By Design: The Envy of the World

In this bimonthly column, Glenn Beall of Glenn Beall Plastics Ltd., Libertyville, IL, shares his special perspective on issues important to design engineers and the molding industry.

In June of 1997, the leaders of the world's major industrialized nations held their recurring "Summit of the Eight" meeting in Denver. This was perfect timing, as the highly regarded Swiss-based Lausanne Institute for Management Development's May 1997 report rated the United States as first in world competitiveness. A stable economy, with seven straight years of growth, has created new jobs and the lowest unemployment in 24 years. Capital spending is the highest in 60 years, while inflation has been kept low. Welfare spending is being addressed, and the national debt is at least being discussed. America was the envy of everyone present.

The widespread usage of plastics in all types of products speaks well to this industry's part in this achievement. The positive attitude of this year's record setting National Plastics Exposition also indicates enthusiasm for the future.

In the past, much was said and written about what America was going to have to do in order to survive a global economy. The U.S. has apparently learned how to use and capitalize on the new technological advances and management philosophies that we have been investing in for the past 15 years or so. The growth in the economy, coupled with advances in manufacturing technology, has once again converted the U.S. into a world class producer of goods and services. Congratulations are in order.

Highs and Lows

America has been a world leader in the past, but it was not always this way. The U.S. was the only major industrialized country whose manufacturing facilities were not destroyed during World War II. While the rest of the world rebuilt, the U.S. prospered by supplying others with credit, food, equipment, products, technical know-how, and a military defense against opportunistic aggressors. Regrettably, the U.S. fell prey to the complacency that so often accompanies prosperity. By the late 1940s and early '50s, the rest of the world had re-equipped itself with the very latest of everything, and the U.S. began to lose its competitive advantage.

Jolted out of its complacency, the manufacturing segment of the U.S. economy reorganized itself. All through the '60s and early '70s, the U.S. was once again leading the world. But we did not maintain the effort. The U.S. had rebuilt its manufacturing capability, but the traditional top-heavy corporate structure remained intact. This bureaucratic, top-down management style had exhausted itself in upgrading its production capability and declared that it needed and was entitled to a vacation.

As we rested on our laurels and enjoyed the good life, European and Asian cars began to appear on the highway. Consumer products with unrecognizable names appeared in every store. Those foreign-made products were accepted as consumers cast their purchasing vote in favor of a radical new marketing philosophy.

Quality vs. Cost

It was always understood that there was a price associated with quality. High-quality products with a lot of desirable features would, understandably, cost more. If the consumer couldn't afford that price, it was his problem and he was expected to be satisfied with a lower quality product with fewer features at a reduced price. Manufacturers appealed to the whole market by producing top-of-the-line and economy models of their products. The new marketing philosophy in the late 1970s was based on the premise that what consumers really wanted was the best of both, or a combination of high quality and lower cost. This new approach was absolutely correct and U.S. manufacturers were, once again, caught flat on their backs in a hammock.

Americans are, by habit or necessity, good at the game of catching up. A massive re-engineering of both management practices and manufacturing procedures has once again made the U.S. a world leader. Is this country now positioned to retain its competitive edge, or is re-engineering just another short-term quick fix? Is there something in the American system of things that dictates that a decline must follow every success?

The American Disease

Management consultant Norihiko Shimizu defines the "American Disease" in an article published in Tokyo Business. He speculates that as American companies become successful, too many of them also become arrogant. This is unjustifiably followed by a sense of overconfidence, based on past performances. These companies generally believe that they know what is best for themselves, their customers, and their suppliers. This know-it-all attitude leads to indifference and the philosophy that what made them successful in the past will work just as well in the future. Customers' wants and needs are constantly changing. Any company that ignores what the customer wants while it concentrates on its core business in order to maximize profits will not remain successful for very long. Any company that is indifferent as to what its competitors are doing is setting itself up to be bushwhacked in the market.

Shimizu goes on to say that the American Disease is contagious. He believes that many Japanese companies who were successful in the past have now contracted the American Disease. He blames the recent decline of Japan's economy, at least in part, on arrogance and a we-know-best attitude that has made it difficult for Japan to change with the times.

Future Threats

It is difficult to think of a logical justification for a roller coaster economy, where a decline follows every success. There are, however, serious threats to the future competitiveness of the U.S. To mention just a few: an undesirable change in the currency exchange rate could have a drastic effect on the global acceptance of American products and services.

Government regulations that interfere with commerce are another major threat. Industries requiring high labor input are still in danger of seeing their business lost to low labor rates around the world. But the biggest threat of all is the resurgence of the American Disease.

Future Solutions

It is easy to find fault with the politicians in Washington. It must be admitted, however, that in spite of its shenanigans, the government is stable and our fiscal policies have been favorable to commerce. About all that business people can do in this regard is to keep pressure on the politicians to continue these policies.

A part of Europe's current economic problems is due to overregulation. It is frightening to note that this country is adopting many of those same regulations - solid waste and take-back legislation, for example. Many multinational corporations are now demanding that their suppliers be ISO-certified for everything. They justify this on the basis that it makes it easier for them to do business in both the U.S. and Europe. What about the rest of the world? The effects of overregulation in Europe are apparent. Does the U.S. really want to copy the same system? The Society of the Plastics Industry (SPI) has the only worthwhile state and federal lobbying activity representing the interests of the plastics industry. All plastics industry companies who want to remain competitive should currently be supporting SPI's battle against this overregulation.

Industries requiring high labor input must continue to become more efficient. There are many new labor saving procedures, such as the use of robots and automated molding and assembly, that have not yet been fully utilized. Employee training in the plastics processing industry is still inadequate. Upgrading your employees will allow you to do more with what you are already paying for. Sending your labor intensive assembly or mold building offshore is only a temporary solution to the high labor rates being paid in America.

Success is a Journey, Not a Destination

Customers, stockholders, and employees always want more. Our competitors are always forcing us to do more. It would be fatal for the U.S. to, once again, relax and pause to enjoy the successes we've had in recent years. In the business world, success is a journey and not a destination. All of the elements that have once again made the United States first in world competitiveness are still present. All that is required is that we maintain the effort, while continuing to guard against the American Disease.