Manufacturing Control via the Internet
Manufacturing Control via the Internet
Manufacturing control via the Internet (e-manufacturing) refers to the process of integrating information and communication networks as well as Internet-supported robotics into the production systems, processes, and structures of the firm. As such, the firm uses the Internet to link production equipments and control functions of its manufacturing systems through series of real-time monitoring gadgets such as computers and mobile communication devices. E-manufacturing comes with many advantages that include: ubiquitous accessibility, remote-controlled monitoring possibilities, real-time communications capabilities, and increased production efficiency as a result of information-integrated production systems.
The unlimited linkage of manufacturing operations to the global communication infrastructure is a phenomenon that relies heavily on the Internet's networking technology. The Internet consists of physically-networked servers and advanced communication linkages that relay information across Web-based servers and client computers. The advent of the Internet and the subsequent advancement of digital technologies have introduced new economic frontiers characterized by the emergence of revolutionary and information-driven economic institutions. The increased access to the global information and communication infrastructures has closed the gaps among consumers, manufacturers, and suppliers by eliminating the political, economic, and geographic barriers.
BRIEF HISTORY OF THE INTERNET
The origins of the Internet can be traced to the 1960s military research activities of the United States Army. In the book titled Internet Literacy, Fred Hofstetter credits the United States Department of Defense for developing the first ever viable Internet called ARPANET through the Advanced Research Projects Agency (ARPA) in 1969. The main objective of ARPANET was to provide the U.S. military with a communication network capacity that could withstand turbulence and obstructions that rose from enemy attacks. It would accomplish this by relying on sets of networked computers to transmit labeled and addressed packets of information to designated destinations, even if one or more of the computers along the way stopped functioning. Thus, in the event of enemy attacks (such as a massive bombing campaign), the packets of information would automatically be routed through alternative paths to their intended destinations.
Commercial use of the Internet has been evident ever since the early 1990s following the liberalization of the National Science Foundation Network (NSFNET) in the United States. The move opened up the routing of high-speed Internet traffic to different interconnected Internet service providers (ISPs), thereby providing easy access to pioneer online auction and commercial entities such as Amazon, eBay, and PayPal. The Internet has since become a powerful tool for trade, commerce, and manufacturing because of its formidable infrastructure that runs across the globe.
THE INTERNET AND MANUFACTURING PROCESSES
The use of computer-based networking in production activities is based on the materials and requirement planning (MRP) framework that is demand dependent and specifically geared to assembly operations in firms. MRP was developed in the 1960s and still remains an important component of industrial manufacturing processes. Computerized MRP has evolved into MRP II, which involves linking and streamlining operations in different departments such as marketing, purchasing, production planning and control, human-resource management, and financial accounting.
MRP II integrates different functions in the firm into a central monitoring and decision system by collecting and relaying data and additional production inputs. The advancements in MRP II have given rise to enterprise resource planning (ERP), which integrates different types of industrial data, processes, and functions into a unified database through comprehensive linkages of software and hardware systems. Unlike MRP and MRP II, ERP has the capacity to link organizational functionalities through multiple systems. Instead of functions such as human resource management, production control, customer relations, financial accounting, and supply chain management existing in independent software applications and individual databases, ERP brings all these functions under one roof to share a single database and software applications.
The ability for ERP to streamline workflows, track processes, and improve productivity makes it easy for manufacturing companies to integrate e-manufacturing in controlling and managing industrial production processes. The implementation of e-manufacturing strategies through the existing ERP systems definitely revolutionizes the monitoring and functioning of the engineering capacity of machines, quality control, material control, and workflow processes.
Firms can use either in-house teams and software applications or software vendors and consultants to implement customized e-manufacturing systems. For example, Jain has contracted Rockwell Automation, a leading industrial automation software and service provider in the United States, to manage its entire processes of real-time automation and track the company's manufacturing data.
Companies can also outsource the management of e-manufacturing to industrial automation and software companies that have global presence such as Oracle and IBM.
The twenty-first century has experienced unprecedented increase in the use of telephone modems, Ethernet wireless connections, cable modems, digital subscriber lines (DSL), and satellite communications to access Web-based services such as e-mails, newsgroups, chat rooms, real-time messaging, and list servers through either computers or mobile devices. Manufacturing companies are embedding digital devices and sensors that range from micro-scale to macro-scale sizes in all aspects of production. For example, as Kwon Yongjin and Rauniar Shreepud point out in their 2007 journal article titled “E-Quality Manufacturing (EQM) Within the Framework of Internet-Based System” and contained in the IEEE Transactions on Systems, Man and Cybernetics, Part C: Application and Reviews, manufacturers use advanced tools such as the Ethernet SmartImage sensor and the Internet Controllable Yamaha Scara robot to initiate continuous correspondence in production processes with the objective of monitoring and achieving sustained quality control.
Manufacturing companies are continuously taking advantage of the advancements in Internet tracking and communications technologies to entrench quality control and monitor daily production activities in firms. In addition to using the Internet to remotely monitor and track production processes, companies also use the Internet to diagnose faulty functionalities of equipment and processes in the entire production system. Remote and automated access to manufacturing systems enables operations managers and production line experts to sustain quality control and initiate instant responses to sudden changes in a firm's manufacturing environment.
The most common real-time solutions that companies employ in production control include chat rooms and instant messaging (IM), which allows the use of voice calls, file sharing, webcams, information-on-demand (such as news, weather, auctions, and stock trading), and online status reporting. Leading IM providers include AOL Instant Messaging (AIM), Microsoft's MSN Messenger, Yahoo Messenger, and Skype.
The twenty-first century has also experienced the increased use of Ethernet video on the floor of the manufacturing plants to monitor operations, streamline coordination, train workers, and control repairs and maintenance. In an Internet article titled Video via Ethernet Now, Martin T. Hoske acknowledges that in addition to enhancing security applications during production processes, Ethernet video applications have also proved to be effective time-saving tools.
SECURITY AND THREATS TO E-MANUFACTURING
Real-time manufacturing control via the Internet is prone to enforceable inconveniences that are beyond the control of the organizations. Such inconveniences include network failure of ISPs or time lag as a result of network congestions. Moreover, the unauthorized access to network systems by hackers, crackers, state intelligence agencies, and other types of intruders remains the biggest threat to Internet security. Internet security threats come in the form of Internet break-ins, Internet fraud, and message sniffing.
Internet break-ins . Internet break-ins are particularly committed by crackers who gain unauthorized access into Web sites to collect private information about individuals, companies, and organizations. Crackers can disastrously land on a firm's private information such as credit card numbers, bank account details of individuals, or classified company information such as production formulas, secret codes, and classified data. In the United States, Internet break-in is treated both as theft and trespassing by the federal laws; offenders can be handed up to a five-year prison sentence for stealing money and ten years for fraudulent acquisition of a company's classified information.
Internet fraud. Internet fraud involves the use of Web site tools such as chat rooms, e-mails, or newsgroups by fraudsters to offer services and products that do not exist with the aim of convincing unsuspecting Internet users to transfer money or goods to the fraudsters. The increased prevalence of Internet fraud, particularly in online auctions, has prompted regulatory authorities in the United States to respond by setting up the Internet Fraud Complaint Center (IFCC). Consisting of a partnership between the Federal Bureau of Investigation (FBI) and the National White Collar Crime Center, the IFCC controls and coordinates campaigns against Internet fraud by providing Internet fraud reporting structures and mechanisms for forwarding fraud cases to law enforcement agencies.
Message sniffing. Message sniffing involves intercepting e-mail communication messages on the Internet with the aim of gaining access to the content of the e-mail messages. Sniffing targets the routes and gateways that link the networks to the Information Superhighway. Incidentally, each computer on the network is a gateway prone to hacking by crackers. For example, the FBI scans both local and international Internet communications in the United States using a customizable electronic sniffing gadget called Carnivore.
Carnivore can be installed in one or more ISPs to monitor the Internet traffic in regard to transmissions of e-mail, instant messaging, chat rooms, and newsgroups, and it automatically forwards any suspect communications
to the FBI data repositories. Although the use of Carnivore by the FBI to spy on private and public communications in the United States raises major privacy concerns, the action is fully backed by the USA Patriot Act of 2001 and the USA Patriot Improvement and Reauthorization Act of 2005, which have broadened the authority of U.S. intelligence and counterintelligence agencies to apply Internet-based surveillance systems in investigations.
