CHAPTER XVII Census of Manufactures Overview Introduction XVII-3 Glossary XVII-9 CENSUS OF MANUFACTURES--OVERVIEW Introduction CONTENTS Census of Manufactures XVII-3 Scope of Census and Definition of Manufacturing XVII-3 Relationship Between Annual Survey of Manufactures and Census of Manufactures XVII-4 Establishment Basis of Reporting XVII-4 Manufacturing Universe and Census Report Forms XVII-4 Auxiliaries XVII-5 Industry Classification of Establishments XVII-6 Value of Shipments for the Industry Compared with Value of Product Shipments XVII-7 Census Disclosure Rules XVII-7 Special Tabulations XVII-7 Abbreviations and Symbols XVII-7 Contacts for Data Users XVII-8 CENSUS OF MANUFACTURES The 1987 Census of Manufactures provides statistics for individual industries or groups of related industries. Reports are issued for each State and the District of Columbia and for special subjects such as type of organization, distribution of sales by class of customer, concentration ratios, and water use in manufacturing. The industry reports include such statistics as number of establishments, employment, payroll, value added by manufacture, cost of materials consumed, capital expenditures, product shipments, etc. State reports present similar statistics for each State and its important metropolitan statistical areas (MSA's), counties, and places. Selected statistical totals for "all manufacturing" have been shown in the State reports for MSA's with 250 employees or more and for counties and places with 450 employees or more. The General Summary report contains industry, product class, and geographic area statistics summarized in one report. The introduction to the General Summary discusses, at greater length, many of the subjects described in this introduction. For example, the General Summary text will discuss the relationship of value added by manufacture to National income by industry of origin, the changes in statistical concepts over the history of the censuses, and the valuation problems arising from intracompany transfers between manufacturing plants of a company and between manufacturing plants and sales offices and sales branches of a company. Scope of Census and Definition of Manufacturing The 1987 Census of Manufactures covers all establishments with one paid employee or more primarily engaged in manufacturing as defined in the 1987 Standard Industrial Classification (SIC) Manual(1). This is the system of industrial classification developed by experts on classification in Government and private industry under the guidance of the Office of Information and Regulatory Affairs, Office of Management and Budget. This classification system is used by Government agencies as well as many organizations outside the Government. The SIC Manual defines manufacturing as the mechanical or chemical transformation of substances or materials into new products. The assembly of component parts of products also is considered to be manufacturing if the resulting product is neither a structure nor other fixed improvement. These activities are usually carried on in plants, factories, or mills that characteristically use power-driven machines and materials-handling equipment. Manufacturing production is usually carried on for the wholesale market, for transfers to other plants of the same company, or to the order of industrial users rather than for direct sale to the household consumer. Some manufacturers in a few industries sell chiefly at retail to household consumers through the mail, through house-to-house routes, or through salespersons. Some activities of a service nature (enameling, engraving, etc.) are included in manufacturing when they are performed primarily for trade. They are considered nonmanufacturing when they are performed primarily to the order of the household consumer. 1. Standard Industrial Classification Manual: 1987. For sale by Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, Stock No. 041-001-00314-2. Relationship Between Annual Survey of Manufactures and Census of Manufactures The Bureau of the Census conducts the annual survey of manufactures (ASM) in each of the 4 years between the censuses of manufactures. The ASM is a probability-based sample of approximately 56,000 establishments and collects the same industry statistics (employment, payroll, value of shipments, etc.) as the census of manufactures. In addition to collecting the information normally requested on the census form, the establishments in the ASM sample are requested to supply information on assets, capital expenditures, retirements, depreciation, rental payments, supplemental labor costs, costs of purchased services, and foreign content of materials consumed. Except for supplemental labor costs, the extra ASM items are collected only in census years. Establishment Basis of Reporting The census of manufactures is conducted on an establishment basis. A company operating at more than one location is required to file a separate report for each location. The ASM also is conducted on an establishment basis, but separate reports are filed for just those establishments selected in the sample. Companies engaged in distinctly different lines of activity at one location are requested to submit separate reports if the plant records permit such a separation and if the activities are substantial in size. In 1987, as in earlier years, a minimum size limit was set for inclusion of establishments in the census. All establishments employing one person or more at any time during the census year are included. The same size limitation has applied since 1947 in censuses and annual surveys of manufactures. In the 1939 and earlier