Are You Ready
Column
By Ben Langlinais   
Sunday, 14 January 2007
smc Manufacturing Trends
A few major trends in the manufacturing industry are shaping the way technology is used to accelerate a company’s success.
As a manufacturer, life was once relatively simple and straightforward: Produce what you can sell, when it is needed, at the highest quality and with the most profit. Somewhere along the way, things have gotten more complicated. Costs are rising, margins are shrinking, customers are demanding more, there are more competitors and you never seem to move fast enough.

• It’s no secret that becoming more agile and working smarter are essential to become and remain competitive. Can technology help our industry work smarter and continue to provide the level of service our customers expect? Those of us who live and breathe manufacturing every day know that tomorrow’s needs are essential when deciding on today’s technology.

• How does one come to a decision without knowing what the future will bring? Eight major manufacturing business trends are shaping the way technology is used to accelerate a manufacturing company’s success. Can you afford to ignore them?

• The first trend is globalization, which is a double-edged sword. On one hand, it represents tremendous opportunity to gain new clients, which stretches your top line, and to use low-cost resources, which cuts expenses. However, it also means being in markets where you may not have much experience or knowledge about how work gets done. Either way, your supply chain is growing in numbers and distance. You are adding new carriers and modes of transportation, and new headaches as you struggle to shrink the time it takes to get product to customers and money in the bank.

Many companies are too easily tempted by the allure of new markets or producing regions, without fully understanding and planning for the new obstacles they entail. For the manufacturer looking to trim costs in its manufacturing operations, it might seem easier to move where things can be done more cheaply.

But at what cost? Are you moving an already efficient operation where you have built real competitive advantage to a region where you will lose some ownership over that knowledge? Are you giving up on trying to improve an inefficient operation by turning it into a cheaper, inefficient operation? Will your quality and customers suffer? Ultimately, will you suffer?

Expect growing pains, but by developing strategies to deal with these challenges and by surviving the extended lead times, the positives will far outweigh the negatives. Globalization remains a critical issue for manufacturers, and the world will only continue to shrink.

A manufacturing company must be able to leverage employees and resources around the world to meet the demands of customers. Although technology in and of itself won’t solve anything, understanding the relationship of your products, operations, suppliers and clients, as well as their readiness for a new business model, will certainly improve your chances of successfully globalizing your operation.

Market Volatility
Let’s face it, none of us has a crystal ball to predict the direction of the marketplace – especially when considering variables like geopolitics, the ongoing threat of terrorism, climate changes and currency fluctuations. Clients are moving and changing, along with your operations and suppliers. Change is the new constant and keeping up with it ensures companies are prepared for the fluctuations that are a part of our world.

Companies that build their business model and processes around change are going to be better equipped to deal with the unknowns. Having standards-based architectures for your business will allow you to manage change at the component level and give you greater options and flexibility when responding to changing demands.

Increasing Customer Demands
It probably all started when Henry Ford decided to make a Model T in a color other than black; well, probably before then. We are all individuals and expressing our uniqueness is central to our individuality. Customers realize that manufacturers don’t know what they want, so they tell us what they desire and need, and then demand they get it – and usually do. This eternal dynamic places two colossal strains on manufacturers: to build more products faster and to give customers options to choose from within a product.

Although these sound similar, they require different approaches to solve, but both drive one overriding challenge: – omplexity. As our customers continue to demand more differentiation, manufacturing processes will continue to become more complex. Gone are the days of managing the operation on a notepad or chalkboard. There are simply too many moving parts that keep accelerating, and adding more people to manage the complexity isn’t a solution. Speed and complexity require a well-thought-out plan to easily scale them up or down as needed. Companies that want to succeed should stop longing for the days of “any car as long as it’s black.” Strategies that enable speed and simplify complexity are key to your company’s success.

Accelerated Product Innovation
As customers’ demands drive new products, traditional product lifecycles are no longer valid to gain market share. The lifecycle process itself is relatively the same, but the timeline is compressed. This drives different approaches for R&D, portfolio management and investment, engineering, manufacturing and service. Many of these once-serial events have had to shrink and overlap.

New methods for collaboration and concurrent work are becoming the norm. This is changing for manufacturers, and also for suppliers and distributors whose business models are being re-tooled to manage an accelerated work flow. Companies can no longer afford to design in 2-D and generate blueprints that then get mailed to suppliers. As companies spread work across the globe to take advantage of new relationships and more affordable supplies, speed and quality are of the essence. As products and processes become more complex, the ability for a manufacturer to design using modules and plan for reuse is essential for speed, quality and cost control.

