What’s on the horizon for the U.S. manufacturing industry in 2010? Jerry Miller, director of Cincom’s Manufacturing Business Solutions, sat down to offer his insights of the year ahead from the economy’s effects to what Twitter can do for manufacturing to going green.
Question: What in general do you see as important to manufacturing companies as we go into 2010?
Most manufacturing companies operate with a business plan and a general corporate strategy, but not all companies have a specific and focused manufacturing strategy, and many of those who create a strategy, fail to execute it and update it on a regular basis. A manufacturing strategy must be a living document. Competitive advantage and success will be gained by having a superior mix of people, technology, focus and direction.
A manufacturing strategy exploits all these issues. The time scale of completing and implementing a radical manufacturing strategy dictates that a long-term view is essential to permit planned investment and implementation.
A manufacturing strategy is a living document which outlines:
- The basis for competitive advantage
- The key issues which will affect the organization
- The strategic manufacturing aims
- The broad strategic initiatives to be pursued
It is key for all manufacturing organizations to develop a manufacturing strategy where they “Do the right things” and “Do things right.”
Q: Let’s talk about the manufacturing supply chain. What are keys to successful supply chain management in 2010 and beyond?
Successful supply chain management is an iterative process that evaluates the cost/benefit trade-offs of operational components. The supply chain strategy constitutes the actual operations of that organization and the extended supply chain to meet a specific supply chain objective.
Most companies are unlikely to have a comprehensive supply chain management strategy. Most supply chain management strategies focus on driving down operational costs and maximizing efficiencies. An organization may choose a supply chain approach directed at supplier and vendor management as a means to remain competitive. The organization is able to implement tactical action items to achieve these goals.
Another reason for having a consistent supply chain management approach is to determine how you interact with your suppliers, distributors, customers, and even your customers’ customers. As the marketplace becomes more competitive and interconnected, it is critical to work together. Well-executed supply chain management results in value creation not only for the manufacturing organization but for the entire supply chain.
The success of effective supply chain management is only as good as the ability to properly execute it for the benefit of all stakeholders of the supply chain. A great supply chain, linked with a process of operational excellence, can provide success for the manufacturing company and also its partners, suppliers and customers.
Q: How does the lean movement fit into the trends of manufacturers in 2010?
Lean manufacturing has its roots in the Toyota Production System. A lean production system emphasizes the elimination of waste, the creation of goods in lock step with the demand of the market, the input of factory workers in creating an efficient production environment (employee involvement), and the pursuit of continuous improvement. Many manufacturers have been implementing lean practices during the last decade or two and have produced significant efficiency and eliminated waste. We do however; have a long way to go to be truly “lean” in our manufacturing processes and the battle will continue.
The movement toward green and sustainable business practices is the new frontier for manufacturers and “Going Green” is the next step in the lean, just-in-time movement.
There has been much reported recently in the news about the conflicting scientific data in the fight for our global ecological salvation. But for manufacturers, this should be more than a question of carbon emissions and water conservation. It is a means to reduce a significant amount of waste and cost in the manufacturing process.
No government regulation requires a company to go lean, and no regulation should be required to go green either. The green/sustainability movement is about eliminating waste, reducing costs and doing business for the long haul.
Q: What about technology trends that effect the manufacturing industry?
A new decade of technology is right around the corner for the manufacturing industry.
More manufacturing applications will move to the “cloud”
Manufacturing software applications will continue to migrate to the Internet, or the “cloud,” where they are cheaper to deliver, more frequently upgraded and will allow access to more real-time information. Manufacturers will initially look for immediate help with applications such as CRM and customer-facing applications but will be slower to move to cloud-based ERP applications. However the benefits of rapid deployment, lower cost and ease of upgrade is compelling and difficult to ignore even for large mission-critical applications.
Social networking and Internet content will evolve into networks of sites and information streams focused around common interests. This is especially true in the function of marketing. Marketers will not be successful with old-fashioned advertising that interrupts this flow of content. Successful marketers will be those that are able to join and gain the trust of the tribes, where people WANT to receive the permission-based marketing message.
Yes, the Internet is all around you
As more applications, content and communities move to the web, we will become increasingly more dependent on it and will require access everywhere and at all times. The functionality of wireless access devices will keep increasing, so that we can wirelessly do most of what we normally do on our office computer. Wireless networks will dramatically increase the amount of data capacity. We are getting to the point that we’ll be connected to the Internet 24/7, for both work and for personal reasons.
Workers of the world are being connected
New companies and ideas will arise seemingly out of nowhere and spread around the world in no time with social networking like Twitter and traditional industries will collapse in the blink of an eye. A good example of this is newspapers and magazines. New ideas and companies can come from anywhere in the world. Young people, called millenials, are often the most creative inventors of new ideas. Manufacturing companies that rely on hierarchy and control will struggle to adapt to a world of decentralization and volatility. Individuals will be more connected as a global community with communities such as Facebook.
With the new capabilities like never before, manufacturing management is a “WE” system instead of an “I” process. The companies that are able to take advantage of this new world of the interconnection of customers, partners, suppliers and employees with the Internet and social (and business) networking will be the real winners in 2010 and beyond. Hang-on for an interesting and wild time of change.
Q: So what is the outlook for manufacturers in 2010?
It has been a very dismal two years for U.S. manufacturers. The slumping economy, the continued housing crisis, and the increasing U.S. national debt has placed the U.S. manufacturing industry in dire straits. By the end of 2008, several leading indicators placed U.S. manufacturing activity at a 26-year low. Recent statistics place manufacturing at less than 12% of U.S. Gross Domestic Product (GDP). This represents more than a 25% reduction over the past 10 years.
Yet, in spite of these alarming statistics, there is beginning to be reason for optimism for U.S. manufacturers in 2010. Yes, the overall U.S. economy may currently be inching up, ever so slowly, and a slow recovery for manufacturing is forming, but don’t expect to see much improvement on the manufacturing jobs front anytime soon.
The economy has shed more than 8 million jobs since the start of the recession, many of those in traditional manufacturing. It remains to be seen how many of those jobs will come back in the near future. The key to the U.S. economic recovery is a significant improvement in the effectiveness of manufacturing so that we can get our unemployment rate on a downward trend. Companies were quick to institute layoffs during this downturn in order to save their businesses but they’re not likely to be nearly as fast about hiring people back, especially since productivity is so high right now. The Labor Department reported that non-farm productivity grew at a 6.4% annual rate in the second quarter, the largest gain in many years. As companies need to ramp up capacity as the economy slowly recovers, they’re more likely to add hours to current workers’ schedules than add new jobs.
The good news for U.S. manufacturing companies with this increase in productivity is that improved earnings should translate into a willingness to invest in the manufacturing infrastructure for the future growth and improved profitability of their businesses. U.S. manufacturing companies will be able to make more investments in plant and equipment.
Our focus, as manufacturers, should be on continually improving our solutions and software to make sure we stay in step with our customers and can help them get to their goals. The most critical question about any new application or service is whether it will get companies closer to their customers and their goals of top-line growth, all while doing this with improved profitability. Only then will we be able to make a significant improvement in the key issue facing our country and its manufacturing industry, job growth.
Images: Factory Tour by Tommytoolhire