are still operating and working toward those goals. I had the pleasure of visiting one of those Advanced Manufacturing Institutes in Detroit, Michigan, as part of the Siemens Media and Analysts Conference in March 2022. We toured the Lightweight Innovation for Tomorrow (LIFT) facility, which was founded in 2014 and focuses on lightweight and advanced metals. Its projects have focused on melting, thermo-mechanical processes, powder processing, agile low-cost tooling, coatings and joining for industries such as automotive (yes, based in Motor City), aerospace, shipbuilding, railroads, fabrication, and other sectors.

We saw much of the facility, though parts of it were walled off, where new projects that weren’t ready for the public were underway. The facility was largely empty when we toured late in the day except for the upper level where many students were in class and doing research. LIFT is a leader among the manufacturing institutes for workforce development, and it was the first to allocate a significant portion of its federal cost share—10%, or $7 million—to workforce education. “It was the first and still probably the only institute to recognize the centrality of education in creating the change agent community that could lead to major production shifts at major industry sectors in advanced manufacturing,” the authors said. The book does detail an entire chapter on workforce development issues and its importance in advanced manufacturing.

Advanced manufacturing will lead to new production paradigms

The underlying aim of the institutes aligns closely with the main point put forth by the authors in this book: the U.S. needs new production paradigms in many production areas, for large and small companies and their supply chains and industry sectors. “The new production paradigms would aim to be transformative, just as the technologies and processes behind mass production in the United States and quality manufacturing in Japan had previously been transformative and enable previous eras of industry leadership in those countries,” Bonvillian and Singer said.

The authors argued that we are at an inflection point (probably even closer so now, as this book was published in 2017), where technologies are now capable of performing nonroutine tasks (leading to autonomous manufacturing and prescriptive maintenance). Not only does advanced manufacturing have the potential to help U.S. industry retake its global throne, an innovation-driven strategy behind manufacturing new technologies could also be a pathway out of America’s economic problems.

This story originally appeared in the September 2022 issue of Plant Services. Subscribe to Plant Services here.