PROGRESSING TOWARD A NATIONWIDE MANUFACTURING EXTENSION NETWORKShaded map shows MEP and STEP activity 1989 to 1993
Large map illustrates current MEP and STEP activity.
When the Boeing Co. told Manufacturing Development, Inc. (MDI) it needed to meet the aircraft maker's stringent D1-9000 quality standards -- or risk losing its largest customer's business -- MDI Vice President Michael Castor knew the company needed help. MDI, a 30-person sheet metal fabricator located in Cheney, Kan., called the NIST Mid-America Manufacturing Technology Center. The extension center's technical staff provided MDI employees with on-site training in statistical process control, and they helped MDI secure a state grant that paid for half of the training costs. MDI earned supplier certification from Boeing, while improving its overall operation. The company estimates, for example, that it will achieve a 50-percent reduction in scrap, reduce rework by 25 percent, and realize annual savings of $132,000.
With assistance from the NIST New York Manufacturing Extension Partnership, Clipper Diamond Tool Co. of Long Island, N.Y., modernized its manufacturing and office operations and, as a result, improved productivity and morale and regained lost customers. Individual actions ranged from redesigning the plant floor layout and installing computer-aided design and manufacturing equipment to providing employee training in statistical process control and quality management. "Our company has been revitalized," says Joseph Klipper, founder of the 50-year-old company. "We are once again able to compete both here in the United States and around the world."
In less than two years, Dyna Mow, Inc., a Cushing, Okla., manufacturer of commercial lawn mowers, has increased its annual production sixfold and more than doubled its payroll, to 16 employees. If sales continue to grow, the workforce soon could double again. Credit for this progress goes to the company. But the firm's new owners attribute a large part of their success to an important technical assist from the Oklahoma Alliance for Manufacturing Excellence, an affiliate of the NIST MEP. "When we took over, the internal paperwork was a shambles -- they didn't really know how much it cost to manufacture each mower," says co-owner Ronald Good. That's not the case today. With the help of the Alliance and private consultants that work with the MEP center, the company made sweeping changes -- from locating a larger facility to redesigning processes to modernizing the firm's computer system. Without the Alliance's help, says Good, Dyna Mow's improved business fortunes would not have been possible.
Whether delivered to individual manufacturers, to clusters of firms organized into supplier-improvement groups, or to classrooms of workers and managers, services of the NIST Manufacturing Extension Partnership are making a real difference in the competitive fortunes of small and medium-sized companies. Like Clipper Diamond Tool, some of the several thousand manufacturers that have worked closely with the MEP's locally managed extension centers credit the technical assistance they received with helping them to turn their businesses around. The resulting improvements reversed declines in performance and opened the way to gains in sales and profitability.
Other MEP client firms view the centers as one-of-a-kind resources. For these companies, the impartial expert advice and hands-on assistance provided by the centers are valuable, yet hard-to-come-by tools. Firms use these tools to solve a particular set of problems or needs as they go about the tasks of meeting changing customer requirements, upgrading their equipment, fine-tuning processes, or overcoming other technical challenges that inevitably arise in the business of manufacturing.
Begun in 1989 with the establishment of three extension centers, the MEP is now making the transition from a modest pilot program to a nationwide network leveraged to achieve substantial impact. When completed, the 100-center network will put hard-to-find technical assistance within reach of all of the nation's 381,000 small and medium-sized manufacturing establishments. Results of evaluations conducted to date suggest that, in making this assistance accessible to smaller manufacturers in all regions of the country, the MEP will deliver sizable benefits, reaped on scales ranging from individual factories to the national economy.
Experience to date indicates that the federal investment in manufacturing extension efforts is rewarded many times over. Results of surveys of a subset of smaller manufacturers that received technical assistance from MEP centers in 1994 are illustrative. [Also see this graph]
Total Project Average
Change in sales $225,000,000 $369,000
Capital spending $54,000,000 $88,000
Capital avoidance $4,000,000 $7,000
Reduction in inventory $13,000,000 $22,000
Labor & materials savings $26,000,000 $43,000
Jobs created or saved 3,417 5.60
Total company-estimated impact* $167,000,000
___________________________________________________
Based on surveys returned by 610 companies served by
13 centers in 1994. Federal funding for the centers
totaled $20 million.