DATA PROTECTION MEASURES FOR E-MANUFACTURING
So many security threats lurk in the communication network systems that no company can afford to run an unprotected Internet network. There are several measures that a company can employ to protect its Internet network from unauthorized access by intruders. Use of password protection, data encryption, firewall, data filters, and employee training are some of the probable measures that companies can adopt as protection against Internet security risks.
Use of passwords . Use of passwords enables companies to limit Web site access to users with authorized passwords. However, password codes should never be fully trusted because crackers can use sophisticated software to break the codes and access the private content in the Web site and e-mail messages.
Data encryption. Data encryption protects data from crackers and sniffing gadgets during the process of transmitting information between computers and network servers. Encrypted messages do not allow access to people who do not have the keys to the encryption codes. Pretty Good Privacy (PGP) is one good example of encryption programs. Fred Hofstetter contends that PGP provides a reliable mode for encrypting messages because it can run on any brand of computer. Companies can acquire messaging software such as Mozilla Thunderbird and Microsoft Outlook which are equipped with built-in encryption abilities.
Firewalls . Firewalls stand out as reliable Internet-security-enhancing tools because they prevent a company's data from flowing beyond the domain restrictions, in addition to preventing users of other domains from accessing the company's domain. Companies implement firewall restrictions by combining software tools, hardware equipment, and relevant IT security policies that block the movement of restricted data across the company's network and computers.
Firewalls are particularly used to protect the company's intranet from unlimited public access through programming of the firewall software to regulate minimum and maximum access levels between the company's intranet and the public Internet.
Data filters. Companies can use data filters to scan and sift the outgoing and incoming data for certain types of Internet content. Data filters can be applied in situations where the company is seeking to block employees from accessing certain Web sites such as adult content and Internet gambling sites. Data filters can be set either on the user or client servers.
Employee training. Employee training through Internet education programs can tremendously improve safety of Internet use in the company apart from improving the capacities of employees to detect and handle fraud. Employees should always be discouraged from responding to everything that they read on the Internet. Employees should be made aware of the dangers of revealing their personal bank account and credit card information and the company's classified data to information seekers with concealed identities.
SEE ALSO Enterprise Resource Planning
Hofstetter, Fred, T. Internet Literacy, 4th ed. McGraw-Hill Companies Inc., 2006.
Hoske, Mark, T. “Video via Ethernet Now.” Control Engineering, January 12, 2007. Available from: http://www.controleng.com/article/CA6510487.html/.
National Institute of Standards and Technology. “Software Tackles Production Line Machine ‘Cyclic Jitters’.” Science Daily, 5 April 2008. Available from: http://www.sciencedaily.com/releases/2008/04/080402101656.htm/.
Smith-Atakan, Serengul. Human-Computer Interaction. Middlesex University Press: Thomson Learning, 2006.
“Three Tiered Web-Based Manufacturing System—Part 1: System Development.” Robotics and Computer Integrated Manufacturing. 23, no. 1, (2007): 138–151. Available from: http://portal.acm.org/toc.cfm?id=J1050&type=periodical&coll=GUIDE&dl=GUIDE&CFID=183639&CFTOKEN=75352989.
University of Wisconsin-Milwaukee. “Merging Control Software with Smart Devices Could Optimize Manufacturing.” Science Daily, 22 May 2008. Available from: http://www.sciencedaily.com/releases/2008/05/080521105255.htm/.
Winschhsen, Molly, Janet Snell, and Jenny Johnson. Diploma in Digital Applications, Book 4. Heinemann, 2006.
Wolf-Ruediger, Hansen, and Frank Gillert. RFID for the Optimization of Business Processes. Wiley, 2008.
Yongjin, Kwon, and Rauniar Shreepud. “E-Quality Manufacturing (EQM) Within the Framework of Internet-Based Systems.” IEEE Transactions on Systems, Man and Cybernetics, Part C: Application and Reviews, 2007. Available from: http://cat.inist.fr/?aModele=afficheN&cpsidt=19180416.
"Manufacturing Control via the Internet." Encyclopedia of Management. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/manufacturing-control-internet
"Manufacturing Control via the Internet." Encyclopedia of Management. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/manufacturing-control-internet
MANUFACTURING. Rather than undergoing a single, rapid "industrial revolution," manufacturing in America has evolved over four centuries of European settlement. While the first colonists introduced some manufacturing processes to their "new world," manufacturing did not become a vital part of the economy until the achievement of national independence. Over the first half of the nineteenth century, all forms of manufacturing—household, artisanal, and factory based—grew and expanded, and textile manufacturing in particular spawned important new technologies. From the Civil War through the early twentieth century heavy industry grew rapidly, transforming the national economy and the very nature of society. After a period of manufacturing prosperity due, in part, to World War II, heavy industry began to decline and Americans suffered from deindustrialization and recession. The growth of high technology and the service sector in the final decades of the century offered both challenges and opportunities for American manufacturing.
The Colonial Era to 1808
Both of the major early English settlements hoped to establish manufacturing in America. The Virginia Company attempted to set up iron foundries and glass manufactories on the James River while the Puritans built several iron foundries in Massachusetts. As colonization proceeded, however, manufacturing became increasingly peripheral to the economy. With quicker and easier profits to be made from cash crops and trans-Atlantic trade, colonists exerted little effort toward manufacturing. Beginning in the late-seventeenth century, colonial manufacturing was further hindered by mercantilistic restrictions imposed by the English, most notably the Woolen Act (1699), Hat Act (1732), and Iron Act (1750). All three of these acts were designed to limit nascent colonial competition with English manufacturers in keeping with the developing mercantilistic perception that colonies should serve the empire as producers of raw materials and consumers of finished products from the mother country. While large-scale iron and steel manufacturing continued to have a presence in the colonies, most colonial manufacturing would still be performed in the farm household and, to a lesser extent, within craft shops.
It was only after the French and Indian War (1689– 1763) that Americans, propelled by their new quest for independence from England, began to turn toward manufacturing in a systematic way. Colonial resistance to the Sugar Act (1764), Stamp Act (1765), Townshend Duties (1767), and Coercive Acts (1774/1775) all involved economic boycotts of British goods, creating a patriotic imperative to produce clothing, glass, paint, paper, and other substitutes for British imports. Empowered by this movement and increasingly politicized by the resistance, urban artisans began to push for a permanently enlarged domestic manufacturing sector as a sign of economic independence from Britain.
The Revolution itself offered some encouragement to domestic manufacturing, particularly war materiel such as salt petre, armaments, ships, and iron and steel. But it also inhibited manufacturing for a number of reasons. Skilled laborers, already scarce before the war, were now extremely difficult to find. Wartime disruptions, including the British blockade and evacuation of manufacturing centers such as Boston, New York City, and Philadelphia further hindered manufacturing.
In the years immediately following the war, manufacturing began to expand on a wider scale. Lobbying efforts by urban mechanics as well as some merchants swayed state governments and later the new federal government to establish mildly protective tariffs and to encourage factory projects, the most famous of which was Alexander Hamilton's Society for Establishing Useful Manufactures in Patterson, New Jersey. New immigrants brought European industrial technologies. The best known case was that of Samuel Slater, who established some of the new nation's first mechanized textile mills in Rhode Island in the 1790s. But the great majority of manufacturing establishments still relied on traditional technologies to perform tasks such as brewing beer, refining sugar, building ships, and making rope. Moreover, craft production and farm-based domestic manufacturing, both of which grew rapidly during this period, continued to be the most characteristic forms of American manufacturing.
From 1808 to the Civil War
Factory production, particularly in the textile industries, became an important part of the American economy during the Embargo of 1808 and the War of 1812. During these years imports were in short supply due to the United States' efforts to boycott European trade and disruptions caused by the British navy during the war. Economic opportunity and patriotic rhetoric pushed Americans to build their largest textile factories to date, from Baltimore's Union Manufactory to the famous establishments financed by the Boston Associates in 1814 in Waltham and in 1826 in Lowell, Massachusetts. America's first million-dollar factories, they used the latest technologies and employed thousands of workers, many of them women and children. After the war promanufacturing protectionists pushed for high tariffs to ensure that manufacturing would continue to flourish. These efforts culminated with the so-called Tariff of Abominations of 1828, which included rates of 25 percent and more on some imported textiles. Protectionism was a vital part of the Whig Party's American System, consisting of tariffs, improved transportation, and better banking. But after 1832, as Southerners successfully fought to lower tariffs, government protection of manufacturing waned.
