by John B. Jensen, Assistant Professor of Business Administration; Bruce H. Andrews, Professor
of Business Administration, both at the University of Southern Maine; and Thomas E. Lynott,
Project Manager, Center for Technology Transfer
Technology Use Among United States Precision Manufacturers
In the last issue of Maine Business Indicators the results of a manufacturing technology survey conducted by The Center for Technology Transfer (CTT), the Maine Metal Products Association (MMPA), and the Center for Business and Economic Research (CBER) were explored. The survey was designed to assess the level of manufacturing technology used in Maine's metal products, electronics, and instrumentation industries. The 15 hard and soft technologies studied were enumerated as follows:
Table 1
TECHNOLOGY (including abbreviation, where applicable)
In a statewide mail survey, metal products, electronics, and instrumentation manufacturers in
Maine were asked to rate (high, medium, low, or none) their current and planned future skill levels
in these technologies. In this installment, the results obtained from Maine manufacturers are
compared with results from a nationwide survey conducted for the Manufacturing Institute of the
National Association of Manufacturers (NAM) by the Thomas Walter Center for Technology
Management of Auburn University. After some contrasts are drawn between the national and
Maine survey respondents, two questions are considered. First, how do Maine firms compare to
the rest of the United States in terms of their current use of manufacturing technology? Second,
do the plans of Maine firms for becoming highly skilled in various forms of technology differ from
the agenda adopted by firms nationwide? Once these questions are explored, some observations
are made pertaining to why there might be significant differences between Maine's and the nation's
current and planned use of manufacturing technology.
National and Maine Survey Respondents
The NAM study, published in December of 1994, reported results gathered from a comprehensive manufacturing technology survey in which 1,121 precision manufactures throughout the United States participated. A similar survey conducted within Maine reported 68 responses. Figures 1, 2, 3, 4, 5, and 6 and Table 2 provide some contrasts between firms that responded to the Maine survey and the firms that responded to the NAM survey.
Summarizing these figures and table, the average Maine precision manufacturer appears to be smaller than the U.S. average in terms of both annual sales dollars and number of employees. While almost 50% of United States manufacturers have annual sales of over $10 million, less than 20% of Maine firms report sales figures above this level (see Figure 1). Nearly half (46%) of the national firms have over 100 employees in total, almost double the proportion of firms of that size in Maine (25%) (see Figure 2). Although a higher proportion of Maine firms seem to be ISO-9000 certified, a larger percentage of Maine firms (over 25%) do not appear to be interested in the ISO 9000 series (see Figure 3). ISO 9000, a certification based on a company's ability to document and precisely follow its operational procedures, is often suggested as an important qualifier for international competition.
The primary Standard Industrial Classification (SIC) of Maine products and the percent of defense-related sales do not appear to be dramatically different from the national survey responses (see Figure 4 and Figure 5). Thus, in terms of the industries in which they participate and the proportion of firms that must manufacture to military specifications and standards, it appears that the manufacturing community in Maine is not tremendously dissimilar from the U.S. average.
Perhaps the characteristic that explains many of the organizational and performance differences between Maine and the nation is the percentage of Maine firms that operate a job shop (see Figure 6). Firms that use this form of process normally exploit their ability to manufacture an unlimited array of components. They tend to rely on the flexibility of their resources (often at the expense of efficiency or high utilization) to serve the diverse needs of their customers. Since job shops manufacture a wide variety of custom products and, therefore, are unable to hold anticipatory inventory, it is not unexpected that Maine firms appear to turn their inventory more often (see Table 2). Additionally, since skilled labor and general purpose equipment are required to handle the diversity of processing, it is not surprising that fewer sales dollars are earned per employee. Since the lack of line-flow processing restricts the ability of job shops to install fixed automation, plant and equipment for job shops tend to be less capital intensive. Thus, even though fewer sales are generated per employee, shops may tend to earn a higher return on investment.
| Table 2 | ||
| Performance Measures | Average for U.S. firms | Average for Maine firms |
| Inventory Turns per Year | 8.04 | 13.70 |
| Lead Time in Weeks | 7.19 | 7.92 |
| Rejection and Rework Rate | 4.00 | 4.11 |
| Sales per Employee in '000s | $133 | $90 |
| Pretax R.O.I. | 12.99 | 16.92 |
Current Skill Level
Figure 7 shows that the rank order of technology usage, at some skill level (low, moderate, or high), is very consistent when one compares Maine manufacturers to the rest of the United States. For example, CAD, JIT, TQM, and CNC technology are the four most-employed manufacturing technologies both in Maine and in the United States Additionally, automated inspection, robots, FMS, and AGV are the least used by both. As suggested in the NAM study, there are two major reasons why these last four technologies are not widely used: either they are not relevant to an operation, or they are not considered to be cost efficient.