censuses, establishments with less than $5,000 value of products were excluded. The change in the minimum size limit in 1947 does not appreciably affect the historical comparability of the census figures except for data on number of establishments for a few industries. This report excludes information for separately operated administrative offices, warehouses, garages, and other auxiliary units that service manufacturing establishments of the same company (see Auxiliaries). Manufacturing Universe and Census Report Forms The 1987 Census of Manufactures universe includes approximately 350,000 establishments. The amounts of information requested from manufacturing establishments were dependent upon a number of factors. The more important considerations were the size of the company and whether it was included in the annual survey of manufactures. The methods of obtaining information for the various subsets of the universe to arrive at the aggregate figures shown in the publication are described below: Small single-establishment companies not sent a report form In the 1987 Census of Manufactures, approximately 150,000 small single-establishment companies were excused from filing reports. Selection of these small establishments was done on an industry-by-industry basis and was based on annual payroll and total shipments data as well as on the industry classification codes contained in the administrative records of Federal agencies. The cutoffs were selected so that these administrative-records cases would account for no more than 3 percent of the value of shipments for all manufacturing. Generally, all single-establishment companies with less than five employees were excused, while all establishments with more than 20 employees were mailed forms. Information on the physical location of the establishment, as well as information on payrolls, receipts (shipments), and industry classification, was obtained from the administrative records of other Federal agencies under special arrangements, which safeguarded their confidentiality. Estimates of data for these small establishments were developed using industry averages in conjunction with the administrative information. The value of shipments and cost of materials were not distributed among specific products and materials for these establishments but were included in the product and material "not specified by kind" (n.s.k.) categories. The industry classification codes included in the administrative-records files were assigned on the basis of brief descriptions of the general activity of the establishment. As a result, an indeterminate number of establishments were erroneously coded at the four-digit SIC level. This was especially true whenever there was a relatively fine line of demarcation between industries or between manufacturing and nonmanufacturing activity. Sometimes these administrative-record cases were only given a two- or three-digit SIC group. For the 1987 Census of Manufactures, these establishments were sent a separate classification form, which requested information on the products and services of the establishment. This form was used to code many of these establishments to the four-digit SIC level. Establishments that did not return the classification form were coded later to those four-digit SIC industries identified as "not elsewhere classified" (n.e.c.) within the given two-or three-digit industry groups. As a result of these situations, a number of small establishments may have been misclassified by industry. However, such possible misclassification has no significant effect on the statistics other than on the number of companies and establishments. The total establishment count for individual industries should be viewed as an approximation rather than a precise measurement. The counts for establishments with 20 employees or more are far more reliable than the count of total number of establishments. Establishments Sent A Report Form The 200,000 establishments covered in the mail canvass were divided into three groups: ASM sample establishments. This group consisted of approximately 56,000 establishments covering all the units of large manufacturing establishments as well as a sample of the medium and smaller establishments. The probability of selection was proportionate to size. In a census of manufactures year, the ASM report form (MA-1000) replaces the first page of the regular census form for those establishments included in the ASM. In addition to information on employment, payroll, and other items normally requested on the regular census form, establishments in the ASM sample were requested to supply information on assets, capital expenditures, retirements, depreciation, rental payments, supplemental labor costs, and costs of purchased services. The census part of the report form is one of approximately 200 versions containing product, material, and special inquiries. The diversity of manufacturing activities necessitated the use of these many forms to canvass the 459 manufacturing industries. Each form was developed for a group of related industries. Appearing on each form was a list of products primary to the group of related industries as well as secondary products and miscellaneous services that establishments classified in these industries were likely to be performing. Respondents were requested to identify the products, the value of each product, and, in a large number of cases, the quantity of the product shipped during the survey year. Space also was provided for the respondent to describe products not specifically identified on the form. The report form also contained a materials-consumed inquiry, which varied from