During these years the proportion of the workforce involved in manufacturing grew more rapidly than in any other period in America's history, rising from only 3.2 percent in 1810 to 18.3 percent by 1860. Growth in textile manufacturing led the way. Cotton production capacity alone increased from 8,000 spindles in 1808 to 80,000 by 1811 and up to 5.2 million by the dawn of the Civil War. By 1860 the United States was, according to some calculations, the world's second greatest manufacturing economy, behind only England. Spectacular as this growth was, it did not come only from the revolution in textile manufacturing. In fact, American manufacturing was extremely varied. While even Europeans admired American inventors' clever use of interchangeable parts and mechanized production, traditional technologies also continued to flourish. Household production, although declining relative to newer forms, remained a significant element of American manufacturing. Many industries other than textiles, and even some branches of textiles, relied on more traditional processes. Established urban centers such as New York City experienced metropolitan industrialization that relied more on the expansion and modification of traditional craft processes than on construction of large vertically integrated factories on the Lowell model.
From the Civil War to World War II
During the latter part of the nineteenth century the United States became the world's leading industrial nation, exceeding the combined outputs of Great Britain, France, and Germany by 1900. Between 1860 and 1900 the share of manufacturing in the nation's total production rose from 32 percent to 53 percent and the number of workers employed in manufacturing tripled from 1.31 million to 4.83 million. Heavy industry, particularly steel, played the most dramatic role in this story. Between 1873 and 1892 the national output of bessemer steel rose from 157,000 to 4.66 million tons. Geographically, the trans-Appalachian midwest was responsible for a disproportionate amount of this growth. Major steel-making centers such as Pittsburgh, Cleveland, and Chicago led the way. The combined population of these industrial metropolises grew by more than 2,500 percent between 1850 and 1900. Yet, even smaller midwestern towns rapidly industrialized; by 1880 60 percent of Ohio's population was employed in manufacturing, and ten years later Peoria County, Illinois, was the most heavily industrialized in the United States. To a far lesser extent manufacturing also extended into the New South after the Civil War. Here industries based on longtime southern agricultural staples such as cotton manufacturing and cigarette making led the way, following some mining and heavy industry.
Besides the growth of heavy industry and large cities, this era marked the onset of big business. The railroad industry, which benefited from the ease of coordination offered by large units, set the pace, but it was in the steel industry that bigness really triumphed, culminating in the creation of United States Steel, America's first billion-dollar firm (it was capitalized at $1.4 billion in 1901). By 1904, 318 large firms controlled 40 percent of all American manufacturing assets. Firms grew due to vertical integration (incorporating units performing all related manufacturing functions from extraction to marketing) as well as horizontal integration (incorporating new units providing similar functions throughout the country). Such growth was hardly limited to heavy industry; among the most famous examples of vertical integration was the Swift Meat Packing Corporation, which, during the 1870s and 1880s, acquired warehouses, retail outlets, distributorships, fertilizer plants, and other units that built on its core businesses.
While consumers welcomed the increasing availability of mass-produced goods ranging from dressed meat to pianos, the growth of big industry also worried many Americans. Concerns that the new colossuses would serve as monopolies spurred government concern, beginning with state actions in the 1880s and the federal Sherman Antitrust Act of 1890 and followed by a number of largely ineffectual efforts by federal courts to bust trusts such as those alleged in the whiskey and lumber industries to keep the market competitive for smaller players. Perhaps more importantly, workers were also frightened by the increasing amount of economic power in the hands of a few industrial giants who were able to slash wages at will. Major labor actions against railroad and steel corporations helped to build new unions such as the Knights of Labor (established 1869), the United Mine Workers (1890), and the American Federation of Labor (1886). In the 1890s there were an average of 1,300 work stoppages involving 250,000 workers per year. Such actions sometimes ended in near-warfare, as in the famous case of the 1892 strike at Carnegie Steel's Homestead, Pennsylvania, plant.
The most important new manufacture of the twentieth century was the automobile. In 1900 the United States produced fewer than $5 million worth of automobiles. Only sixteen years later American factories turned out more than 1.6 million cars valued at over half a billion dollars. Henry Ford's assembly line production techniques showcased in his enormous River Rouge factory transformed industry worldwide. Automobile production also stimulated and transformed many ancillary industries such as petroleum, rubber, steel, and, with the development of the enclosed automobile, glass. Automobiles also contributed significantly to the growth of a consumer culture in the era before World War II, leading to new forms of commuting, shopping, traveling, and even new adolescent dating rituals. While the development of new forms of consumption kept the economy afloat during good times, reluctance to purchase goods such as automobiles and radios during the Great Depression would intensify the economic stagnation of the 1930s.
World War II to 2000
After the fallow years of the depression, heavy industry again thrived during and after World War II, buoyed by defense spending as well as consumer purchases. Due partly to the politics of federal defense contracts and partly to lower labor costs, the South and West experienced more rapid industrial growth than the established manufacturing centers in the Northeast and Midwest. While workers in the Pacific coast states accounted for only 5.5 percent of the nation's manufacturing workforce in 1939, by 1969 they accounted for 10.5 percent of the total. Manufacturing employment in San Jose, Phoenix, Houston, and Dallas all grew by more than 50 percent between 1960 and 1970.
Industrial employment reached its peak in 1970, when 26 percent of Americans worked in the manufacturing sector. By 1998 the percentage had plunged to 16 percent, the lowest since the Civil War. Deindustrialization struck particularly hard during the 1970s when, according to one estimate, more than 32 million jobs may have been destroyed or adversely affected, as manufacturing firms shut down, cut back, and moved their plants. Due to increasing globalization, manufacturing jobs, which previously moved from the northern rust belt to the southern and western sun belt, could now be performed for even lower wages in Asia and Latin America. These developments led some observers to label the late twentieth century a post-industrial era and suggest that service industry jobs would replace manufacturing as the backbone of the economy, just as manufacturing had superseded agriculture in the nineteenth century. They may have spoken too soon. In the boom years of the 1990s the number of manufacturing jobs continued to drop, but increased productivity led to gains in output for many industries, most notably in the high technology sector. Additionally, other economic observers have argued that manufacturing will continue to matter because the linkages that it provides are vital to the service sector. Without manufacturing, they suggest, the service sector would quickly follow our factories to foreign countries. Thus, at the dawn of the twenty-first century the future of manufacturing and the economy as a whole remained murky.
Bluestone, Barry, and Bennett Harrison. The Deindustrialization of America. New York: Basic Books, 1982.
Clark, Victor. History of Manufactures in the United States, 1893–1928. 3 vols. New York: McGraw Hill, 1929.
Cochran, Thomas. American Business in the Twentieth Century. Cambridge, Mass.: Harvard University Press, 1972.
Cochran, Thomas, and William Miller. The Age of Enterprise: ASocial History of Industrial America. New York: Macmillan, 1942.
Licht, Walter. Industrializing America: The Nineteenth Century. Baltimore: Johns Hopkins University Press, 1995.
Porter, Glenn. The Rise of Big Business, 1860–1910. New York: Caswell, 1973; Arlington Heights, Ill.: Harlan Davidson, 1973.
Tryon, Rolla M. Household Manufactures in the United States,1640–1860. Chicago: University of Chicago Press, 1917. Reprint, New York: Johnson Reprint Company, 1966.
"Manufacturing." Dictionary of American History. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/manufacturing
"Manufacturing." Dictionary of American History. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/manufacturing
Manufacturing Resources Planning
Manufacturing Resources Planning
Manufacturing resource planning, also known as MRP II, is a method for the effective planning of a manufacturer's resources. MRP II is composed of several linked functions, such as business planning, sales and operations planning, capacity requirements planning, and all related support systems. The output from these MRP II functions can be integrated into financial reports, such as the business plan, purchase commitment report, shipping budget, and inventory projections. It has the capability of specifically addressing operational planning and financial planning, and has simulation capability that allows its users to conduct sensitivity analyses (answering “what if” questions).
The earliest form of manufacturing resource planning was known as material requirements planning (MRP). This system was vastly improved upon until it no longer resembled the original version. The newer version was so fundamentally different from MRP that a new term seemed appropriate. Oliver Wight coined the acronym MRP II for manufacturing resource planning.
A basic understanding of MRP is essential to understanding MRP II. The following paragraphs begin with a description of MRP before moving on to MRP II.
MATERIAL REQUIREMENTS PLANNING
Material requirements planning (MRP) is a computer-based, time-phased system for planning and controlling the production and inventory function of a firm from the purchase of materials to the shipment of finished goods. All MRP systems are computer based since the detail involved and the inherent burden of computation make manual use prohibitive. MRP is time phased because it not only determines what and how much needs to be made or purchased, but also when.
