Between 1977 and 1982, the Great Lakes region lost 15 percent of its manufacturing jobs. During the 1982 recession, 11 of the region's 17 major industrial sectors performed below their U.S. and Canadian counterparts. Unemployment in the Great Lakes was twice the national average. Most observers predicted that the region would experience a long and steady decline, lagging farther and farther behind a new biocoastal economy.

Their predictions proved false. Consider these recent statistics:

• Twelve of the region's 17 industries outperformed their U.S. and Canadian counterparts during the first two years of this decade.
• The Great Lakes states and Ontario currently account for 60 percent of all manufacturing output in North America, including 60 percent of the steel, 55 percent of the automobiles, and 50 percent of the machine tools produced on the continent.
• When compared to the world's leading industrialized nations, the Great Lakes region showed greater growth in productivity during the 1980s (36 percent) than every nation except Japan.
• The rate of growth in manufacturing exports from Great Lakes companies exceeds both U.S. and Canadian national averages. In 1991, the region shipped more than $160 billion in manufactured goods to more than 80 countries, including $9.4 billion to Japan and $5.6 billion to Germany. The Wall Street Journal has called the Great Lakes region the "world's greatest export platform."

These statistics suggest that the manufacturing base of the Great Lakes region has not merely survived hard times, but has undergone a fundamental change -- a dramatic reindustrialization -- reaffirming its traditional role as the center of the North American economy.

High-Performance Manufacturing:

Regional Strategy for Reindustrialization

The revolutionary production strategy driving reindustrialization in the Great Lakes region is called high-performance manufacturing. It is defined by the development and application of information, technology, and supplier relationships, emphasizing quality, efficiency, and innovation in response to changing market needs.

High-performance manufacturing differs greatly from the mass production strategies that dominated the regional economy after World War II. Mass production is primarily technology based, creating competitive advantage through standardized, volume production. In contrast, high-performance manufacturing fosters competitive advantage through flexible production, low cost, and high quality.

Reinventing the Heartland, a 1993 study by Carnegie Mellon University, looked at high-performance manufacturing in the Great Lakes region. The study team identified dozens of firms region-wide that exhibited high-performance characteristics, and conducted in-depth surveys of 12 representative firms. Most of these were registered ISO 9000 firms, meaning they met quality process and product standards for export to Europe. Many were winners of the Baldridge Award, which recognizes "best-in-class" business practices. The Carnegie Mellon study suggested that these high-performance firms were changing the economic landscape of the region in at least three important ways:

• They create hubs of production, connected to dense supplier networks throughout the region.
• They rely on information-based manufacturing processes.
• They succeed at doing more -- in terms of productive output -- with less resource input and waste.

High-Performance Production Hubs

During the boom times of mass production, the Great Lakes region was characterized by massive factories, such as the Rouge River auto plant in Michigan and the huge steel facilities of Hamilton, Ontario, southeast Chicago and Lackawana, New York. The giant Mesabi Tool Plant outside of Pittsburgh was one of two sites Nikita Khrushchev insisted on seeing during his visit to the U.S. in 1959. Today, clusters of hub producers, connected to a dense supplier network throughout the region, are replacing massive factories as the dominant feature of the economic landscape. These hubs act as gateways to capital, new technologies, workforce training, and work organization practices.

The Diamond-Star auto plant in Bloomington, Illinois, exemplifies this new industrial geography. According to research at the Regional Economic Applications Laboratory at the University of Illinois, the state of Michigan has gained the greatest net increase in jobs from Diamond-Star, due to the plant's relationships with numerous Michigan-based suppliers. Thus, Diamond-Star is not a conventional, centralized mass production plant. Rather, it is the center of a network of firms, including tool and parts makers, engineers, electronic component manufacturers, and marketers, linked tightly in a region-wide research, design and production network.

Because their supplier networks intermesh, the region's high-performance hubs cannot strictly be defined by singular product outputs. Intensive linkages among the auto, steel and electronic

The high-performance revolution has essentially transformed the entire region into a factory without walls.

industries effectively bind the region's production clusters together The auto and steel belts that reach from Ontario down through Michigan, Indiana, and Illinois, and across to Ohio and Pennsylvania, are increasingly linked through joint production and supplier networks to the electronics concentration that stretches from Pittsburgh through Ohio to Indianapolis and up through Chicago to Minneapolis. Centers for advanced materials production in western New York, Pennsylvania, Ohio, Illinois and Wisconsin are linked inextricably to the auto and electronics clusters. Similarly, the continued expansion of the furniture cluster that rims Lake Michigan and is centered in Grand Rapids depends on close linkages and ventures with the advanced office technology cluster centered around Rochester and Pittsburgh. The high-performance revolution has essentially transformed the entire region into a factory without walls.