form to form depending on the industries being canvassed. The respondents were asked to review a list of materials generally used in their production processes. From this list, each establishment was requested to identify those materials consumed during the survey year, the cost of each, and, in certain cases, the quantity consumed. Once again, space was provided for the respondent to describe significant material not identified on the form. Finally, a wide variety of special inquiries was included to measure activities peculiar to a given industry, such as operations performed and equipment used. Large and medium establishments (non-ASM). Approximately 84,000 establishments were included in this group. A variable cutoff, based on administrative-records payroll data and determined on an industry-by- industry basis, was used to select those establishments that were to receive one of the approximately 200 census of manufactures regular forms. The first page, requesting establishment data for items such as employment and payroll, was standard but did not contain the detailed statistics included on the ASM form. The product, material, and special inquiry sections supplied were based on the historical industry classification of the establishment. Small single-establishment companies (non-ASM). This group consisted of approximately 60,000 establishments. For those industries where application of the variable cutoff for administrative-records cases resulted in a large number of small establishments being included in the mail canvass, an abbreviated or "short" form was used. These establishments received one of the approximately 80 versions of the short form, which requested summary product and material data and totals but no details on employment, payrolls, cost of materials, inventories, and capital expenditures. Use of the short form has no adverse effect on published totals for the industry statistics; the same data were collected on the short form as on the long form. However, detailed information on materials consumed was not collected on the short form; thus its use would increase the value of the n.s.k. categories. Auxiliaries In this industry report, the data on employment and payroll are limited to operating manufacturing establishments. The census report form filed for auxiliaries (ES-9200) requested a description of the activity of the establishments serviced. However, the manufacturing auxiliaries were coded only to the two-digit major group of the establishments they served; whereas, the operating establishments were coded to a four-digit manufacturing industry. Data for the approximately 10,000 separately operated auxiliaries are included in the geographic area series and in a report issued as part of the 1987 Enterprise Statistics Survey. Auxiliaries are establishments whose employees are primarily engaged in performing supporting services for other establishments of the same company, rather than for the general public or for other business firms. They can be at different locations from the establishments served or at the same location as one of those establishments but not operating as an integral part thereof and serving two establishments or more. Where auxiliary operations are conducted at the same location as the manufacturing operation and operate as an integral part thereof, they usually are included in the report for the operating manufacturing establishment. Included in the broad category of auxiliaries are administrative offices. Employees in administrative offices are concerned with the general management of multiestablishment companies, i.e., with the general supervision and control of two units or more, such as manufacturing plants, mines, sales branches, or stores. The functions of these employees may include (1) program planning, including sales research and coordination of purchasing, production, and distribution; (2) company purchasing, including general contracts and purchasing methods; (3) company financial policy and accounting; (4) general engineering, including design of product machinery and equipment, and direction of engineering effort conducted at the individual operation locations; (5) direction of company personnel matters; and (6) legal and patent matters. Other types of auxiliaries serving the plants or central management of the company include purchasing offices, sales promotion offices, research and development organizations, etc. Industry Classification of Establishments Each of the establishments covered in the census was classified in 1 of 459 manufacturing industries in accordance with the industry definitions in the 1987 SIC Manual. The 1987 edition of this manual represents a major revision for manufacturing industries from the 1972 edition and its 1977 supplement. Appendix A of the 1987 Manual notes the revisions in the four- digit industry levels between 1972/77 and 1987. An industry is generally defined as a group of establishments producing the same product or a closely related group of products. The product groupings from which industry classifications are derived are based on considerations such as similarity of manufacturing processes, types of materials used, types of customers, and the like. The resulting group of establishments must be significant in terms of number, value added by manufacture, value of shipments, and number of employees. The system operates in such a way that the definitions progressively become narrower with successive additions of numerical digits. For 1987, there are 20 major groups (two- digit SIC), 139 industry groups (three-digit SIC), and 459 industries (four-digit SIC). This represents an expansion of