The Importance of Outsourcing
Outsourcing will continue to increase as manufacturers realize it’s importance to combating shrinking profit lines. Differentiation will continue to force companies to assess their strengths and weaknesses, as well as those of the competition. As companies play to their strengths and exploit the weaknesses of their competition, what they do well and don’t do well will be a central topic of discussion in strategy sessions. More importantly, what outsourcers do well has to be part of the equation. Although cost may be the obvious reason to consider outsourcing, it shouldn’t be the only one. Speed, quality, flexibility and risk are important attributes to assess in your operation as well as the competitions and the outsourcer’s. Ask: What makes your customer want to buy from you? If you and your customer agree on the answer, you’re close to understanding outsourcing options.

Cost pressure
It’s the focus of any manufacturer, and cutting cost just comes with the territory. Although removing cost is important, it’s a natural part of any overall continuous improvement program that aims to eliminate waste. Cost is a natural and necessary part of any successful business, but waste is not. And waste is what companies should strive to eradicate. It is found everywhere and in everything we do. When the focus is on cutting cost, it’s easy to target things like headcount, moving the operations to China and cutting back travel.

When the enemy becomes waste instead of cost, then it presents a whole new approach and set of options to consider. Focusing on eliminating waste drives a well-disciplined continuous improvement philosophy which becomes key to the organization. The emphasis becomes “what you do,” not “what you don’t do.”

Eliminating unnecessary things ensures you become better at what you do. After all, you want to be good at what you do and set the standard for it. World-class manufacturers do that by focusing on setting a base standard and measuring their continuous improvement from that point to a new standard, not by focusing on cutting cost.

Flexibility
Clearly one of the hottest trends, and one of the least understood, involves manufacturers being flexible. The definition seems to range from how quickly manufacturers can accommodate changing customer orders, to how many products manufacturers can build on one line or in one facility.

Essentially, flexibility has to do with striking the optimal balance between cost and product variation. If a manufacturer can produce what a customer wants, when they want it, at the best price, they will win no matter how anyone defines flexibility. The challenge that manufacturers face today is the traditional approach to building products. Historically, product lifecycles were longer and product variations were fewer. Manufacturers developed investment models that allowed them to buy expensive, fixed equipment and recovered its costs over a longer period of time.

The problem with this approach is that as customer demands shorten product lifecycles, the need to modify product or introduce newer products has turned these investment models upside down. Even if the cost of fixed equipment has come down, it is still fixed. The time and resource required to overhaul or replace it can be critical to your market share. The trick is to find your industry’s middle ground to create an economic model that works in today’s marketplace.

Flexibility doesn’t stop there, though. To have an operation that is capable of striking that balance also requires a build schedule that optimizes the capabilities of other constraints such as material availability, supplier capability and labor. To ensure market leadership, a manufacturer must have the ability to quickly meet customer needs and remain cost competitive in the process.

Competition
If globalization has done anything, it has introduced more players on the field than we originally thought were even allowed. Whether you are exploiting new markets or taking advantage of lower labor costs, you are running into more competitors. The old tricks that allowed you to beat the competition in the past are part of everyone’s repertoire now. To be the best, or beat the best, now requires different strategies.

As with outsourcing, understanding and enhancing what you do well and exploiting what your competitors don’t do well is central to this strategy. The marketplace has grown and shrunk at the same time. Manufacturers who are agile, nimble and quick to adapt will grow, while those who are slow and large will struggle. Even if your marketplace was once upon a time the United States, it is now, for better or worse, the world. This brings a whole new breed of global competitors. No matter your size, competitors now include the mom-and-pop operation working out of their garage and the Fortune 500 world leader.

Each one of these trends is pervasive across the global manufacturing industry. There are strategies that companies are planning and investing in to deal with each one. All of these trends are either connected or influenced by the others. They are part of our global industry ecosystem, which is shaping how we will operate tomorrow, who will win and who will lose. Whether you are developing a business strategy aimed at retaining your leadership position or clawing your way back into the fight, the way you plan and use technology must recognize these trends as enablers for change and growth.

A comprehensive business strategy to address the interdependencies of these trends and their impact on your solutions is paramount to move up the ladder of success. These trends warrant a response. What will yours be? MT

Ben Langlinais is a client industry executive for the Manufacturing Industry Group at EDS, a global technology services company delivering business solutions to its clients. He works with leading manufacturers to ensure they have an integrated strategy for turning trends into enablers for success. For more information, contact him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it '; document.write( '' ); document.write( addy_text92721 ); document.write( '<\/a>' ); //-->\n This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
 
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