Information-Based Industrial Processes

I/N Tek, an Indiana-based joint venture between Inland Steel and Nippon Steel, provides an example of high-performance manufacturing. The company has transformed the process of cold-rolling steel into a continuous process that takes less than one hour from start to finish. This is a tremendous advance over the old way of producing cold-rolled steel in separate batches, which took as long as 12 working days to complete. The key to this transformation was unleashing the collective intelligence of the work force. The company mobilized factory workers, engineers, and R&D scientists to combine the various batch processes one at a time. Workers, engineers, and computer specialists then worked together to connect the entire cold-rolling process to another process, called electro-galvanizing, which coats steel for corrosion-resistant automobile body parts.

Rather than simply investing in more physical plant, the region's high-performance hub companies are investing in workplace restructuring, total quality management, and supplier modernization at levels that dwarf current or projected government outlays in these areas. High-performance companies have also pioneered new models for investing in education, training, and the broader infrastructure required to support a high-performance economy. To a significant degree, these hub companies also have affected modernization of the region's small- and medium-sized manufacturing base. Thus, high-performance companies have acted as a powerful force in transforming the overall economy of the region.

Increasing Resource Efficiency

The aims of high-performance manufacturing are inherently compatible with the increasingly efficient use of natural resources. Total quality management, an important tool for high-performance operations, stresses maximizing all manufacturing resources including labor, information, capital, and natural resources. A commitment to continuous improvement encourages efficiency innovations; statistical process control (SPC) and just-in-time inventory systems spot and eliminate waste. Moreover, sensitivity to customer needs and attitudes increasingly directs high-performance firms toward more environmentally desirable, sustainable production strategies.

A New Role for Government

The leadership shown by high-performance hub firms has begun transforming the region, but gradually, affecting supply and distribution firms within their immediate high-performance networks. The recovery is being fueled by "islands" of world class firms and their suppliers, who have internally adopted total quality management, designed new training and education programs, and in many cases also restricted relationships with government. However, too many communities, firms, and workers are still left out of the high-performance revolution, and the regional economy is still unable to reach its full economic potential. Some communities, firms, and workers still face the dislocation and downward economic performance of past decades.

A region-wide transformation to a high-performance economy requires a transformation of economic development policy, within as well as among the region's provincial and state governments. The Great Lakes states and Ontario have always been interdependent, but increasingly they are becoming interactive. The focus of development policies must shift from attracting and retaining specific plants to creating an infrastructure for region-wide high-performance production networks.

There is evidence that the strategy for creating this infrastructure must depart from the norm of creating specific government services for specific towns and industries. A more effective approach would identify strategies to transform the overall business climate, eliminating barriers and creating incentives for the adoption of high-performance practices. In short, high-performance firms must be encouraged to continue doing what they have been doing -- taking the initiative to identify programs and services that meet their needs. In order to succeed, these firms require communities primed and responsive to the dynamic nature of new and expanding high-performance production clusters.

The Nippondenso plant in Battle Creek, Michigan, provides an example of how the high-performance infrastructure is being built today. Battle Creek's existing manufacturing infrastructure, including the base of high skilled labor and transportation services, attracted the auto parts maker to the region. However, Nippondenso found that the local education system lacked the capacity to provide the lifelong learning and skills necessary for working in teams. Nippondenso essentially adopted the local community college, developing new curricula and training techniques. The firm also developed a partnership with the local school district.

Before economic renewal can reach all corners of the region, high-performance firms must be freed from such extensive responsibility for developing the basic, public resources they require. The challenge to government is to revise education, regulatory, and infrastructure policies and investments to mirror the dynamics of high-performance production. Restructuring the business climate enables firms that cannot establish their own workforce training programs or create private data networks and other services to adopt high-performance strategies.

Economic vitality for the Great Lakes region depends upon transforming a business climate that was crafted for the age of mass production into one that can support high-performance production, region-wide. Through the initiative of high-performance hub firms and local officials working on a case-by-case basis, the region has begun a dramatic reindustrialization. By all indications, reindustrialization and the new prosperity it brings should spread region-wide. But it cannot, so long as outdated business, financial, transportation, environmental, and education regulations, services, and policies create barriers to new high-performance development. Government in the Great Lakes region must face this new leadership challenge.