four-digit industries from 452 in 1972/77 and a reduction of three-digit groups from 143 in 1972/77. Product classes and products of the manufacturing industries have been assigned codes based on the industry from which they originate. There are about 11,000 products identified by a seven-digit code. The seven- digit products are considered the primary products of the industry with the same four digits. Accordingly, an establishment is usually classified in a particular industry on the basis of its major activity during a particular year, i.e., production of the products primary to that industry exceeds, in value, production of the products primary to any other single industry. In a few instances, however, the industry classification of an establishment is not only determined by the products it makes but also by the process employed in operations. Refining of nonferrous metals from ore or rolling and drawing of nonferrous metals (processes which involve heavy capitalization in specialized equipment) would be classified according to the process used during a census year. These establishments then would be "frozen" in that industry during the following ASM years. In either a census or ASM year, establishments included in the ASM sample with certainty weight, other than those involved with heavily capitalized activities described above, are reclassified by industry only if the change in the primary activity from the prior year is significant or the change has occurred for 2 successive years. This procedure prevents reclassification when there are minor shifts in product mix. In ASM years, establishments included in the ASM sample with noncertainty weight are not shifted from one industry classification to another. They are retained in the industry where they were classified in the base census year (see appendix, Annual Survey of Manufactures). However, in the following census year, these ASM plants are allowed to shift from one industry to another. The result of these rules covering the switching of plants from one industry classification to another is that, at the aggregate level, some industries comprise different mixes of establishments between survey years, and establishment data for such industry statistics as employment and payroll may be tabulated in different industries between survey years. Hence, comparisons between prior-year and current-year published totals, particularly at the four-digit SIC level, should be viewed with caution. This is particularly true for the comparison between the data shown for a census year versus the data shown for the previous ASM year. As previously noted, the small establishments that may have been misclassified by industry are usually administrative-record cases whose industry codes were assigned on the basis of incomplete descriptions of the general activity of the establishment. Such possible misclassifications have no significant effect on the statistics other than on the number of companies and establishments. While some establishments produce only the primary products of the industry in which they are classified, all establishments of an industry rarely specialize to this extent. The industry statistics (employment, inventories, value added by manufacture, total value of shipments including resales and miscellaneous receipts, etc.) shown in tables 1a through 5a, therefore, reflect not only the primary activities of the establishments in that industry but also their secondary activities. The product statistics in table 6a represent the output of all establishments whether or not they are classified in the same industry as the product. For this reason, in relating the industry statistics, especially the value of shipments to the product statistics, the composition of the industry's output shown in table 5b should be considered. The extent to which industry and product statistics may be matched with each other is measured by two ratios which are computed from the figures shown in table 5b. The first of these ratios, called the primary product specialization ratio, measures the proportion of product shipments (both primary and secondary) of the establishments classified in the industry represented by the primary products of those establishments. The second ratio, called the coverage ratio, is the proportion of primary products shipped by the establishments classified in the industry to total shipments of such products by all manufacturing establishments. However, establishments making products falling into the same industry category may use a variety of processes and materials to produce them. Also, the same industry classification (based on end products) may include both establishments that are highly integrated and those that put only the finishing touches on an already highly fabricated item. For example, the refrigeration equipment industry includes instances of almost complete integration (production of the compressor, condensing unit, electric motor, casting, stamping of the case, and final assembly) all carried on at one plant. On the other hand, the condensing unit, the motor, and the case may be purchased and only assembled into the finished product. In some instances, separate industry categories have been established for integrated and nonintegrated establishments. For other industries, the census provides separate statistics on the production of intermediate commodities made and used in the producing plant. For some industries characterized by many plants of the same company, separate figures on interplant transfers of products usually are shown. Differences in the integration of production processes, types of operations, and alternatives