For U.S. manufacturers to compete with China and other low-cost labor centers, they must continue to increase productivity.

That was the consensus of an expert panel convened at Assembly East, which was held May 5 to 6 at the Hynes Convention Center in Boston. More than 4,000 manufacturing professionals attended the show, which was held in conjunction with three other trade shows: Nepcon East, Electro and Vision East.

"There's always room for improvement," says Steve Savage, vice president of operations at Affordable Interior Systems (Hudson, MA), and one of five manufacturing experts on the panel. "In China, manufacturers are getting the latest technology, so it's critical that we continue to innovate."

Besides Savage, the panelists were Donald E. Peterson, senior project manager at the New Hampshire Manufacturing Extension Partnership (Concorde, NH); Gerard W. Ward, president of CONNSTEP Inc. (Rocky Hill, CT); Jim McClellan, president of McClellan Automation Systems (Bedford, NH); and Brad Householder, a principal with Pittiglio Rabin Todd & McGrath (Waltham, MA).

During the past decade, U.S. manufacturers have achieved remarkable gains in productivity. In 2002, for example, the United States posted its highest annual growth rate in output per hour in 15 years. The panel cited numerous reasons for this success.

Savage attributes productivity growth to the increasing popularity of lean manufacturing. "I'm a big believer in lean manufacturing," he says. "I know people make a lot of the buzzwords, but it all boils down to being passionate about continuous improvement."

He should know. By adopting lean manufacturing, Affordable Interior Systems was able to increase productivity 88 percent. A manufacturer of office furniture, Affordable Interior Systems reduced lead time by 33 percent in just 2 years. More than 40,000 square feet of storage space was converted to production at two facilities, and the company reduced defects by 62 percent and scrap by 54 percent. Such successes helped the company earn a Shingo Prize for Manufacturing Excellence in 2003.

Technological improvements and automation have also contributed to productivity gains. "The recession of the 1990s forced us to implement technology," says Peterson. "The cost of information technology and communications has gone to zero. It used to take a day to get information about what you were making. Now, you can can get that information in 45 seconds or less."

However, the panel cautioned engineers that automating a process doesn't always mean that productivity improvements will follow. "It's very easy to automate a bad system," Ward points out.

"How many engineers have been victimized by CEOs who come back from trade shows with expensive new technology...that did not address the real bottleneck?" adds Peterson.

One way to avoid the problem of misapplied technology is to contact vendors early in the equipment acquisition process, says McClellan. "Most people get their vendors involved way too late," he says. "The vendor should be involved before you even write the specs."

Workers, too, have played an important role in boosting productivity. "Investment in training has gone up considerably over the past few years," says Householder. "Yes, it's costly. And, if you're growing, it's hard to pull people off the line. But, the investment is worth it."

Can productivity improve too much? Are manufacturers increasing productivity at the expense of employment? The panelists were split. "The recent gains in productivity represent the victory of capital over labor," says Ward. "It has to put downward pressure on labor costs. ...The question is: ‘How much are we willing to tolerate?' You wouldn't want a world where there's no protection for workers."

But, Peterson argues that increasing productivity does not necessarily lead to layoffs. "Toyota didn't get where it is today by getting rid of people," says Peterson. "Increasing productivity has enabled the company to add more features to vehicles at less cost. That makes Toyota vehicles more attractive to consumers, which means Toyota sells more cars and creates more jobs."

Next year, Assembly East, Nepcon East and Electro will be held May 4 and 5 at the new Boston Convention and Exhibition Center.