The `flexible factory' reshapes American industry

DON TRUSKOWSKI pushes some buttons and takes a step toward the 21st century. His ``time machine'' is a computerized lathe that cuts metal into axles, bearing rings, and other metal parts. The parts themselves may be unexciting. But they are the early fruits of the next industrial revolution - a revolution that will likely determine whether or not this country can compete in the world market. Mr. Truskowski, an engineer at a small manufacturing company called Frost Inc., is reprogramming the computer so that the lathe will cut a different sized cylinder from the one it is set up to cut now. It takes a few minutes.

Before Frost got computers in 1984, such changes were manual and could take hours, or for big changeovers, days. In those days, Frost made parts for conveyer machines. Now, Truskowski says, the company makes ``round things.''

It's a subtle distinction, but one that kept Frost from going bankrupt. It allowed the company to sell to other industries, including the automotive and aerospace industry.

``Anything round, we'll machine it,'' Truskowski yells over the whir of the robots. ``We're getting into different trades so that if one goes down, we can keep the other markets going, and always hopefully keep everything happy around here.''

Frost is one of the first small manufacturers to invest millions of dollars in a ``flexible manufacturing system.'' The technology, in varying degrees of sophistication, allows the same production line to turn out different products, often within seconds of each other.

Bringing home the plants

The Japanese are ahead of the United States in exploiting the technology (story, Page 20). But, increasingly, large American companies are using flexible manufacturing as a tool to regain their competitive edge, win back markets, and penetrate new ones. It spells the revitalization of US industries long considered lost to foreign competition.

``We can make almost anything with flexible automated systems if we just get our act together,'' says D. Bruce Merrifield, US assistant secretary of commerce. ``The automated manufacture of textiles, of shoes, almost anything is feasible now, but it's going to take some effort.''

To date, the major advances have been in high-tech goods. And those have been impressive, if expensive.

For example, in the early 1980s, IBM watched Asian rivals walk away with part of its typewriter business. IBM was considering closing its Lexington, Ky., typewriter factory and getting out of the business or setting up shop overseas.

But in 1983 - in a move that other companies are increasingly parroting - IBM decided it could get a better cost advantage by building its products in the US using an automated facility. It spent more than $300 million on the Lexington plant, which now makes electric typewriters and printers for its personal computers.

Moreover, it makes the 12 different models on the same line, with a computer channeling the various parts to the correct areas for robots to assemble. (The same line could make toasters, videocassette recorders, and other products about the same size.)

The flexible system allowed IBM to introduce new models more quickly and regain market share - especially from the Japanese, who had 80 percent of the personal computer printer market just three years ago.

Allen-Bradley Inc. used the technology to penetrate new markets. The company's Milwaukee factory makes parts for electric engines and has a big share of US sales. But Allen-Bradley also wanted to sell to customers - mostly overseas - who needed smaller electric motors. So it bought $15 million worth of flexible manufacturing equipment. Now the plant can switch from one size motor to the other in six seconds - and a whole new market has been opened up to the company.

Custom-made manufacturing

These examples are among the most dramatic, of course. Many US manufacturers, especially small ``job shops,'' still use the archaic methods - slow, inflexible, and riddled with flaws - that sent companies looking overseas, where labor was cheap and efficient, to do their manufacturing work. The US has paid dearly in closed plants and lost jobs.

As the country's industrial base gives way to a service economy, many economists worry that America's standard of living is falling as well. But others believe that the recent trend toward services is setting the stage for revitalizing American manufacturing.

``I see manufacturing, with or without us, moving primarily to a service function within a decade,'' says Mr. Merrifield of the Commerce Department.

In the future, he and others say, a manufacturing plant will ``sell time'' on its line, and make hundreds of custom-made products for different companies in different industries. A company like Zenith could buy time at a manufacturing facility to make televisions. Later that day, after a taking a few seconds or minutes to reprogram the computer, that same manufacturing line could turn out microwave ovens for General Electric. This is what Frost plans to do within the next couple of years with component parts rather than end products.

