Manufacturing has been transformed and now consists of reassembling parts made around the globe with raw materials purchased from multiple foreign sources.

Agile, flexible, nimble, quick -- these are characteristics that separate world-class Olympic performers from the vast pool of great athletes. These same characteristics are prerequisites for success in today's manufacturing environment. Gone are the days when manufacturing was defined by independent companies assembling unique products, which were later sold and distributed directly.

Over the past few decades, manufacturing has been transformed and now consists of reassembling parts made around the globe with raw materials purchased from multiple foreign sources. Even distribution channels are astoundingly more complex with emerging markets and a worldwide web of possibilities. As a result, competition has never been more challenging, and only those manufacturers with agility, flexibility and speed will succeed.

Competition Is Not New. Right?
Competition has been a constant force since the advent of commerce. Today’s competition, however, has some new twists and turns. Globally, demand for product is stronger than ever due to a changing world economy.

“As development rolls across once-destitute countries [China and India in particular] at breakneck pace, lifting billions out of poverty, demand for food, metals and fuel is red-hot,” writes Clifford Kraus of the New York Times (“Chinese and U.S. Demand Drives Commodities Surge,” Jan. 15, 2008).    

The increased global demand is evident in its inflationary effect on a growing number of raw materials. In the past five years, the price of copper has tripled, zinc has doubled and oil has attained a historical record surpassing $110 per barrel. Such escalation and volatility in the price of raw materials are challenging manufacturers to explore every opportunity in an effort to maintain profitable operations. No doubt, manufacturers today are competing for raw materials with unprecedented pressure.

Advancements in technology and communication have contributed to the intensification of competition today. Such advancements have equipped even the smallest manufacturers with the expertise to compete against their largest competitors.

Until recently, large manufacturers generally maintained a monopoly on certain key competitive advantages. For example, utilizing offshore labor was not widely accessible to smaller organizations lacking the sophistication required to operate clear around the globe. Today, the utilization of offshore labor is a standard practice for manufacturers of any size.       

The Proof Is in the Price
The ferocity of today’s competition is visible in the steady, not inflationary, prices of consumer products. In the absence of intense competition, spiraling raw material costs naturally drive up prices. Manufacturers simply pass on the costs. In today’s market, however, the cost of products has not increased proportionally.

As competition revs up, manufacturers are less willing (and less able) to raise prices. Instead, they will temporarily tolerate lower profit margins while exploring every opportunity to lower costs, and increase efficiency and productivity.