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Economic Perspectives, Vol. 17, 2nd, No. 3, May 1993
How lean manufacturing changes the way we understand the manufacturing sector

Manufacturing is currently undergoing a transition from a mass production system to a lean production system which emphasizes quality and speedy response to market conditions using technologically advanced equipment and a flexible organization of the production process. This new manufacturing system has achieved remarkable productivity advances. The success or failure of the Midwest's manufacturing sector in climbing on board this revolution will be central to the region's future prosperity due to the historic role of manufacturing in shaping the region's economy. Successful adaptation to lean manufacturing is likely to require significant changes in both the management of factories and the structure of the economy, such as changes in worker training, job performance, public infrastructure, and perhaps the location of factories and jobs.


These changes are the focus of this article. First, I briefly summarize the main features of lean manufacturing. The next section concentrates on the effects of the introduction of lean manufacturing. I will discuss several aspects of the new manufacturing system: managementlabor relationships, worker training, location decisions, and product development. Finally, I discuss policy implications of the change in manufacturing systems. To illustrate, examples from the auto industry will be used throughout the article because it has greatly influenced the way many other businesses organize their factories. However, it is important to note that specific applications of lean manufacturing vary according to industry and firm. Thus, the picture described in this article is necessarily a general one.

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