``When you have an environment which is very flexible and you can introduce new products very quickly, what you can do is actually talk to your customer, find out what your customer needs, and build a product just for the customer's needs,'' says Ramchandran Jaikumar, a professor at Harvard Business School who has studied flexible manufacturing in Japan and the US. ``You're ending up more as an engineering consulting firm, rather than a [company] that is manufacturing products.''

Small revolution

For the US to be competitive in the new world of manufacturing, it will need more than a few showcase examples. Computerization must filter down to the 100,000 or so small ``job shops'' that cut, polish, and treat components which then get shipped to, say, General Motors and are put into a new Chevrolet. They are the backbone of American manufacturing, supplying some 75 percent of all the parts used in cars, refrigerators, televisions, or any machine.

``If America is to maintain its industrial base - and its standard of living - then it will undoubtedly be the small companies that make it possible,'' says John Simpson, who heads the Center for Manufacturing Engineering at the National Bureau of Standards.

``Manufacturing is becoming a service industry, and service industries are best managed by smaller companies, not industrial giants.''

But thus far, small companies have dragged their feet. Many simply can't afford the new technology, which costs million of dollars.

Ken Gettelman, editor of Modern Machine Shop, figures that only about 1,000 have put in sophisticated ``computer numerically controlled'' (CNC) machines, though some 21,000 have at least some computerization.

By contrast, 40 percent of all CNC machines in Japan have gone to small and medium-sized companies, Dr. Jaikumar says. In 1980, Japan's equipmentmakers established Japan Robot Lease Company to get automated machine tools and robots into small factories. The government also provides low-interest loans for the venture.

The US government does not have an equivalent program. ``This administration resists anything that sounds like industrial policy,'' notes Mr. Simpson.

Still, his center at the National Bureau of Standards has assembled a prototype for what the small machine shop will look like in the year 2000. A bill before Congress would set up these prototypes around the country to let managers of small companies see the new technology.

With or without government help, small companies may be forced to buy flexible manufacturing systems.

For Chad Frost, the impetus came from the Japanese. Ten years ago, Mr. Frost had a thriving business making bearing rings and other parts for conveyor machines. But the recession in the early '80s cut demand for conveyer parts, and a price war with a Japanese-backed firm left Frost fighting for its life.

So Mr. Frost, great-grandson of the company's founder and now the firm's president, decided to diversify so the company was not so dependent on one business. Frost borrowed $5.1 million, nearly half a year's sales, to get flexible machines that could be adjusted by a computer to cut round shapes of any dimension.

He trimmed costs by 30 percent, prices by a quarter, and the Japanese-backed firm pulled out of the competition. Moreover, when Frost's core business is sluggish, as it is today, it can make axels for cars and trucks, which it could not make before. ``Our definition of our business has changed,'' he says.

New set of rules

For other job shops, the pressure to automate is coming from their large American customers, particularly the automakers, aerospace companies, and the Department of Defense.

When large customers computerized, they made a new set of rules. For example, many large companies now use ``just in time'' production techniques, which means they make smaller orders, and on much shorter notice. Producing small quantities is inefficient and expensive on traditional machinery. Antiquated job shops face an unpleasant choice: Settle for lower (or negative) profits, or spend the money on flexible systems, which can make small quantities more cheaply.

In addition, many big companies use computers to redraw their designs on a computer screen. Increasingly, large customers, particularly General Motors, require their parts suppliers to have computers that can run the same programs. The supplier can plug in the new design and make parts to fit it.

Robert Haas, whose company makes molds for car transmissions, finally bowed to the pressure a few years ago. He bought computer-aided design equipment that could ``talk'' with his customers' computers.

Whenever they redesign their products on their computers, he says, ``they construct a data base, send it to us, and I program the machine tools to make the molds.'' It was so much easier for customers to work with his computers, he says, that ``I insulated myself from the competition,'' including his fiercest rivals, the Canadians.

Temporarily, at least: Ten of his competitors have bought similar equipment. -30-{et