in types of materials used should be considered when relating the industry statistics (employment, payrolls, value added, etc.) to the product and material data. Value of Shipments for the Industry Compared With Value of Product Shipments This report shows value of shipments data for industries and products. In tables 1a through 5a, these data represent the total value of shipments of all establishments classified in a particular industry. The data include the shipments of the products classified in the industry (primary to the industry), products classified in other industries (secondary to the industry), and miscellaneous receipts (repair work, sale of scrap, research and development, installation receipts, and resales). Value of product shipments shown in table 6a represents the total value of all products shipped that are classified as primary to an industry. CENSUS DISCLOSURE RULES In accordance with Federal law governing census reports, no data are published that would disclose the data for an individual establishment or company. However, the number of establishments classified in a specific industry is not considered a disclosure, so this information may be released even though other information is withheld. The disclosure analysis for the industry statistics in tables 1a through 5a of this report is based on the total value of shipments. When the total value of shipments cannot be shown without disclosing information for individual companies, the complete line is suppressed. However, the suppressed data are included in higher-level totals. Additional disclosure analysis is performed for new capital expenditures that can be suppressed even though value of shipments data are publishable. SPECIAL TABULATIONS Special tabulations of data collected in the 1987 Census of Manufactures may be obtained on computer tape or in tabular form. The data will be in summary form and subject to the same rules prohibiting disclosure of confidential information (including name, address, kind of business, or other data for individual business establishments or companies) as are the regular publications. Special tabulations are prepared on a cost basis. A request for a cost estimate, as well as exact specifications on the type and format of the data to be provided, should be directed to the Chief, Industry Division, Bureau of the Census, Washington, DC 20233. CONTACTS FOR DATA USERS Subject Area Contact Phone Census/ASM Durables Kenneth Hansen (301) 763-7304 Nondurables Michael Zampogna (301) 763-2510 Current Industrial Reports Durables Tom Flood (301) 763-2518 Nondurables Staff (301) 763-5911 Import/Export Foreign Trade Division (301) 763-5140 Publications Industry Analy- International Trade (202) 377-4356 sis and Fore- Administration casts CENSUS OF MANUFACTURES--OVERVIEW Glossary CONTENTS Number of establishments and companies XVII--9 Employment and related items XVII--9 All employees XVII--9 Production workers XVII--9 All other employees XVII--9 Payroll XVII--10 Production-worker hours XVII--10 Cost of materials XVII--10 Specifc materials consumed XVII--10 Value of shipments XVII--10 Individual products XVII--11 Classes of products XVII--11 Duplication in cost materials XVII--11 Value added by manufacture XVII--11 New and used capital expenditures XVII--12 End-of-year inventories XVII--12 Specialization and coverage ratios XVII--12 Number of establishments and companies--An establishment is defined as a single physical location where manufacturing is performed. A company, on the other hand, is defined as a business organization consisting of one establishment or more under common ownership or control. If the company operated at different physical locations, even if the individual locations were producing the same line of goods, a separate report was requested for each location. If the company operated in two or more distinct lines of manufacturing at the same location, a separate report was requested for each activity. An establishment not in operation for any portion of the year was requested to return the report form with the proper notation in the "Operational Status" section of the form. In addition, the establishment was requested to report data on any employees, capital expenditures, inventories, or shipments from inventories during the year. Employment and related items--The report forms requested separate information on production workers for a specific payroll period within each quarter of the year and on other employees as of the payroll period which included the 12th of March. All employees--This item includes all full-time and part-time employees on the payrolls of operating manufacturing establishments during any part of the pay period which included the 12th of the months specified on the report form. Included are all persons on paid sick leave, paid holidays, and paid vacations during these pay periods. Officers of corporations are included as employees; proprietors and partners of unincorporated firms are excluded. The "all employees" number is the average number of production workers plus the number of other employees in mid-March. The number of production workers is the average for the payroll periods including the 12th of March, May, August, and November. Production workers--This item includes workers (up through the line- supervisor level) engaged in fabricating, processing, assembling, inspecting, receiving, storing, handling, packing, warehousing, shipping (but not delivering), maintenance, repair, janitorial and guard services, product development, auxiliary production for plant's own use (e.g., power plant), recordkeeping, and other services closely associated with these