Exploring Advanced Manufacturing Technologies. Steve Krar
Thus, policies that promote and support continued capital investment, the development of advanced manufacturing technologies, and the continuing advancement of education and skill training for the American worker should be a priority at all levels of government.
Specific public policy initiatives have been developed and are to be published separately. Among the highlights are:
▪Keeping interest rates stable so as not to discourage continued investment.
▪Stimulating more investment by allowing investments in productive equipment to be written off at the time the expenditure is made.
▪Supporting research & development by extending the R&D tax credit on a permanent basis and increasing the budget for the National Science Foundation and other technology oriented programs.
▪Improving the trade environment by adopting a territorial and border adjustable tax system, increasing resources for trade promotion agencies including the Export/Import Bank, eliminating unilateral U.S. export controls, vigorously enforcing U.S. Fair Trade laws, strengthening dispute resolution within the World Trade Organization, and working to open foreign markets to U.S. products.
▪Assuring that exchange rates reflect international as well as domestic economic conditions to provide fair trading relationships.
▪Adopting fair and balanced legal and regulatory reforms.
These policies will, AMT believes, help extend prosperity in the United States in a manner that will provide the maximum opportunity for manufacturing and other industries to participate in the expansion.
The study was sponsored by AMT The Association For Manufacturing Technology, the trade association for American producers of machine tools and manufacturing technology equipment. For additional copies contact AMT at 703 893 2900. E mail: [email protected].
Fig. 1-1-1
The Law of Production
What Everyone Should Know About Economics
The following sets of facts, developed by The American Economic Foundation, are called the “Ten Pillars of Economic Wisdom.” These basic laws of economics might be called a blueprint for man’s economic life. These simple truths should clear up the hostility that has been generated between economic groups by people who want to benefit by that hostility.
These ten rules show how simply the economic truth can be told:
1.NOTHING IN OUR MATERIAL WORLD can come from nowhere or go nowhere, nor can it be free. Everything in our economic life has a source, a destination, and a cost that must be paid.
2.GOVERNMENT IS NEVER A SOURCE OF GOODS. Everything produced is produced by the people, and everything that government gives to the people, it must first take from the people.
3.THE ONLY VALUABLE MONEY that government has to spend is that money taxed or borrowed out of the people’s earnings. When government decides to spend more than it has thus received, that extra unearned money is created out of thin air, through the banks, and, when spent, takes on value only by reducing the value of all money, savings, and insurance.
4.IN OUR MODERN EXCHANGE ECONOMY, all payroll and employment come from customers, and the only worthwhile job security is customer security; if there are no customers, there can be no payroll and no jobs.
5.CUSTOMER SECURITY can be achieved by workers only when they cooperate with management in doing the things that win and hold customers. Job security, therefore, is a partnership problem that can be solved only in a spirit of understanding and cooperation.
6.BECAUSE WAGES ARE THE PRINCIPAL COST of everything, widespread wage increases, without corresponding increases in production, simply increase the cost of everybody’s living.
7.THE GREATEST GOOD FOR THE GREATEST NUMBER means, in its material sense, the greatest goods for the greatest number that, in turn, means the greatest productivity per worker.
8.ALL PRODUCTIVITY IS BASED on three factors: 1) natural resources, whose form, place, and condition are changed by the expenditure of 2) human energy (both muscular and mental), with the aid of 3) tools.
9.TOOLS ARE THE ONLY ONE of these three factors that people can increase without limit. Tools come into being in a free society only when there is a reward for the temporary self-denial that people must practice in order to channel part of their earnings away from purchases that produce immediate comfort and pleasure, and into new tools of production. Proper payment for the use of tools is essential to their creation.
10.THE PRODUCTIVITY OF THE TOOLS - that is, the efficiency of the human energy applied in connection with their use - has always been highest in a competitive society in which the economic decisions are made by millions of progress-seeking individuals, rather than in a state-planned society in which those decisions are made by a handful of all-powerful people, regardless of how well-meaning, unselfish, sincere, and intelligent those people may be.
For more information on PRODUCING PROSPERITY see the Website: www.mfgtech.org.
ECONOMICS OF ADVANCED MANUFACTURING TECHNOLOGY
The global competition in manufacturing industries has focused on producing quality parts quickly and accurately. This attention to the quality of products, along with the increased productivity necessary to compete globally, has led more and more manufacturers to introduce advanced manufacturing technologies. This appears to be the strategy of companies striving to become world-class competitors; generally it involves the use of the latest machine tools, cutting tools, and manufacturing processes which are expensive and sometimes difficult to justify using the traditional accounting practices.
The major opposition to introducing advanced manufacturing technologies seems to be the fact that many companies are still using traditional cost accounting and justification methods of the past. These methods are too short-term and too bottom-line oriented and do not consider the effects and benefits that advanced technologies can have on the entire company’s competitive position in world trade. What is required is the extension of traditional cost accounting to include a softer relationship that goes beyond purely financial measures. It must consider the sometimes intangible effects that advanced technologies can have on the customer which in turn can affect the entire company. Recent surveys reveal that 92% of those responding believe that the biggest barriers to using new manufacturing technologies are related to management and not to technical problems. Four factors seem to confirm the reasons for their unwillingness to invest:
1.The misconceptions of the past and the present economic conditions.
▪There is an overemphasis on direct labor costs which in the past amounted to as much as 50% of the total product cost.
▪In the 1990s, the approximate division of manufacturing costs is was follows: direct labor – 10%, material – 55%, overhead – 20%, and indirect labor – 15%, Fig. 1-2-1.
2.The bias against capital equipment investment because of the critical errors in the way the theory is applied.
▪A common mistake is only considering the cost of the piece of the technological equipment and not its effect on the entire manufacturing operation.
3.The failure to deal with or understand any of the important factors relating to the company’s business philosophy.
▪Many projects can be justified on direct productivity savings, reduced warranty costs, reductions in scrap, and rework costs, Fig.