MRP first appeared in the early 1970s and was popularized by a book of the same name by Joseph Orlicky. Its use was quickly heralded as the new manufacturing panacea, but enthusiasm slowed somewhat when firms began to realize the difficulty inherent in its implementation.
The MRP system is composed of three primary modules, all of which function as a form of input. These are the master production schedule, the bill-of-materials, and the inventory status file. Each module serves a unique purpose that is inter-related with the purpose of the other modules, and produces several forms of usable output.
Master Production Schedule. The master production schedule (MPS) is basically the production schedule for finished goods. This schedule is usually derived from current orders, plus any forecast requirements. The MPS is divided into units of time called “buckets.” While any time frame may be utilized, usually days or weeks is appropriate. The MPS is also said to be the aggregate plan “disaggregated.” In other words, the plan for goods to be produced in aggregate is broken down into its individual units or finished goods.
Bill-of-Materials . The bill-of-materials is a file made up of bills-of-material (BOM). Each BOM is a hierarchical listing of the type and number of parts needed to produce one unit of finished goods. Other information, such as the routings (the route through the system that individual parts take on the way to becoming a finished good), alternate routings, or substitute materials may be also be contained with the BOM.
A tool known as a product structure tree is used to clarify the relationship among the parts making up each unit of finished goods. Figure 1 details how a product structure tree for a rolling cart might appear on a bill-of-material. This cart consists of a top that is pressed from a sheet of steel; a frame formed from four steel bars; and a leg assembly consisting of four legs, each with a caster attached. Each caster is made up of a wheel, a ball bearing, an axle, and a caster frame.
The BOM can be used to determine the gross number of component parts needed to manufacturer a given number of finished goods. Since a gross number is determined, safety stock can be reduced because component parts may be shared by any number of finished goods (this is known as commonality).
The process of determining gross requirements of components is termed the “explosion” process, or “exploding” the bill-of-material. Assuming 100 rolling carts are needed, the example product structure tree can be used to compute the gross requirements for each rolling cart component. In order to produce 100 rolling carts, 100 tops are needed, which would require 100 sheets of steel; 100 leg assemblies, which would require 400 legs and 400 casters (requiring 400 wheels, 400 ball bearings,
400 axles, and 400 caster frames); and 100 frames, which would require 400 bars.
Inventory Status File. The inventory status file, or inventory records file, contains a count of the on-hand balance of every part held in inventory. In addition, the inventory status file contains all pertinent information regarding open orders and the lead time (the time that elapses between placing an order and actually receiving it) for each item.
Open orders are purchase orders (orders for items purchased outside the firm) or shop orders (formal instructions to the plant floor to process a given number of parts by a given date) that have not been completely satisfied. In other words, they are items that have been ordered, but are yet to be received.
The MRP Process. The MRP logic starts at the MPS, where it learns the schedule for finished goods (how many and when). It takes this information to the BOM where it “explodes” the gross requirements for all component parts. The MRP package then takes its knowledge of the gross requirements for all components parts to the inventory status file, where the on-hand balances are listed. It then subtracts the on-hand balances and open orders from the gross requirements for components yielding the net requirements for each component.
The process not only shows how many components are needed but when they are needed in order to complete the schedule for finished goods on time. By subtracting the lead time from the due date for each part, it is possible to see when an order must be placed for each part so that it can be received in time to avoid a delay in the MPS. A manual version of MRP for a part with requirements of 100 in period 3 and 250 in period 6 and with a two-period lead time is shown in Figure 2.
In order for the firm to meet demand on time (the MPS), it must place an order for 25 in period 1 and an order for 200 in period 4. Note that this is an overly simplified version of MRP, which does not include such relevant factors as lot sizing and safety stock.
EXPANDING INTO MRP II
With MRP generating the material and schedule requirements necessary for meeting the appropriate sales and inventory demands, more than the obvious manufacturing resources for supporting the MRP plan was found to be needed. Financial resources would have to be generated in varying amounts and timing. Also, the process would require varying degrees of marketing resource support. Production, marketing, and finance would be operating without complete knowledge or even regard for what the other functional areas of the firm were doing.
In the early 1980s MRP was expanded into a much broader approach. This new approach, manufacturing resource planning (MRP II), was an effort to expand the scope of production resource planning and to involve other functional areas of the firm in the planning process, most notably marketing and finance, but also engineering, personnel, and purchasing. Incorporation of other functional areas allows all areas of the firm to focus on a common set of goals. It also provides a means for generating a variety of reports to help managers in varying functions monitor the process and make necessary adjustments as the work progresses.
When finance knows which items will be purchased and when products will be delivered, it can accurately project the firm's cash flows. In addition, personnel can project hiring or layoff requirements, while marketing can keep track of up-to-the-minute changes in delivery times, lead times, and so on. Cost accounting information is gathered, engineering input is recorded, and distribution requirements planning is performed.
An MRP II system also has a simulation capability that enables its users to conduct sensitivity analyses or evaluate a variety of possible scenarios. The MRP II system can simulate a certain decision's impact throughout the organization, and predict its results in terms of customer orders, due dates, or other “what if” outcomes. Being able to answer these “what if” questions provides a firmer grasp of available options and their potential consequences.
As with MRP, MRP II requires a computer system for implementation because of its complexity and relatively large scale. Pursuit of MRP or MRP II in a clerical fashion would prove far too cumbersome to ever be useful. When MRP and MRP II were originally developed, hardware, software, and database technology were not sufficiently well advanced to provide the speed and computational power needed to run these systems in real time. Additionally, the cost of these systems was prohibitive. With the rapid advances in computer and information technology since the 1980s, these systems have become more affordable and widely available.
CLASSES OF FIRMS USING MRP AND MRP II
MRP and MRP II users are classified by the degree to which they utilize the various aspects of these systems. Class D companies have MRP working in their data processing area, but utilize little more than the inventory status file and the master production schedule, both of which may be poorly used and mismanaged. Typically, these firms are not getting much return for the expense incurred by the system.
Class C firms use their MRP system as an inventory ordering technique but make little use of its scheduling capabilities.
Class B companies utilize the basic MRP system (MPS, BOM, and Inventory file) with the addition of capacity requirements planning and a shop floor control system. Class B users have not incorporated purchasing into the system and do not have a management team that uses the system to run the business, but rather see it as a production and inventory control system.
Class A firms are said use the system in a closed loop mode. Their system consists of the basic MRP system, plus capacity planning and control, shop floor control, and vendor scheduling systems. In addition, their management uses the system to run the business. The system provides the game plan for sales, finance, manufacturing, purchasing, and engineering. Management then can use the system's report capability to monitor accuracy in the BOM, the inventory status file, and routing, as well as monitor the attainment of the MPS and capacity plans.
Class A firms have also tied in the financial system and have developed the system's simulation capabilities to answer “what if” questions. Because everyone is using the same numbers (e.g., finance and production), management has to work with only one set of numbers to run the business.
A further extension of MRP and MRP II has been developed to improve resource planning by broadening the scope of planning to include more of the supply chain. The Gartner Group of Stamford, Connecticut, coined the term “enterprise resource planning” (ERP) for this system. Like MRP II systems, ERP systems rely on a common database throughout the company with the additional use of a modular software design that allows new programs to be added to improve the efficiency of specific aspects of the business.
With the improvement of lean manufacturing and just-in-time (JIT) systems that has occurred because of the same technological advances that made MRP and MRP II more accessible, some firms have come to feel that MRP, MRP II, and even ERP systems are obsolete. However, research has found that in certain environments with advance demand information, MRP-type push strategies yield better performance in term of inventories and service levels than did JIT's kanban-based pull strategies, and they continue to be used by big businesses and many medium and smaller businesses even today. In 2007, author Phil Robinson noted that “when properly implemented, an ERP package can be the most cost effective project a company has ever seen.”
By the early twenty-first century, MRP and ERP systems were so entrenched in businesses that they no longer provided a source of competitive advantage. In 2005, the authors of Manufacturing Planning and Control for Supply Chain Management pointed out that sustaining competitive advantage would require that manufacturing planning and control (MPC) systems cross organizational boundaries to coordinate company units that have traditionally worked independently. They recommend that organizations need to begin working in pairs or dyads to develop jointly new MPC systems that allow integrated operations. Organizations will learn as much as possible from each dyad and then leverage what they have learned into other dyads. They termed this approach the “next frontier” for manufacturing planning and control systems.