production operations at the establishment covered by the report. Employees above the working-supervisor level are excluded from this item. All other employees--This item covers nonproduction employees of the manufacturing establishment including those engaged in factory supervision above the line-supervisor level. It includes sales (including driver salespersons), sales delivery (highway truck drivers and their helpers), advertising, credit, collection, installation and servicing of own products, clerical and routine office function, executive, purchasing, financing, legal, personnel (including cafeteria, medical, etc.), professional, and technical employees. Also included are employees on the payroll of the manufacturing establishment engaged in the construction of major additions or alterations to the plant and utilized as a separate work force. In addition to reports sent to operating manufacturing establishments, information on employment during the payroll period which included March 12 and annual payrolls also was requested of auxiliary units (e.g., administrative offices, warehouses, and research and development laboratories) of multiestablishment companies. However, these figures are not included in the totals for individual industries shown in this report. They are included in the general summary and geographic area reports as a separate category. Payroll--This item includes the gross earnings of all employees on the payroll of operating manufacturing establishments paid in the calendar year 1987. Respondents were told they could follow the definition of payrolls used for calculating the Federal withholding tax. It includes all forms of compensation, such as salaries, wages, commissions, dismissal pay, bonuses, vacation and sick leave pay, and compensation in kind, prior to such deductions as employees' Social Security contributions, withholding taxes, group insurance, union dues, and savings bonds. The total includes salaries of officers of corporations; it excludes payments to proprietors or partners of unincorporated concerns. Also excluded are payments to members of Armed Forces and pensioners carried on the active payroll of manufacturing establishments. The census definition of payrolls is identical to that recommended to all Federal statistical agencies by the Office of Management and Budget. It should be noted that this definition does not include employers' Social Security contributions or other nonpayroll labor costs, such as employees' pension plans, group insurance premiums, and workers' compensation. The ASM provides estimates of employers' supplemental labor costs, both those required by Federal and State laws and those incurred voluntarily or as part of collective bargaining agreements. As in the case of employment figures, the payrolls of separate auxiliary units of multi establishment companies are not included in the totals for individual industries or industry groups. Production-worker hours--This item covers hours worked or paid for at the plant, including actual overtime hours (not straight-time equivalent hours). It excludes hours paid for vacations, holidays, or sick leave. Cost of materials--This term refers to direct charges actually paid or payable for items consumed or put into production during the year, in- cluding freight charges and other direct charges incurred by the establishment in acquiring these materials. It includes the cost of materials or fuel consumed, whether purchased by the individual estab- lishment from other companies, transferred to it from other establishments of the same company, or withdrawn from inventory during the year. The important components of this cost item are (1) all raw materials, semifinished goods, parts, containers, scrap, and supplies put into production or used as operating supplies and for repair and maintenance during the year, (2) electric energy purchased, (3) fuels consumed for heat, power, or the generation of electricity, (4) work done by others on materials or parts furnished by manufacturing establishments (contract work), and (5) products bought and resold in the same condition. Specific materials consumed--In addition to the total cost of materials, which every establishment was required to report, information also was col- lected for most manufacturing industries on the consumption of major materials used in manufacturing. The inquiries were restricted to those materials which were important parts of the cost of production in a particular industry and for which cost information was available from manufacturers' records. Information on the establishments consuming less than a specified amount (usually $10,000) of a specific material were not requested to report consumption of that material separately. Also, the cost of materials for the small establishments for which either administrative records or short forms were used was imputed as "not speci- fied by kind."