While the rank orderings of adoption do not seem to differ dramatically, statistical tests that compare the relative difference between the percentages of Maine and U.S. firms that use a particular technology show that CNC, SQC, and CAM are employed by significantly fewer firms in Maine than in the United States. The magnitude of the 12 remaining sample-based differences in Figure 8 do not provide enough evidence to support the conjecture that the adoption rates for other technologies truly differ between Maine and the United States. It is likely that the job shop nature of Maine manufacturing lies behind the lesser rates of adoption of CNC, SQC, and CAM. For example, CNC equipment, often a first step toward CAM, may be viewed as unsuited to firms that do not manufacture a specific product line. Similarly, SQC may be seen as inappropriate since important quality parameters change from job to job.
Figure 9 provides the percentage of U.S. and Maine precision manufacturers that consider themselves to be highly skilled in the same 15 manufacturing technologies. Percentage-wise, more U.S. firms appear to be highly skilled at CAD, CNC, CAM, and SQC. In Maine, JIT replaces SQC in the group of the four most popular technologies for high skill usage. In both cases, the five technologies attracting the smallest percentage of highly skilled firms appear to be CIM, automated inspection, robots, FMS, and AGV.
While the differences displayed in Figure 10 suggest that three technologies (SQC, JIT, and CAM)
are employed by a significantly different percentage of firms, only SQC and JIT are truly different
in a statistical sense. While a significantly smaller percentage of Maine firms consider themselves
to be highly skilled at SQC, a significantly higher percentage of Maine firms consider themselves
to be highly skilled at JIT. The reason behind the lack of high skill usage of SQC is likely to be the
same as the reason for lack of SQC adoption at all skill levels: SQC may be seen as impossible to
apply. JIT provides a more interesting case. The NAM study reported that, nationwide, almost
90% of firms that consider JIT to be applicable adopt it at some skill level. Overall, Maine firms
tend to adopt JIT in similar percentages, but at significantly higher skill levels (see Figure 7 and
Figure 9). It may be that customers have exerted competitive pressure on Maine manufacturers to
deliver products in JIT fashion. Since the majority of Maine firms are job shops and cannot buffer
against short-term changes in customer demand with finished goods inventory, this requires expert
knowledge and ability in JIT to implement this technology throughout their manufacturing process.
Planned Skill Level
Both surveys also asked executives to indicate their planned future skill levels (high, moderate, low, or none) for the 15 technologies provided in Table 1. As seen in Figure 11, Maine and U.S. executives have somewhat similar plans for developing high skill levels. In both Maine and the United States, CAD, TQM, JIT, and CNC rank among the top five technologies targeted for developing high skill levels.
However, in significantly larger percentages, Maine firms are planning to become highly skilled in
MRP1, CIM, and CNC technologies (see Figure 12). As seen in Figure 9, the highly skilled use of
CNC and MRPI are equivalent for the United States and Maine. Comparing Figure 9 and
Figure 11 on a national level, there is little difference between current and planned use of these
two technologies at a high skill level. On the other hand, a significantly smaller percentage of
Maine firms are planning to develop high skill levels in TQM, GT, and automated inspection (see
Figure 12). For Maine job shops, automated inspection and GT may not be viewed as relevant
technologies. The lack of commitment to become highly skilled in TQM is not easily explained.
Conclusion
This study supports the notion that, in terms of technology adoption, Maine manufacturing does not appear to be falling behind the rest of the country. With the exception of TQM, technologies that have not been heavily applied within Maine firms are most likely viewed by these firms as irrelevant.
In the next issue of Maine Business Indicators the authors will report their finds on the
relationship between overall corporate performance measures and manufacturing technology
adoption in Maine.
The Maine Science and Technology Foundation funded this study through state appropriation for the Center for Innovation Program.