*Impact = (change in sales x 0.60) + capital avoidance
+ (reduction in inventory x 0.10) + labor and materials
savings. Because of input and overhead costs, only 60
percent of the increase in sales is included in the
estimate. Cost savings due to reductions in inventory
are estimated to be 10 percent of the reduction in
inventory volume. Jobs created or saved and benefits
derived from new machinery and other capital items are
not factored into the impact estimate.
These aggregate results, consistent with those from earlier evaluations, are but one gauge of the MEP's economic impact. Other benefits -- such as greater efficiency in the delivery of services and in the use of public and private resources -- enhance the network's effectiveness. They all contribute to the bottom-line impacts realized by companies, communities, and the nation.
MEP focuses its activities on a strategically important sector of national, regional, and local economies: manufacturing establishments that employ fewer than 500 people. These small and medium-sized manufacturers account for more than half the total value of U.S. production. They employ nearly 12 million people, or two-thirds of manufacturing workers. Between 1967 and 1992, smaller manufacturers added 1.7 million workers to their payrolls, while larger plants trimmed their workforces.
Within the manufacturing sector, smaller companies have grown in number and importance. Large companies are downsizing and outsourcing a growing share of their operations. Information technologies are bringing continents, customers, and suppliers closer together. Consequently, the performance and capabilities of smaller manufacturers are becoming ever more fundamental to the productivity and competitiveness of the entire manufacturing sector and to the health of the entire U.S. economy.
Smaller U.S. firms lag behind their overseas counterparts in adopting performance-improving technologies. Many continue to use decades-old technologies and manufacturing methods. Not surprisingly, the productivity of smaller manufacturers has been declining relative to that of large U.S. producers. One consequence is that the nation's larger manufacturers -- and largest exporters -- look increasingly to off-shore suppliers. That trend is already evident in several major domestic industries.
Because of limited budgets, lack of in-house expertise, and other constraints, according to a 1993 study by the National Research Council, smaller manufacturers face significant barriers to learning about and adopting modern equipment and techniques -- technologies that can improve their ability to compete. Yet, the expertise and technical assistance that companies need to overcome these barriers often are not readily available from the private sector. Many consultants focus on large companies. They bypass small firms because the costs incurred in reaching and securing these firms as customers often are not justified by the amount of business generated.
The MEP is helping to fill this critical void. As a nationwide system of community- and state- based non-profit organizations, the MEP provides smaller manufacturers with access to public and private resources, information, and services to meet their unique needs in improving production and business practices. Specifically, MEP works with states to establish or to expand services designed to assist small and medium-sized manufacturers. Services supported with federal dollars matched by states are provided through non-profit manufacturing extension centers. All centers are chosen and funded through a rigorous, merit-based competition. Emphasis is on grassroots service delivery, facilitated by a small NIST staff of fewer than 60 people.
Through its State Technology Extension Program (STEP), MEP also assists states not yet ready for a center. In 1994, for example, MEP awarded STEP grants to 15 states. The grants will support efforts to evaluate the competitiveness of local small and medium-sized manufacturers, determine needs for technical services, and begin building the organizational relationships required for efficient delivery of appropriate technical services.
To ensure that federal participation and investment in manufacturing extension efforts add value and contribute new capabilities to the mix of services available to local manufacturers, the MEP:
In 1993, fewer than one smaller manufacturer in 20 was located within the collective service area of the seven federally sponsored extension centers. Since then, MEP's reach -- and service to U.S. manufacturers -- has expanded significantly, making a major stride toward becoming a truly nationwide network. (See map below.) By May 1995, 42 MEP centers were sending engineers and other specialists with manufacturing or business experience into the field to work with firms. One additional center was preparing to open. The current MEP centers are located in regions that contain two-thirds of the nation's smaller manufacturers. In many regions, particularly areas of high manufacturing density, a single center is but a first step toward building and integrating service-delivery capabilities on a scale commensurate with the many and diverse needs of the large clientele base.