(See the introduction for the importance of administrative records in the industry.) Value of shipments--This item covers the received or receivable net selling values, f.o.b. plant (exclusive of freight and taxes), of all products shipped, both primary and secondary, as well as all miscellaneous receipts, such as receipts for contract work performed for others, installation and repair, sales of scrap, and sales of products bought and resold without further processing. Included are all items made by or for the establishments from materials owned by it, whether sold, transferred to other plants of the same company, or shipped on consignment. The net selling value of products made in one plant on a contract basis from materials owned by another was reported by the plant providing the materials. In the case of multiunit companies, the manufacturer was requested to report the value of products transferred to other establishments of the same company at full economic or commercial value, including not only the direct cost of production but also a reasonable proportion of "all other costs" (including company overhead) and profit. Individual products--As in previous censuses, data were collected for most industries on the quantity and value of individual products shipped. In the 1987 census program, information was collected on the output of approximately 11,000 individual product items. The term "product," as used in the census of manufactures, represents the finest level of detail for which output information was requested. Consequently, it is not necessarily synonymous with the term "product" as used in the marketing sense. In some cases, it may be much more detailed and, in other cases, it is more aggregative. For example, "pharmaceutical preparations" was distributed into over 100 terms; whereas, "motor gasoline" was reported as a single item. Approximately 6,600 of the product items were listed separately on the 1987 census report forms. Data for about 4,400 products were obtained in the monthly, quarterly, or annual surveys comprising the Current Industrial Reports series of the Census Bureau. Totals for the year 1987 for these items, as derived from the commodity surveys, are shown in the "products shipped" table (table 6a-2). The list of products for which separate information was collected was prepared after consultation with industry and government representatives. Comparability with previous figures was given considerable weight in the selection of product categories so that comparable 1982 information is presented for most products. Typically, both quantity and value of shipments information were collected. However, if quantity was not significant or could not be reported by manufacturers, only value of shipments was collected. Shipments include both commercial shipments and transfers of products to other plants of the same company. For industries in which a considerable portion of the total shipments is transferred to other plants of the same company, separate information on interplant transfers also was collected. Moreover, for products that are used to a large degree within the same establishment as materials or components in the fabrication of other products, total production and often consumption of the item within the plant was collected. Typically, the information on production also was collected for products for which there are significant differences between total production and shipments in a given year because of wide fluctuations in finished goods inventories. Other measures of output of products with long production cycles were used as appropriate and feasible. Classes of products--To summarize the product information, the separate products were aggregated into classes of products that, in turn, were grouped into all primary products of each industry. The code structure used is a seven-digit number for the individual product, a five-digit number for the class of product, and a four-digit number for the total primary products in an industry. In the 1987 census, the 11,000 products were grouped into approximately 1,500 separate classes on the basis of general similarity of manufacturing processes, types of materials used, and the like. However, the grouping of products was affected by the economic significance of the class and, in some cases, dissimilar products were grouped because the products were not sufficiently significant to warrant separate classes. Duplication in cost of materials and value of shipments--The aggregate of the cost of materials and value of shipments figures for industry groups and for all manufacturing industries includes large amounts of duplication since the products of some industries are used as materials by others. This duplication results, in part, from the addition of related industries representing successive stages in the production of a finished manufactured product. Examples are the addition of flour mills to bakeries in the food group and the addition of pulp mills to paper mills in the paper and allied products group of industries. Estimates of the overall extent of this duplication indicate that the value of manufactured products exclusive of such duplication (the value of finished manufactures) tends to approximate two-thirds of the total value of products reported in the annual survey. Duplication of products within individual industries is significant within a number of industry groups, e.g., machinery and transportation industries. These industries frequently include complete machinery and their parts. In this case, the parts made for original equipment are materials consumed for assembly plants in the same industry. Even when no significant amount of duplication is involved, value of shipments figures are deficient as measures of the relative economic importance of individual manufacturing industries or geographic areas because of the wide variation in ratio of materials, labor, and other processing costs of value of shipments, both among industries and within the same industry. Before 1962, cost of materials and value of shipments were not published for some industries which included considerable duplication. Since then, these data have been published for all industries at the United States level and beginning in 1964, for all geographic levels. Value added by manufacture--This measure of manufacturing activity is derived by subtracting the cost of