SEE ALSO Competitive Advantage; Enterprise Resource Planning; Inventory Types; Lean Manufacturing and Just-in-Time Production; Quality and Total Quality Management
Krishnamurthy, Ananth, Rajan Suri, and Mary Vernon. “Re-Examining the Performance of MRP and Kanban Material Control Strategies for Multi-Product Flexible Manufacturing Systems.” International Journal of Flexible Manufacturing Systems 16, no. 2 (2004): 123.
Orlicky, Joseph. Material Requirements Planning. New York, NY: McGraw-Hill, 1975.
Robinson, Phil. “ERP (Enterprise Resource Planning) Survival Guide.” The Business Improvement Consultancy, 2007. Available from: http://www.bpic.co.uk/erp.htm.
Stevenson, William J. Production Operations Management. Boston, MA: Irwin/McGraw-Hill, 2004.
Vollmann, Thomas E., William L. Berry, D. Clay Whybark, andF. Robert Jacobs. Manufacturing Planning and Control for Supply Chain Management. Boston, MA: McGraw-Hill, 2005.
Wight, Oliver. Manufacturing Resource Planning: MRP II. Essex Junction, VT: Oliver Wight Ltd., 1984.
Zhou, Li, and Robert W. Grubbstrom. “Analysis of the Effect of Commonality in Multi-Level Inventory Systems Applying MRP Theory.” International Journal of Production Economics 90, no. 2 (2004): 251.
"Manufacturing Resources Planning." Encyclopedia of Management. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/manufacturing-resources-planning
"Manufacturing Resources Planning." Encyclopedia of Management. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/manufacturing-resources-planning
One can trace the origins of modern manufacturing management to the advent of agricultural production, which meant that humans did not constantly have to wander to find new sources of food. Since that time, people have been developing better techniques for producing goods to meet human needs and wants. Since they had additional time available because of more efficient food sources, people began to develop techniques to produce items for use and trade. They also began to specialize based on their skills and resources. With the first era of water-based exploration, trade, and conflict, new ideas regarding product development eventually emerged, over the course of the centuries, leading to the beginning of the Industrial Revolution in the mid-eighteenth century. The early twentieth century, however, is generally considered to mark the true beginning of a disciplined effort to study
and improve manufacturing and operations management practices. Thus, what we know as modern manufacturing began in the final decades of the twentieth century.
The late 1970s and early 1980s saw the development of the manufacturing strategy paradigm by researchers at the Harvard Business School. This work focused on how manufacturing executives could use their factories' capabilities as strategic competitive weapons, specifically identifying how what we call the five P's of manufacturing management (people, plants, parts, processes, and planning) can be analyzed as strategic and tactical decision variables. Central to this notion is the focus on factory and manufacturing trade-offs. Because a factory cannot excel on all performance measures, its management must devise a focused strategy, creating a focused factory that does a limited set of tasks extremely well. Thus the need arose for making trade-offs among such performance measures as low cost, high quality, and high flexibility in designing and managing factories.
The 1980s saw a revolution in management philosophy and the technologies used in manufacturing. Just-in-time (JIT) production was the primary breakthrough in manufacturing philosophy. Pioneered by the Japanese, JIT is an integrated set of activities designed to achieve high-volume production using minimal inventories of parts that arrive at the workstation "just in time." This philosophy—coupled with total quality control (TQC), which aggressively seeks to eliminate causes of production defects—is now a cornerstone in many manufacturers' practices.
As profound as JIT's impact has been, factory automation in its various forms promises to have an even greater impact on operations management in coming decades. Such terms as computer-integrated manufacturing (CIM), flexible manufacturing systems (FMS), and factory of the future (FOF) are part of the vocabulary of manufacturing leaders.
Another major development of the 1970s and 1980s was the broad application of computers to operations problems. For manufacturers, the big breakthrough was the application of materials requirements planning (MRP) to production control. This approach brings together, in a computer program, all the parts that go into complicated products. This computer program then enables production planners to quickly adjust production schedules and inventory purchases to meet changing demands during the manufacturing process. Clearly, the massive data manipulation required for changing the schedules of products with thousands of parts would be impossible without such programs and the computer capacity to run them. The promotion of this approach by the American Production and Inventory Control Society (APICS) has been termed the MRP Crusade.
The hallmark development in the field of manufacturing management, as well as in management practice in general, is total quality management (TQM). Although practiced by many companies in the 1980s, TQM became truly pervasive in the 1990s. All manufacturing executives are aware of the quality message put forth by the so-called quality gurus—W. Edwards Deming, Joseph M. Juran, and Philip Crosby. Helping the quality movement along was the creation of the Baldrige National Quality Award in 1986 under the direction of the American Society of Quality Control and the National Institute of Standards and Technology. The Baldrige Award recognizes up to five companies a year for outstanding quality management systems.
The ISO 9000 certification standards, issued by the International Organization for Standardization, now play a major role in setting quality standards, particularly for global manufacturers. Many European companies require that their vendors meet these standards as a condition for obtaining contracts.
The need to become or remain competitive in the global economic recession of the early 1990s pushed companies to seek major innovations in the processes used to run their operations. One major type of business process reengineering (BPR) is conveyed in the title of Michael Hammer's influential article "Reengineering Work: Don't Automate, Obliterate." The approach seeks to make revolutionary, as opposed to evolutionary, changes. It does this by taking a fresh look at what the organization is trying to do, and then eliminating non-value-added steps and computerizing the remaining ones to achieve the desired out-come.
The idea is to apply a total system approach to managing the flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer. Recent trends, such as outsourcing and mass customization, are forcing companies to find flexible ways to meet customer demand. The focus is on optimizing those core activities in order to maximize the speed of response to changes in customer expectations.
Based on the work of several researchers, a few basic operations priorities have been identified. These priorities include cost, product quality and reliability, delivery speed, delivery reliability, ability to cope with changes in demand, flexibility, and speed of new product introduction. In every industry, there is usually a segment of the market that buys products—typically products that are commodity-like in nature like sugar, iron ore, or coal—strictly on the basis of low cost. Because this segment of the market is frequently very large, many companies are lured by the potential for significant profits, which they associate with the large unit volumes of the product. As a
consequence, competition in this segment is fierce—and so is the failure rate.
Quality can be divided into two categories: product quality and process quality. The level of a product's quality will vary with the market segment to which it is aimed because the goal in establishing the proper level of product quality is to meet the requirements of the customer. Overdesigned products with too high a level of quality will be viewed as prohibitively expensive. Underdesigned products, on the other hand, will result in losing customers to products that cost a little more but are perceived as offering greater benefits.
Process quality is critical since it relates directly to the reliability of the product. Regardless of the product, customers want products without defects. Thus, the goal of process quality is to produce error-free products. Adherence to product specifications is essential to ensure the reliability of the product as defined by its intended use.
A company's ability to deliver more quickly than its competitors may be critical. Take, for example, a company that offers a repair service for computer-networking equipment. A company that can offer on-site repair within one or two hours has a significant advantage over a competing firm that only guarantees service only within twenty-four hours.
Delivery reliability relates to a firm's ability to supply the product or service on or before a promised delivery due date. The focus during the 1980s and 1990s on reducing inventory stocks in order to reduce cost has made delivery reliability an increasingly important criterion in evaluating alternative vendors.
A company's ability to respond to increases and decreases in demand is another important factor in its ability to compete. It is well known that a company with increasing demand can do little wrong. When demand is strong and increasing, costs are continuously reduced because of economies of scale, and investments in new technologies can be easily justified. Scaling back when demand decreases may require many difficult decisions regarding laying off employees and related reductions in assets. The ability to deal effectively with dynamic market demand over the long term is an essential element of manufacturing strategy.
Flexibility, from a strategic perspective, refers to a company's ability to offer a wide variety of products to its customers. In the 1990s companies began to adjust their processes and outputs to dynamic and sometimes volatile customer needs. An important component of flexibility is the ability to develop different products and deliver them to market. As new technologies and processes become widespread, a company must be able to respond to market demands more and more quickly if it is to continue to be successful.
Manufacturing strategy must be linked vertically to the customer and horizontally to other parts of the enterprise. Underlying this framework is senior management's strategic vision of the firm. This vision identifies, in general terms, the target market, the firm's product line, and its core enterprise and operations capabilities. The choice of a target market can be difficult, but it must be made. Indeed, it may lead to turning away business—ruling out a customer segment that would simply be unprofitable or too hard to serve given the firm's capabilities. Core capabilities are those skills that differentiate the manufacturing from its competitors.
