The manufacturing industry continues to occupy a central place in the American economy. Compared with other sectors, manufacturing plays an outsized role in overall productivity growth rates and innovation across the economy, and remains a promising source of opportunities for workers looking for higher wages. Understanding the contemporary dynamics of the industry can thus yield valuable insight into the future of work and the near-term prospects for growth-generating innovation and technological change. As other work carried out by the MIT Task Force on the Work of the Future has discussed, American manufacturing firms find themselves in a period of uncertainty as well as major opportunity.[i] A host of challenges, including technological advances, international competition, and potential reshoring waves resulting from the COVID-19 crisis and its aftermath will all be brought to bear on manufacturers’ strategies in the years ahead.
While Berger et al. examined a cross-section of manufacturing firms that included a number of different types of manufacturing and firms of varying size, it primarily emphasized small and medium-sized enterprises (SMEs) occupying “high-mix, low-volume” (HMLV) niches within the industry. With regard to technology adoption and changes to the skill profiles of these firms, they observed for the most part firms undergoing incremental technological changes, very few of which triggered sudden changes in firm strategy or major layoffs of workers. This SME-focused view from the field suggests that the manufacturing industry is indeed changing, though not at the breakneck pace that would make technology-induced unemployment a major concern. If anything, technological change may be proceeding too slowly within manufacturing SMEs compared with firms of a larger scale, and policy makers may want to consider strategies for facilitating technology acquisition and faster adoption at these firms.
The situation may be quite different, however, at large manufacturing firms. Firms in this category employ over 500 workers, and often maintain branches in several locations spread out across the country and abroad. Unlike SMEs, which often lack the resources needed to stay at the technological vanguard, large firms are more likely to maintain the financial position, higher-skill employee base, and internal technical know-how that support adoption of the most advanced technologies to ensure global competitiveness. Large firms tend to be more capital-intensive and productive and are often the leading adopters of the most advanced technologies, which often eventually make their way into smaller firms as the business case becomes fully demonstrated. Large manufacturers account for the overwhelming majority of private R&D funding across the industry and are also often the first to implement new management practices, which eventually make their way across the industry and into SMEs. If we seek a view of the technological frontier of the manufacturing industry, and all of its associated impacts on the nature of work, we need to look to large firms to provide this view.
This outsized role played by large firms is not a new phenomenon. While government has often sponsored initial innovations, large firms have long been the driving force of commercialization and diffusion of technological change in the industrial economy. The early pioneers of American corporate research, including General Electric and Bell Telephone, established large-scale industrial R&D labs only once they had achieved the necessary scale and position in the market to devote substantial resources to new research programs. Although the initial development of mass production principles was done by government agencies (e.g., the Springfield Armory), mass production was diffused by large firms such as Ford , which developed innovative combinations of industrial machinery and assembly line methods. When the adoption of industrial robotics first began in the late 1970s and 1980s, it was large firms, particularly those in the automotive industry, that led the way. When MIT researchers conducted the “Production in the Innovation Economy” (PIE) project beginning in 2010, they reported that similar paradigm shifts in production techniques at the most advanced firms were possibly on the horizon. Noting a number of potentially transformative new technologies, including additive manufacturing, advanced robotics, and a variety of connective technologies, PIE researchers concluded that a number of new manufacturing “worlds” appeared possible through different combinations of the most advanced technologies.
One decade on from the PIE study, what shifts have occurred or are currently underway? What technological changes can we observe at large manufacturing firms, and what implications do these changes carry for skills and education, job quality, and manufacturing ecosystems? As part of its investigations of the manufacturing industry, the Task Force on the Work of the Future has taken a detailed look at large manufacturing firms to get a better sense for what the “factory of the future” may look like and what this will mean for the future of work more broadly. A spotlight on these firms may demonstrate the way in which the manufacturing industry as a whole is likely to move in the coming years; technologically-sophisticated large firms may offer a window into the industry’s future more broadly. Likewise, these firms can also inform a view of how the industry is changing based on what these firms are not doing. Since these firms are likely to be among the industry leaders in technology adoption and new production techniques, a lack of radical change may suggest that the industry is not on the verge of the kind of technological transformation that some have predicted.
It is important to note at the outset that large manufacturers in the US are facing a series of critical challenges. Though large firms based in the US offer a view toward the cutting edge in the domestic manufacturing sector, productivity growth over the past decade has been flat. Especially in recent decades, many have argued that pursuit of short-term shareholder value has constrained innovation.[v] Through shifted incentives brought on by increased financialization and its resulting structural changes, many large firms have off-boarded much of their R&D and innovative capacity in the process of vertical disintegration.
China in particular represents a new and quite significant competitive challenge, and the Chinese government’s “Made in China 2025” industrial policy initiative promises to accelerate the dramatic productivity gains already achieved by large Chinese manufacturers in recent years.[vi] This presents a serious long-term challenge that American firms as well as policy makers will need to confront. A close examination of the internal workings of large manufacturing firms can provide some window into the sources of the productivity in US manufacturing. Firms face a series of headwinds in the drive to increase productivity through technological and skill-based interventions. A careful ground-level view of their operations may yield useful generalizations upon which policy changes can be based.
In keeping with the Task Force’s other work on the manufacturing industry, we sought to shed light on these questions through qualitative research techniques that gave us a detailed view of production at large firms. Quantitative research and even surveys tend to miss some of the critical and nuanced factors that are at play in the interaction between organizations, technology and workers. Over the course of the past two years, Task Force researchers have interviewed twelve large manufacturing companies located in Ohio, Michigan, Pennsylvania, and Massachusetts. Our interviews before March 2020 usually also included plant tours. Several of these companies were in the automotive sub-sector of manufacturing, one was in personal products, and one produced industrial products for a variety of uses. These firms all easily qualified under any definition of “large enterprise,” as they all employed well over 1,000 workers, and nearly all of them had a number of branches across the country, if not abroad as well. The interviewees at these firms were usually upper-level management with in-depth knowledge of recent technological acquisitions and changes. These included operations directors, chief technology officers, research directors, and others in similar positions within their firms. Researchers conducted semi-structured interviews focused primarily on changes that had occurred at these firms in the previous five years: which new technologies had been acquired and why; what changes these new technologies had brought to the firm; how workers’ tasks had been impacted or redirected; and what new skills were required to successfully implement these technologies. A limitation of our study is that in most cases we did not have interaction with shopfloor workers.
The information collected through this process was rich in detail and offered an in-depth view of processes underway at these firms. However, due to the limited number of firms examined in this study, we cannot draw general conclusions. Instead, we focus our analysis on examinations of detailed case studies, which can demonstrate certain concepts and point the way to broader trends without necessarily offering a definitive account of the phenomena being examined. Case studies are also useful here because they are exploratory; we want a concrete look at how large manufacturing firms are changing, while still maintaining an openness to different and unexpected observations gathered at these firms. The point here is that while this is not meant to be an exhaustive study of advanced manufacturing at large firms, it does capture some of the important ways in which the industry is changing and a window on possible futures for the industry.