materials, supplies, containers, fuel, purchased electricity, and contract work from the value of shipments (products manufactured plus receipts for services rendered). The result of this calculation is adjusted by the addition of value added by merchandising operations (i.e., the difference between the sales value and the cost of merchandise sold without further manufacture, processing, or assembly) plus the net change in finished goods and work-in-process between the beginning- and end-of-year inventories. For those industries where value of production is collected instead of value of shipments (see footnote in table 1a), value added is adjusted only for the change in work-in-process inventories between the beginning and end of year. For those industries where value of work done is collected, the value added does not include an adjustment for the change in finished goods or work-in-process inventories. "Value added" avoids the duplication in the figure for value of shipments that results from the use of products of some establishments as materials by others. Value added is considered to be the best value measure available for comparing the relative economic importance of manufacturing among industries and geographic areas. New and used capital expenditures--For establishments in operation and any known plants under construction, manufacturers were asked to report their new expenditures for (1) permanent additions and major alterations to manufacturing establishments, and (2) machinery and equipment used for replacement and additions to plant capacity if they were of the type for which depreciation accounts were ordinarily maintained. The totals for new expenditures include expenditures leased from nonmanufacturing concerns through capital leases. New facilities owned by the Federal Government but operated under contract by private companies, and plant and equipment furnished to the manufacturer by communities and nonprofit organizations are excluded. Also excluded are expenditures for used plant and equipment (although reported in the census), expenditures for land, and cost of maintenance and repairs charged as current operating expenses. Manufacturers also were requested to report the value of all used buildings and equipment purchased during the year at the purchase price. For any equipment or structure transferred for the use of the reporting establishment by the parent company or one of its subsidiaries, the value at which it was transferred to the establishment was to be reported. Furthermore, if the establishment changed ownership during the year, the cost of the fixed assets (building and equipment) was to be reported under used capital expenditures. Total expenditures for used plant and equipment is a universe figure; it is collected on all census forms. However, the breakdown of this figure be- tween expenditures for used buildings and other structures and expenditures for used machinery and equipment is collected only on the ASM form. The data for total new capital expenditures, new building expenditures, and new machinery expenditures, as well as the data for total used expenditures, are shown in table 3b. End-of-year inventories--Respondents were asked to report their 1986 and 1987 end-of-year inventories at cost or market. Effective with the 1982 Economic Censuses, this change to a uniform instruction for reporting inventories was introduced for all sector reports. Prior to 1982, respondents were permitted to value inventories using any generally accepted accounting method (FIFO, LIFO, market, to name a few). In 1982, LIFO users were asked to first report inventory values prior to the LIFO adjustment and then to report the LIFO reserve and the LIFO value after adjustment for the reserve. In using inventory data by stage of fabrication for "all industries" and at the two-digit industry level, it should be noted that an item treated as a finished product by an establishment in one industry may be reported as a raw material by another establishment in a different industry. For example, the finished-product inventories of a steel mill would be reported as raw materials by a stamping plant. Such differences are present in the inventory figures by stage of fabrication shown for individual industries, industry groups, and "all manufacturing," which are aggregates of figures reported by establishments in specified industries. Specialization and coverage ratios--These items are not collected on the report forms but are derived from the data shown in table 5b. An estab- lishment is classified in a particular industry if its shipments of primary products of that industry exceed in value its shipments of the products of any other single industry. As noted in the introduction, an establishment's shipments include those products assigned to an industry (primary products), those considered pri- mary to other industries (secondary products), and receipts for miscellaneous activities (merchandising, contract work, resales, etc.). Specialization and coverage ratios have been developed to measure the relationship of primary product shipments to the data on shipments for the industry shown in tables 1a through 5a and data on product shipments shown in tables 6a through 6c. Specialization ratio represents the ratio of primary product shipments to total product shipments (primary and secondary, excluding miscellaneous receipts) for the establishments classified in the industry. Coverage ratio represents the ratio of primary products shipped by the establishments classified in the industry to the total shipments of such products that are shipped by all manufacturing establishments wherever classified.