In general, customers' new-product or current-product requirements set the performance priorities that then become the required priorities for operations. Manufacturing organizations have a linkage of priorities because they cannot satisfy customer needs without the involvement of R&D and distribution and without the direct or indirect support of financial management, human resource management, and information management. Given its performance requirements, a manufacturing division uses its capabilities to achieve these priority goals in order to complete sales. These capabilities include technology, systems, and people. CIM, JIT, and TQM represent fundamental concepts and tools used in each of the three areas.
Suppliers do not become suppliers unless their capabilities in the management of technology, systems, and people reach acceptable levels. In addition, most manufacturing capabilities are now subjected to the "make-or-buy" decision. It is current practice among world-class manufacturers to subject each part of a manufacturing operation to the question: If we are not among the best in the world at, say, metal forming, should we be doing this at all, or should we subcontract to someone who is the best?
The main objectives of manufacturing strategy development are (1) to translate required priorities into specific performance requirements for operations and (2) to make the necessary plans to assure that manufacturing capabilities are sufficient to accomplish them. Developing priorities involves the following steps:
- Segment the market according to the product group.
- Identify the product requirements, demand patterns, and profit margins of each group.
- Determine the order winners and order qualifiers for each group.
- Convert order winners into specific performance requirements.
It has been said that America's resurgence in manufacturing is not the result of U.S. firms being better innovators than most foreign competitors. This has been true for a long time. Rather, it is because U.S. firms are proving to be very effective copiers, having spent a decade examining the advantages of foreign rivals in product development, production operations, supply chain management, and corporate governance then putting in place functional equivalents that incrementally improve on their best techniques. Four main adaptations on the part of U.S. firms underscore this success:
- New approaches to product-development team structure and management have resulted in getting products to market faster, with better designs and manufacturability.
- Companies have improved their manufacturing facilities through dramatic reductions of work-in-process, space, tool costs, and human effort, while simultaneously improving quality and flexibility.
- New methods of customer-supplier cooperation, which borrow from the Japanese keiretsu (large holding companies) practices of close linkages but maintain the independence of the organizations desired by U.S. companies, have been put in place.
- Better leadership—through strong, independent boards of directors who will dismiss managers who are not doing their jobs effectively—now exists.
In sum, the last few decades of the twentieth century witnessed tremendous change and advancement in the means of producing goods and the manner of managing these operations that have led to higher levels of quality and quantity as well as greater efficiency in the use of resources. In the new millennium, because of global competition and the expansive use of new technologies, including the Internet, a successful firm will be one that is competitive with new products and services that are creatively marketed and effectively financed. Yet what is becoming increasingly critical is the ability to develop manufacturing practices that provide unique benefits to the products. The organization that can develop superior products, sell them at lower prices, and deliver them to their customers in a timely manner stands to become a formidable presence in the marketplace.
see also Factors of Production
"Manufacturing." Encyclopedia of Business and Finance, 2nd ed.. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/finance/finance-and-accounting-magazines/manufacturing
"Manufacturing." Encyclopedia of Business and Finance, 2nd ed.. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/finance/finance-and-accounting-magazines/manufacturing
Goods made from raw materials, originally by hand; also those made by machinery.
In antiquity and into the Byzantine Empire, the Middle East was the center of Western civilization and the region from which a wide variety of goods were first made and traded. The settled farming society allowed time for handicrafts, between crop work, and for market days and market towns. Regional trade became established by land caravan, by riverboats, and by coastal vessels that sailed the Mediterranean, the east coast of Africa, and beyond Arabia, into the Indian Ocean.
The ancient Near East was the seat of civilizations that traded with one another—luxury goods for the urban elite and utilitarian items for both urban dwellers and for rural agricultural, herding, and artisan folk. Specialty products included textiles, metals, glassware, pottery, chemicals, and, later, sugar and paper. By the fourteenth and fifteenth centuries, however, Europe had progressed to the point that it was exporting to the Middle East not only high technology goods, such as clocks and spectacles, but refined types of textiles, glassware, and metals. During the following centuries the flow from Europe to the Middle East increased; by the nineteenth century, Europe overwhelmed the region with goods produced cheaply and abundantly by the machinery of the Industrial Revolution, including the railroads and steamships that transported them. The Anglo–Ottoman treaty of 1838 (called the Convention of Balta Liman) fixed import duties to the Ottoman Empire at a low 8 percent. These factors drove thousands of Middle Eastern craftsmen and artisans out of business, but some managed to retain their shops and others found employment in the new textile factories of the late nineteenth century.
World War I exposed the region's lack of industry and, with the achievement of total or partial independence, the various governments began to take measures to encourage development. Around 1930, the Commercial and Navigation Treaties regulating tariffs lapsed, and most countries regained full fiscal autonomy. They immediately raised tariffs to favor local industry. They also promoted manufacturing in various other ways, such as encouraging people to buy national goods and giving such goods preference for government purchases. Moreover, they set up special banking, such as the Sümer and Eti banks in Turkey and the Agricultural and Industrial banks of Iran and Iraq, to promote manufacturing and mining; they also channeled credit through existing banks, such as Bank Misr in Egypt. Local entrepreneurs also became more active in the economic field, including manufacturing. In Egypt, the Misr and Abboud groups set up various industries, and in Turkey, the Iş Bank promoted development. In Palestine, where some European and Russian
Jewish immigrants brought with them both capital and skills, some set up factories or workshops in a wide variety of fields.
It is difficult to estimate the rate of industrial growth: In Turkey, between 1929 and 1938, net manufacturing production increased at 7.5 percent a year and mining advanced at about the same pace. In Egypt, the rate of growth was slightly lower and in the Jewish sector of Palestine distinctly higher. In Iran, between 1926 and 1940, some 150 factories were established with a paid-up capital of about US$150 million and employing 35,000 persons. Nevertheless, industry still played a minor role in the basically agricultural Middle Eastern economy. By 1939, employment in manufacturing and mining was everywhere less than 10 percent of the labor force, and in most of the countries it was closer to 5 percent. Industry's contribution to gross domestic product (GDP) was put at 8 percent in Egypt, 12 in Turkey, and 20 in the Jewish sector of Palestine; in the other countries it was lower. Industry still depended on imports of machinery, spare parts, raw materials, and technicians—and there were no exports of manufactured goods. A wide range of light industries, including textiles, food processing, building materials, and simple chemicals, had developed in Egypt, Turkey, Iran, Palestine, and, to a smaller extent, in Lebanon, Syria, and Iraq. In addition, Turkey had the beginnings of heavy industry—iron, steel, and coal. Petroleum production and refining had become important to Iran, Bahrain, and Iraq. Several countries were meeting most of their requirements of such basic consumer goods as textiles, refined sugar, shoes, matches, and cement.
World War II gave great stimulus to Middle Eastern industry. Imports were drastically reduced and Allied troops provided a huge market for many goods. The Anglo–American Middle East Supply Center helped by providing parts, materials, and technical assistance. By 1945, total output had increased by some 50 percent. With the resumption of trade, from 1946 to 1950, many firms were hit by foreign competition, but the governments gave them tariff and other protection, so output continued to grow at about 10 percent per annum from 1946 to 1953. This rate was maintained, and in some countries (like Iran) exceeded through the 1970s, but in the 1980s it fell off sharply because of such factors as the Iran–Iraq War, the Sudanese and Lebanese civil wars, and the 1980s fall in oil prices.
Table 1 shows a breakdown of the structure of Middle Eastern industry. The main industries are still textiles (including garments); food processing (sugar refining, dough products, confectionery, soft drinks, beer); tobacco; building materials (cement, bricks, glass, sanitary ware); and assembly plants for automobiles, refrigerators, radio and television sets, and so forth, with some of the components produced locally. Important new industries have also developed—notably chemicals—including basic products, fertilizers, and various kinds of plastics; basic metals and metal products; and many types of machinery. A particularly rapidly growing branch is petrochemicals, using gases produced in the oil fields or in refineries. Only in petrochemicals, textiles, and food processing does the region's share approach or exceed 5 percent of world output. Similarly, only in phosphates and chromium is the region's share of mineral production significant.
Israel, however, has a large diamond-cutting industry and is a significant exporter of precision instruments. It is also a large exporter of arms, as is Egypt; in the late 1980s each country exported more than US$1 billion worth of weapons; they ranked third and fourth, respectively, among exporters from developing countries, and twelfth and fifteenth, among world exporters of arms. The Arab boycott has, of course, restricted some of Israel's economic pursuits within the region as well as with some international trade.
