In the current market, reducing costs remains critically important, but that alone won’t enable most U.S. manufacturers to meet their growth goals.

A survey of nearly 300 top U.S. manufacturing executives, conducted in 2007, offers a sobering portrayal of how the nation’s industrial leaders view themselves:  

• Only 14 percent of the respondents believe their companies are “world class” in operational excellence.
• Less than half (39.9 percent) of the surveyed executives are very confident that they will be able to meet their top-line revenue growth goals over the next three years with their existing resources.

Yet, despite the magnitude of uncertainty among them as 2007 winds to a close, American manufacturers are entering the new year with a sense of optimism, albeit a guarded one.  

Though it’s too soon to tell, 2008 could well be remembered as the year the U.S. manufacturing industry began to turn the corner in reclaiming its long-held position as the undisputed leader of the industrial world. In fact, the new year presents a wide range of opportunities for U.S. manufacturers to leverage their renewed quest for leadership.

However, before they pursue those opportunities, manufacturers should first consider what has led them to their current global position. Although many factors have been at play, the decline of the U.S. manufacturing industry is primarily due to the fact that over the past 30 years, manufacturers have primarily focused on – and have largely excelled in – cost reduction and cost containment. But along the way, they have not been able to balance the cost issues with the need for top-line growth, and that’s one of the greatest challenges they’re facing today.

In the current market, reducing costs remains critically important, but that alone won’t enable most U.S. manufacturers to meet their growth goals. As the survey showed, manufacturers overwhelmingly understand this. But most of them also understand that they don’t have the right assets in technology, machinery or people in place right now to be “world class.”

To recapture their world-leading positions and confront the challenges they face, American manufacturers are pursuing a wide range of strategies. According to the survey respondents, these measures include:

• Implementing continuous improvement practices outside of production (56.5 percent of the respondents are considering this strategy)
• Increasing training (49 percent are considering)
• Making larger investments in capital assets (38.3 percent)
• Outsourcing some current functions (32.4 percent)
• Hiring more people (32 percent)
• Seeking mergers and/or acquisitions (28.5 percent)

What’s especially notable about these strategies is that four of them are correlated with people management, which may be the key factor in fueling U.S. manufacturing growth, not only in 2008, but in the years ahead. While it’s clear manufacturers are considering multiple and complex strategies for growth, for many firms the real solution may be much more straightforward. In fact, using a single strategy – partnering with external companies with deep industry knowledge and world-class resources – can enable manufacturers to address all the challenges they face in managing their people.

Back to 'World Class’
To reclaim their global leadership position, American manufacturers must decide exactly what it is they want to be world class in, and for most companies, the best way to decide that will be to listen to their customers. Such insight helps the world’s best manufacturers become world class in the areas that matter most to their customers.

American manufacturers understand the importance of customer insight, but most of them admit they need to know their customers and their needs better. According to the survey, 57.2 percent of executives said they could strengthen product innovation by knowing more about their customers; 36.1 percent said operational excellence would be stronger with better customer insights; and 56.3 percent said it would increase customer retention and attraction.

Clearly, companies want to improve their customer relationships because they understand the importance of customer insight.

But the plain fact is that it’s easier said than done, and many companies are learning that the hard way as they attempt to solve problems on their own. Instead, they should seek out a partner with whom they can collaborate to gain the type of crucial customer insights that will enable them to decide how and where they can be world class.

Years from now, U.S. manufacturers will look back at 2007 as a year of uncertainty. How will 2008 be recalled? For the most visionary manufacturers, 2008 will be remembered as a watershed year, a period which will see American manufacturers begin to capitalize on the opportunities for growth that result from adopting a collaborative business model that combines the customers’ viewpoints with the perspectives of suppliers, while leveraging the capabilities of all partners in their respective value chains. In a nutshell, 2008 can be the year that the industry moves away from its “go it alone” model to recapture its world-class position of strength.

Gary Baldwin is a vice president in Capgemini's manufacturing practice. His primary areas of specialization are transformational consulting, strategic planning, ERP and supply chain management. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .