The 19 months preceding July, 2005 have shown vast improvement in U.S. consumption of chip-making machine tools. Today, the U.S. market is comparatively robust when one considers 2002 and 2003’s almost 70 percent reduction in consumption from the market’s peak in 1999. Spurred by a rebounding economy, changes in the tax code that allow for rapid depreciation of new equipment, and the necessity of competing with overseas manufacturing in low-cost countries, American manufacturers are again investing in capital equipment.
During the early stages of this recovery, a weak dollar provided short-term relief, allowing some businesses to remain in our country. Globally, European manufacturing remains flat at best, while China is only beginning to positively address the value of Yuan. The domestic Japanese appetite for machine tools is ravenous, significantly reducing the number of machines available for the U.S. market. Prolific low-cost producers—Haas and Daewoo—continue to steal market share while other Asian suppliers are establishing a toehold in this once Japanese-dominated market.
What makes this recovery different from recoveries of the past are the enormous increases in productivity made possible by today’s multifunction technology. The global marketplace requires American manufacturers to continually do more with less. They must increase throughput while reducing costs, improve part quality without the skilled labor they are used to and continue to reduce part costs over the length of the contract while material and operating costs continue to increase.
In response, entrepreneurial manufacturers have re-engineered their businesses by removing every setup, process, material and person that does not add value to the finished product. In retrospect, a few dominant trends are clear. Chief among them are lean manufacturing and multifunction machines. More than JIT, lean manufacturing has revolutionized the way today’s factories are run. New multifunction machines give manufacturers the ability to drop parts complete in one setup, substantially reducing part cost while improving part quality.
Multifunction machines often allow manufacturers to consolidate operations previously run on many dedicated machines into a single mill/turn, Swiss or grind/turn machine. In doing so, tooling costs, utility costs and labor costs are considerably lower. Furthermore, scrap rates are significantly reduced because of the reduction in chucking, while tolerances are improved. With more and more parts completed in one setup, manufacturers who never benefited from lights-out manufacturing before are able to increase throughput without adding overhead.
It has never been clearer that the competitive advantage of the U.S. manufacturer lies in our industry’s ability to develop and implement cutting-edge technology. Success is to be found on the edge of the cutting blade. Staying there requires vision, strategy and a commitment to investing in and pioneering new technology.
While technology, vision and leadership have made it possible for U.S. firms to compete globally with low-cost products, we are by no means out of the woods. Manufacturers and the government must work together to proactively address the steep rise in health care costs to American employers. Without relief, U.S. business will continue to reign in capital investment, hold down employment and resort to offshoring in order to maintain profitability. To understand the magnitude of this issue, read the news coming out of Detroit, Michigan, this year.