Today, manufacturing plays an important part in the Middle East's economy, accounting in many countries for 15 to 20 percent of GDP. Industry,
|SOURCE: world bank. world development report, 1990, table 6. world development report, 1986, table 7.|
|Table by GGS Information Services, The Gale Group.|
|Value Added (millions of U.S. dollars)|
|United Arab Emirates||—||—||2,155|
|Distribution of Value Added (percent)|
|Food Beverages Tobacco||Textiles Clothing||Machinery & Transport Equipment|
|United Arab Emirates||14||1||—|
|Distribution of Value Added (percent)|
|United Arab Emirates||—||84|
in the broader sense, which includes mining (and therefore oil), construction, electricity, water, and gas as well as manufacturing, generally constitutes over 30 percent of GDP. In the major oil nations it is 60 percent or more, usually employing 20 to 30 percent of the labor force (including immigrant labor).
Factors for Low Productivity
With rare exceptions, industries still export very little and survive through government protection. Productivity is low; for example, gross annual value added in 1974 was only worth US$4,000 to US$5,000 in most countries (compared to $20,000 in West Germany). This is particularly marked in the more capital-intensive industries, such as steel, automobiles, and aircraft. In the late 1970s, in the Turkish state-owned steel mill in Iskenderun, a ton of steel took 72 worker-hours, compared with 5 in the United States and 7 in Europe; in Egypt, annual output per worker in the automobile industry was one car, compared with 30 to 50 in leading Japanese firms. In the more labor intensive industries, such as textiles, however, physical output per worker is about 30 to 50 percent of European output. Here, very low wages offset low productivity and enable the Middle East to compete. In 1980, hourly wages in the textile industry were equal to US$1 in Syria and Turkey and 40 cents in Egypt, compared to US$8.25 in Western Europe.
Low productivity in the Middle East is caused by many factors. First, capital investment per employee is low, although governments have poured large amounts into industry; in the late 1970s the share of manufacturing, mining (including oil), and energy was over 40 percent of total investment in Egypt, Iraq, and Syria, and 30 percent in Iran. In the Gulf region's petrochemical industry, however, capital intensity is high and up-to-date machinery is used. Second, industry is greatly overstaffed; many governments compel firms to take on more workers—to relieve unemployment or for other political purposes. Third, the poor health, education, and housing of workers adversely affect their productivity—but conditions are improving. Fourth, there has been much bad planning, with factories being located far from suitable raw materials or good transport.
General conditions are also unfavorable for industrial development. The region is, on the whole, poor in raw materials. Wood and water have become very scarce. Minerals are generally sparse, remote, and often low grade. Most agricultural raw materials are of poor quality, lacking the uniformity required for industrial processes. The protection given to manufacturers of producers' goods (e.g., metals, chemicals, sugar) creates a handicap for industries that use their products. The main exceptions are natural and refinery gas, which are available almost free of cost, and raw cotton, which is of fine quality. The small size of the local market makes it impossible to set up factories of optimum size and the general underdevelopment of industries prevents profitable linkages among industries; both factors raise unit costs. Although the infrastructure has greatly improved, it still does not serve manufacturing adequately; for example, the frequency of power failures led many firms to install their own generators and transport costs remain high. A dependence on imported machinery, spare parts, and raw materials, although declining, is still great—hence, when a shortage of foreign exchange curtails imports, factories work below capacity, further raising unit costs.
Middle East industry also suffers from a lack of competition. Because of the small size of the local market and the high degree of protection, firms often enjoy a quasi monopoly—and behave accordingly. Finally, a great shortage of industrial skills exists at both the supervisory and foreperson levels. Even more serious is the shortage of managers; this is compounded where the government has nationalized the bulk of industry—as in Egypt, Iran, Iraq, Sudan, and Syria. Here market discipline has been replaced by bureaucratic control, so efficiency has been sharply reduced.
On the whole, then, manufacturing does not make the contribution to the Middle East's economy commensurate with either the efforts or the capital invested in it. Conditions may be expected to improve, however, as the society and the economy continue to develop and as some measure of peace takes hold.
see also arab boycott; balta liman, convention of (1838); commercial and navigation treaties; trade.
Aliboni, Robert, ed. Arab Industrialization and Economic Integration. London: St. Martin's, 1979.
Economist Intelligence Unit. Industrialization in the Arab World. London, 1986.
Hershlag, Z. Y. Contemporary Turkish Economy. London and New York: Routledge, 1988.
Issawi, Charles. An Economic History of the Middle East and North Africa. New York: Columbia University Press, 1982.
Turner, Louis, and Bedore, James. Middle East Industrialization. Fainborough, U.K., 1979.
United Nations. The Development of Manufacturing in Egypt, Israel, and Turkey. New York, 1958.
"Manufactures." Encyclopedia of the Modern Middle East and North Africa. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/humanities/encyclopedias-almanacs-transcripts-and-maps/manufactures
"Manufactures." Encyclopedia of the Modern Middle East and North Africa. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/humanities/encyclopedias-almanacs-transcripts-and-maps/manufactures
Manufacturing and Processing
Manufacturing and Processing
Restrictions on Manufacturing. The vast majority of colonists worked in the agricultural sector as farmers and planters, yet they were familiar with a wide array of manufactured goods. The colonists themselves had no large factories for manufacturing many of the products they used every day. British regulations forbade most manufactures in the colonies because the authorities wanted to prevent any competition with English industries. But there were other obstacles too, and in the end these probably were more significant. For one, manufacturing required a large labor force. Compared to agriculture, it also demanded a large amount of capital. Both of these factors of production, as economists call them, were relatively scarce and expensive in the colonies. Besides, the colonists could not protect their domestic industries by imposing tariffs on British goods, so the colonial-made products would have had to compete with affordable, well-made, and high-quality ones from Britain. Not surprisingly, most colonists concluded that it was not worth the effort to manufacture such goods on a large scale.
Successes. Even so, there were some significant exceptions. Imperial authorities encouraged the colonists to produce iron although they were only allowed to produce the raw iron, not the finished goods. In 1645 John Winthrop Jr., the son of the governor of Massachusetts Bay, established the first iron furnace in Saugus, Massachusetts. His venture did not last, but many later ones did. By 1775 at least 82 furnaces and 175 forges operated in the colonies, mainly in Pennsylvania, Maryland, and New Jersey. The colonial iron industry was larger than that of England and Wales, and it accounted for a full 15 percent of the total world output. Shipbuilding was another manufacturing success story. The vast supply of timber available in the colonies made shipbuilding there relatively cheaper than in Europe. In the 1770s nearly half of the ships built in the colonies were sold to overseas buyers, sometimes as part of the cargo. Up to 10 percent of workers in Boston and Philadelphia were involved directly in shipbuilding. Colonial merchants also had some success in manufacturing consumer products. Among the most prominent were the four Brown brothers of Providence, Rhode Island. In the early 1760s the Browns produced high-quality spermaceti candles made from the oil of the sperm whale. The Browns packaged these candles in a distinctive box with their company’s logo, one of the earliest examples of a recognizable brand in American history. Colonial manufacturers succeeded in establishing cottage industries—wherein goods are produced in households rather than factories—for earthenware, nails, footwear, and textiles. Women made a large proportion of the textile products, including table linens, blankets, undershirts, shawls, and hosiery. Their contribution was significant: even in the early nineteenth century, the total value of homemade cloth was ten times that of cloth manufactured outside the home.
Artisans. Most colonial manufacturing was not done in factories. Instead it was done primarily in small work-shops or households by artisans, farmers, women, children, and slaves. The term artisan encompassed many occupations, including coopers, tailors, cordwainers (shoemakers), weavers, and silversmiths. Men who made their living primarily by doing artisinal work headed from 7 to 10 percent of all colonial households; most lived in villages and towns. They were self-employed, owned their own tools, did their own accounts, and worked at home or in small workshops attached to their homes. All of these shops produced goods in small quantities or made them to order for a few customers. Wives, children, and a few apprentices contributed to the artisan’s work, and sometimes two or more artisans pooled their resources to form a joint workshop. Although few artisans became wealthy, most owned enough property to qualify as voters. Because of their numbers and their ability to influence the outcome of elections, colonial artisans played a larger social and political role than did their European counterparts. Disruptions in local politics during the Revolution gave artisans even greater opportunity to participate in the political process. They formed mechanics committees to discuss and act upon issues that were important to them. In Boston, New York, and Philadelphia artisans organized or joined with other patriots to force reluctant merchants to abide by nonimportation agreements.
COLONIAL MANUFACTURED AND PROCESSED GOODS
Although the colonies depended on the mother country for many of their manufactured products, they engaged in a substantial amount of manufacturing and processing activities themselves. By the 1760s the colonial economy had become large and diversified.