PROGRESSING TOWARD A NATIONWIDE MANUFACTURING EXTENSION NETWORK
Shaded map shows MEP and STEP activity 1989 to 1993
Large map illustrates current MEP and STEP activity.
Last year's growth of the MEP network was enabled by the Technology Reinvestment Project (TRP), led by the Defense Department's Advanced Research Projects Agency. As part of its efforts to foster integration of the defense-dependent and commercial sectors of the economy, the TRP provided funds -- matched by state and local sponsors -- that enabled the MEP to add new affiliate centers to the extension network. Centers initiated with the aid of TRP funding must meet the MEP's performance standards. When TRP start-up funding ceases, centers that demonstrate high levels of performance and impact will be eligible to receive cost-shared support from the MEP.
The Numbers: Growing Roster of MEP Partners
Expands Services for Manufacturers
The TRP also has provided matching funds for projects that are developing training modules, assessment tools, and other support services that will enhance the ability of MEP centers to deliver quality services to customer firms. Other cost-shared projects are testing new approaches to building more productive relationships between large companies and their suppliers and to enable interfirm collaboration. As is true for all of the MEP, these projects were selected competitively.
The MEP and its individual centers have developed relationships with hundreds of organizations that increase the breadth and depth of the centers' capabilities and those of the network. As of mid-1994, 34 centers, most of them in the start-up stage, reported linkages to a total of nearly 700 partner organizations, for an average of about 20 partners per center. Among these partners, the most common are non-profit or university-sponsored technology or business assistance centers, followed by non-profit economic development organizations, community colleges and technical schools, private consultants, and universities and four-year colleges. To date, about half of the centers have ties to industry associations.
Services provided by partner organizations supplement the centers' technical capabilities. In addition, many of these organizations offer expertise that helps companies address non-technical obstacles to improving operations and becoming more competitive. As they modernize, manufacturers confront a spectrum of related challenges, from upgrading the skills of workers to identifying sources of capital to complying with local, state, and national regulations. As a result, MEP centers now can help manufacturers respond to the many factors influencing their efforts to improve. For example, the typical center has ties to about six organizations that offer services in business management and finance. Moreover, the typical center has relationships with at least three organizations with expertise in one or the other of the following areas: manufacturing technology, supplier interactions and networking, engineering and design, environmental issues, and quality.
Broader access to services saves companies time and money and lowers the threshold for taking concrete actions to better their performance. At the same time, partner organizations are spared the cost and expense of developing their own service-delivery mechanisms to reach smaller firms across the nation.
Developing working ties with other organizations in support of the entire extension network also is a high MEP priority. Strategic partners now include the National Association of Manufacturers, National Governors Association, National Alliance for Business, Council for Adult and Experiential Learning, and several federal agencies. In 1994, for example, the MEP and the Environmental Protection Agency completed preparations for a jointly funded, $3 million initiative to help smaller manufacturers lower costs through waste-reduction techniques. A major objective is to prevent pollution and associated environmental problems and, thereby, eliminate the need for companies to undertake costly actions to comply with regulations. The initiative will support several types of enabling activities, including:
Another national initiative begun late last year is augmenting the quality-improvement and supplier-development efforts of the individual centers. The MEP joined with the Commerce Department's Bureau of Export Administration and Department of Energy laboratories in technology efforts focused on a key group of suppliers in the U.S. electronics industry. The partners launched an MEP-led consortium that aims to reduce manufacturing costs and improve quality among suppliers of the brazed pins that connect semiconductor chips to the circuit boards of computers and other electronic products. Industrial participants include pin manufacturers, many of which are small companies, and their customers, the makers of semiconductor packages. MEP centers now are working with pin manufacturers to define technical obstacles to improving production, finishing, and cleaning processes as well as key aspects of pin performance. The MEP also will help these suppliers assess training needs, long-term financing options, and opportunities for cooperative purchasing of manufacturing materials. Extension centers then will work with pin manufacturers as they carry out technical improvement projects and apply the results of research performed by other consortium partners.
In all, personnel from 28 MEP centers that operated during at least part of 1994 provided services or made initial visits to more than 30,000 companies during the year. (See pie chart on page 34.) In addition, the centers offered training and educational activities that involved employees and managers from more than 5,000 manufacturing firms. Because they were the only centers that operated over the entire year, the original seven MEP centers (or Manufacturing Technology Centers) accounted for a disproportionately large share of interactions with companies. (See customer profile on page 35.)
MEP activities varied widely in terms of areas of technical activity and the type, length, and intensity of interaction. Center staff made more than 10,000 initial site visits, which include preliminary assessments of company operations, the first step toward undertaking improvement efforts. The centers also organized forums and seminars on manufacturing and business-related issues. In addition, they fielded thousands of requests for quick problem-solving assistance or for referrals to sources of information and expertise.
MEP CENTERS ENGAGED IN MORE THAN 30,000 ACTIVITIES WITH CLIENT FIRMS IN 1994
Percentage of total MEP interactions.
Extrapolated from quarterly reports, 32 of 35 centers reporting. Reports
differentiate training and education programs from other types of
activities, such as assessment and technical assistance projects.
Extension personnel engaged in or helped initiate more than 4,000 full-fledged technical assistance projects. Many involved private-sector consultants. Such projects entailed, for example, redesigning plant-floor layouts, installing and implementing computer-integrated manufacturing systems, training and guidance to achieve quality certification, or market development. Often, a combination of technical and training activities were carried out in a single assistance project.
All MEP activities are tailored to the particular needs of local manufacturers, individually or collectively.
FIRMS SEEK MEP ASSISTANCE IN A WIDE RANGE OF AREAS
Areas addressed in client firm interactions.
Based on 1994 quarterly reports of the seven original Manufacturing Technology Centers.
Ultimately, the MEP is judged on its impact on the competitiveness of individual firms and on the economy. Surveys of client firms indicate that manufacturing extension services are fostering significant improvements in manufacturing and business performance, catalyzing company-estimated benefits that greatly exceed the federal investment in the MEP. At the same time, the MEP is prompting changes in the behavior of private- and public-sector providers of extension services and in the technology awareness of manufacturers exposed to those services.
Median size of an MEP client company 50 employees Median annual sales of an MEP client company $5.4 million Median age of an MEP client company 26 years old Based on Dun & Bradstreet's 1994 survey of client firms of the original seven Manufacturing Technology Centers.
Impacts on Service Delivery. The MEP is creating new opportunities in the delivery of manufacturing extension services. For example, federal support and ties to a national network of supporting services are enabling previously existing, state-sponsored extension centers to extend their reach, develop new capabilities, and broaden the range of services available to companies. Integration and coordination of activities have introduced collective learning and shared development of tools and resources into extension efforts. More than 300 field engineers and other center personnel have been trained, for example, in the fundamentals of manufacturing extension services or the uses of assessment tools, such as those for evaluating workforce needs and capabilities. A comparable number have been trained in competitive benchmarking, an evaluative method for showing individual manufacturers how their performance compares with that of similar firms. To achieve continuity in efforts focused on workforce-related issues, MEP centers have formed a network-wide working group. Composed of extension center representatives, the group disseminates information, develops training programs for extension personnel, and serves as a point of contact and collaboration for federal agencies and other partner organizations with programs and interests related to the manufacturing workforce.
In addition, organizational partnerships engendered by the MEP are proving to be productive, extending the reach of new and existing manufacturer-focused services. For example, many private-sector consultants are finding that they can reach smaller manufacturers more efficiently by working with the centers. Results of a recent Dun & Bradstreet Information Services survey of consultants, MEP client firms, and manufacturers who do not use MEP services indicate that extension and private services tend to be complementary. Nearly 80 percent of client firms did not perceive centers and consultants as being in direct competition. In many instances, manufacturers are tapping the expertise and capabilities of both the MEP and the private sector. The combination is filling the void in informational and technical resources that can impede smaller manufacturers' self-improvement efforts. To ensure a complementary relationship, MEP centers must be vigilant in clearly distinguishing their role from that of the private sector.