Food and related products:
Fermented and distilled beverages
Other food products
Textiles and textile products:
Other textile goods
Casks and other wooden containers
Masts, spars, and other ship timbers
Pitch, tar, and turpentine
Other forest products
Paper and printed materials:
Newspaper and other periodicals
Other paper products
Chemicals and allied substances:
Other chemical products
Stone, clay, and glass products:
Other stone, clay, and glass products
Iron and steel products
Other metal products
Equipment and apparatus:
Machinery, agricultural and nonagricultural
Source: John J. McCusker and Russell R. Menard, The Economy of British America, 1607-1789 (Chapel Hill: University of North Carolina Press, 1985), pp. 328-329.
Processing. Mills, distilleries, and refineries used some of the colonies’ most advanced technologies to transform raw and semifinished products. Sawmills—the largest of them located in Pennsylvania, Delaware, and New Jersey—cut lumber into boards. Mills processed iron into the pigs and bars that were turned into finished goods by some colonial artisans but mostly shipped to Britain. Tanneries, as well as papermaking and textile establishments, also used mills extensively. Sometimes mills were clustered near sources of water power. Wilmington, Delaware, emerged as a milling center that by the 1790s processed large volumes of cloth, lumber, paper, snuff, cotton, and iron. Distilling and refining also were important processing activities. From the mid seventeenth century the colonists had distilled molasses imported from the West Indies into rum. Domestic rum was a cheaper alternative to imported rum and brandy, and colonial demand for it remained high over the next century and a half. In 1770 about 140 rum distilleries, most of them run by merchants in the northern port towns, were in operation. Colonial distilleries produced nearly five million gallons of rum that year, or about 60 percent of the 8.5 million that the mainland colonies consumed annually. The colonists also processed large amounts of another West Indian product: muscovado sugar, which they refined into the more costly white sugar that colonial consumers had come to prefer. The colonists used the sugar to sweeten their imported tea, coffee, and chocolate drinks. Some twenty-six sugar refineries were in operation in 1770, and they met about 75 percent of the rising domestic demand. Like the distilleries, most sugar refineries were run by Northern merchants as adjuncts to their West Indian importing business.
Self-Sufficiency. Beginning in the 1760s the colonists tried to decrease their dependence on Great Britain by becoming more self-sufficient in manufacturing. They formed various organizations for this purpose. After the Sugar Act was passed in 1764 New York established the Society for the Promotion of Arts, Agriculture, and Economy. The colonists’ resolve intensified when Parliament imposed the Townshend duties in 1767. Colonial governments and eventually the Continental Congress began offering inducements to support native industry. These included bounties, loans, guaranteed markets at set prices, monopoly privileges, tax exemptions, and land grants. The Americans succeeded best in producing cloth, especially linens and woolens, made mostly by women working at home. In 1775 the United Company of Philadelphia for Promoting American Manufactures was formed to encourage textile production. Philadelphians established a manufactory that became among America’s largest enterprises, eventually employing hundreds, perhaps even thousands, of women. The home manufacture of cloth became a celebrated activity during the early years of the Revolution, and spinning schools were established in cities and villages. In 1769 the women of Middletown, Massachusetts, wove 20,522 yards of cloth. Women in Lancaster, Pennsylvania, produced 35,000 yards. Spinning bees became popular, and entire communities sometimes turned out for these events. Ezra Stiles estimated that the spinning bee held at his house in 1769 drew some six hundred spectators. Newspapers cheered on these patriotic women by referring to them as the “Daughters of Liberty” and reporting on their achievements. At times the newspapers used harsher tactics to encourage production. One newspaper in 1774 lectured women to “cease trifling their time away [and] prudently employ it in learning the use of the spinning wheel.” In the end the value of the formal spinning groups and spinning bees was more symbolic than real. Most did not even meet regularly. But they focused public attention on the importance of supporting native industry and allowed many women to make a political statement in support of the Revolution.
War Industries. The colonists tried to manufacture items other than cloth, but many of these could be produced only in households using inefficient tools and methods. Nevertheless several industries succeeded in becoming more permanently productive and efficient, especially when the colonies declared their independence and broke away from imperial restrictions. The war stimulated the domestic manufacturing sector as the demand for war matériel and other products that the colonists could no longer get directly from Britain increased. Armies on both sides bought locally produced items such as shoes—which became a major enterprise in Massachusetts and New Jersey—tents, clothing, and other military supplies. Great Britain prohibited the exportation of gunpowder, firearms, and other military stores, so the Americans had to produce these items locally. Maryland, located far from most of the fighting, became a center for gun making; Connecticut farmers produced saltpeter for gunpowder. In 1777 Congress established an armory in Springfield, Massachusetts. War supplies had to be transported, and this led to some permanent enhancements of the road network. The military demand for munitions stimulated the development of the iron and steel industries, and Americans erected new forges, mills, foundries, and shops. From 1775 to 1783 Pennsylvania alone built at least eleven new forges and furnaces. Along with the improvements in inland transportation the invigorated manufacturing sector allowed Pennsylvanians to enlarge their markets in the South. The war also proved a boon for paper mills because the number of newspapers rose from only thirty-seven in 1776 to more than a hundred by 1789.
Victor S. Clark, History of Manufactures in the United States, 3 volumes (Washington, D.C.: Carnegie Institution of Washington, 1929);
John J. McCusker and Russell R. Menard, The Economy of British America, 1607-1789 (Chapel Hill: University of North Carolina Press, 1985);
Edwin J. Perkins, The Economy of Colonial America (New York: Columbia University Press, 1980).
"Manufacturing and Processing." American Eras. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/history/news-wires-white-papers-and-books/manufacturing-and-processing
"Manufacturing and Processing." American Eras. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/news-wires-white-papers-and-books/manufacturing-and-processing
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ARMSTRONG WORLD INDUSTRIES, INC.
ATLAS COPCO AB
BAKER HUGHES INCORPORATED
BALLY MANUFACTURING CORPORATION
THE BLACK & DECKER CORPORATION
CASIO COMPUTER CO., LTD.
CITIZEN WATCH CO., LTD.
DAIKIN INDUSTRIES, LTD.
DEERE & COMPANY
DEUTSCHE BABCOCK AG
DRESSER INDUSTRIES, INC.
EASTMAN KODAK COMPANY
FLEETWOOD ENTERPRISES, INC.
FUJI PHOTO FILM CO., LTD.
THE FURUKAWA ELECTRIC CO., LTD.
HAWKER SIDDELEY GROUP PUBLIC LIMITED COMPANY
THE HENLEY GROUP, INC.
HITACHI ZOSEN CORPORATION
ILLINOIS TOOL WORKS INC.
ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES CO., LTD.
JOHNSON CONTROLS, INC.
KAWASAKI HEAVY INDUSTRIES, LTD.
LUCAS INDUSTRIES PLC
MCDERMOTT INTERNATIONAL, INC.
MINOLTA CAMERA CO., LTD
MITSUBISHI HEAVY INDUSTRIES, LTD.
NHK SPRING CO., LTD.
NINTENDO CO., LTD.
NIPPON SEIKO K.K.
NIPPONDENSO CO., LTD.
OUTBOARD MARINE CORPORATION
PARKER HANNIFIN CORPORATION
PIONEER ELECTRONIC CORPORATION
PREMARK INTERNTIONAL, INC.
THE STANLEY WORKS
SULZER BROTHERS LIMITED (GEBRÜDER SULZER AKTIENGESELLSCHAFT)
SUMITOMO HEAVY INDUSTRIES, LTD.
TOYODA AUTOMATIC LOOM WORKS, LTD.
TYCO LABORATORIES, INC.
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"Manufacturing." International Directory of Company Histories. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/manufacturing
"Manufacturing." International Directory of Company Histories. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/manufacturing
Items of trade that have been transformed from raw materials, either by labor, art, skill, or machine into finished articles that have new forms, qualities, or properties.
For example, a blouse that is made of raw silk would be considered a manufacture, whereas fresh vegetables sold on a farm would not.
Whether particular products are within the definition of manufactures becomes significant with respect to taxes and other regulations imposed upon manufacturers.
"Manufactures." West's Encyclopedia of American Law. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/manufactures
"Manufactures." West's Encyclopedia of American Law. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/manufactures
"manufacturing." A Dictionary of Sociology. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/social-sciences/dictionaries-thesauruses-pictures-and-press-releases/manufacturing
"manufacturing." A Dictionary of Sociology. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/social-sciences/dictionaries-thesauruses-pictures-and-press-releases/manufacturing