Impacts on Manufacturers' Technology Awareness. The success of MEP efforts begins with firms' awareness of the benefits of modern manufacturing technology and methods. Only then will individual companies become receptive to possibilities for improving their operations. Once they recognize the competitive advantages to be gained, firms are much more likely to invest in their own growth and development, to upgrade their technology and capabilities, and, most importantly, realize the benefits that motivated their investments.
BEFORE-AND-AFTER LOOK AT A SAMPLE OF MEP CLIENT FIRMS
Progress measures: average percentage change 1990-1992
Based on surveys returned by 55 companies who received service from
three Manufacturing Technology Centers in 1991. Percentages compare
actual company performance in 1990 and 1992, using mean company data.
MEP centers are cultivating this recognition through educational programs, continuous improvement groups, manufacturing assessments, and many other activities with companies -- setting the stage for concrete actions.
Client Firms' Valuation of MEP Services. To assess firms' perceptions of the value of MEP-provided assistance, centers survey client firms after technical assistance projects are completed. Though the experiences of individual client firms demonstrate that MEP services can lead to fairly immediate improvements in capabilities, the full impact must be measured over longer spans and, of course, is influenced by a firm's follow-through efforts. Similarly, economic conditions and a number of other external factors can mask the benefits that firms derive from MEP services.
Client valuation surveys are a first step toward evaluating eventual firm-level performance and business impacts. Firms are asked to estimate the benefits they expect to realize from changes and improvements made on the basis of the services and assistance they received.
Results from 610 companies that completed valuation surveys in 1994 are presented in the table on page 29. The cumulative estimated economic impact for this sample of firms totals about $167 million, as compared with the federal investment of $20 million. On the basis of results for this sample, which are consistent with previous findings, the MEP delivers an estimated benefit of $8 on each federal dollar invested in the MEP. Although based on self-reported data, the estimate probably undervalues the return on the federal investment. The estimate is limited to a subset of client firms participating in technical assistance projects. It does not capture benefits that firms may realize in subsequent years. The estimate also omits benefits that companies realize from participation in less intensive activities. These include educational and informational programs, informal consultations with technical staff, technology demonstrations, and formal assessments of plant operations. These activities are highly valued by firms and also can lead to improvements and economic benefits.
Client Progress Reports. Centers also follow the progress of individual firms in three areas: use of modern manufacturing technologies, manufacturing performance, and business performance. Measures relevant to each of these areas are tracked in the year preceding and the year following the completion of a technical assistance project. These before-and-after assessments provide an additional means of evaluating the firm-level impact of extension services. Client progress reports are in the early stages of implementation. Results for 55 firms surveyed by three Manufacturing Technology Centers in 1993 are shown in the bar graph on page 37.
On average, these firms improved markedly in all 10 areas. While these measures relate to the objectives of most technical assistance projects, other factors also may have contributed to the improvements documented in client progress reports. Consequently, the MEP is exploring methods for further refining its estimates of the impact of extension services on manufacturers and on local and regional economies. For example, the MEP and the Census Bureau are exploring the feasibility of comparing the performance of client firms with that of similar companies that have not used manufacturing extension services. Such comparative evaluations would permit more detailed assessment of the impact of extension services on the performance of client firms.
The MEP is committed to continuous performance measurement, focusing on the bottom-line economic impact resulting from its work with client companies. It also is committed to monitoring the efficiency and effectiveness of its services and its service delivery mechanisms. For example, NIST and its New York state partner agreed recently to discontinue funding for the headquarters center of the New York MEP. The agreement reflects New York's restructuring of its manufacturing assistance programs and NIST's decision that federal resources would be used most effectively by directly supporting the four manufacturing extension centers that had been reporting through the New York MEP headquarters operation. NIST also has taken steps to ensure extension center management was improved in two other states -- with good results. The MEP also will continue to explore innovative approaches to helping the nation's smaller manufacturers continuously improve their performance. Manufacturing extension is still in its infancy in this country, but the results to date augur well for this vital force in our changing economy.
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