Friday, April 27, 2012

The evolution of (new) manufacturing

There is much conjecture about the future sustainability of the manufacturing industry, especially in industry news out of the US. Previously, some economists predicted the need for a more service-based economy as, they argue, manufacturing is now the primary domain of the lower-cost BRIC nations. Contrarily, stories are now emerging where large manufacturers are 'reshoring' or coming back to the west - up to a third of manufacturers are looking at reshoring according to a recent Boston Consulting Group Survey.

There's no doubt the industry is at a watershed in its global relevance. To date, the focus has been on an emerging China and the low-cost production and vast consumer market it offers. The balance is due to shift, as outlined in a previous post on MIMOC. Manufacturing In Markets Of Consumption is where production is determined by proximity to markets and is expected to be felt in large consumer markets such as Europe, US and China. Some will say it is jobs coming back to their rightful place and well... let them say that.

In consuming various facts and opinion, I've reached a number of conclusions that both resonated with and challenged my previous beliefs:

The business case for manufacturing

The business case for manufacturing must be compelling enough to convince economic rationalists and those in positions of power as to its worth. These stakeholders will be supportive of the industry if they recognise its long-term value - at present, most do not.

It is likely industry will change it spots - perhaps a third Industrial Revolution is on its way, led by a digital manufacturing movement? Adjusting to such change will be difficult at worst, but not impossible. Its resilience has been proven in the face of natural disasters, economic volatility and competitive pressures in times gone by, and there's no doubt our approach needs to change. I recently became engrossed in a presentation by Professor Goran Roos who noted that Australian manufacturing, mainly because of its parity with the US dollar, has moved from a low-cost competitive environment into a high-cost one and has to shift its approach accordingly. He makes salient points in his 2011 report "Manufacturing into the Future" such as - advanced economies need manufacturing because:
  • nations that emerged best from the GFC were based around high-value add export oriented manufacturing
  • it is the biggest spender on applied research and driver for productivity
  • it is the largest generator of employment
  • manufacturing is at the forefront of applied technology and innovation
  • the resources boom may be shorter than expected
It is people like Professor Roos that will help build a sound business case for manufacturing that will resonate with economists and influencers, minus the sentimentality.

Blatant promotion: Professor Roos is a keynote speaker at our upcoming Manufacturing Skills Conference on 18 May.

Let's address the career path

Many governments and industry associations have orchestrated campaigns to make manufacturing "sexy" or "cool" to kids. I read an article on the manufacturing skills shortage that examined the deep psychological roots the industry has for Gen Y and thereby influencing their choice of manufacturing as a career path. AJ Sweatt says its not that people are smarter, that they don't want to make things or even that they don't think manufacturing is "cool". He says:
"The problem is that for a generation, US manufacturers outsourced the jobs of fathers, mothers, uncles, aunts, brothers and sisters in search of cheap labor...the factory/mill/shop/plant was shutting down, and the manufacturing job that had given them a decent life, pride, and dignity was no more. There were probably tears. Moods changed, relationships suffered, some families shattered. These kids watched their parents and communities face a dust-bowl reality that said they were expendable....How do you tell someone to ‘un-live’ that?"
Is this the same for Gen-Y and Gen-Z in Australian manufacturing? Perhaps. In my encounters with Gen-Y, it seems that remuneration, status (career progression) and lifestyle are the determining factors in a career choice. Much is being done to re-educate Gen-Ys about the changing nature of (new) manufacturing careers, but this is a long-term challenge requiring a long-term commitment. If we do not continue this campaign, we will reduce the future capability of (new) manufacturing. We will only know if it has been successful once all of Gen-Y are in the workforce and by then, we should be wising up Gen-Z that manufacturing is "mental"(?) that phrase catch on in a couple of years.

The "S" word
Now here's a dirty word... "subsidies" a.k.a. "protectionism". I know it is US-centric, but I refer you to a great article on how "Balancing Trade is not Protectionism". The author Mike Collins argues that the US trade balance is not based on a level playing field as China manipulates its currency to force a trade deficit. He says the only beneficiaries are US multinationals (who produce in these low-cost countries) and those nations that manipulate their currency, likening the relationship as trying to sustain a heroine addiction. His argument that the US should be using the "S" word to protect its future from the ultimate collapse that will happen from an ever-expanding trade deficit.

I tend to agree that why wouldn't we, as part of a manufacturing policy, identify key manufacturing sectors of strategic importance and support them in preparation as future economic cornerstones? As those sectors mature, ultimately other low-cost providers will emerge which is when the free market should take over and we should look at the next wave of strategically important sectors.

Well, that's my brain drained. What do you think?

Wednesday, April 18, 2012

Skills development: are manufacturers shooting themselves in the foot?

A pertinent question as asked by the Manufacturing Executive blog. It aligns with one of our previous posts about the benefits of recruiting mature-aged workers. But in the long-term does this benefit the industry?

Will this practice of hiring mature-aged workers ultimately discourage Gen-Y and the long-term sustainability of the manufacturing industry?

Comment below or on the post at Manufacturing Executive.   

Tuesday, April 17, 2012

My 100th post... have I jumped the shark?

Well 100 posts seemed to come around quite quickly and whenever a TV show reaches some sort of milestone (read: runs out of ideas) they have a flashback show. So if you'll indulge me I'd like to provide some highlights of the last 100 posts, in no particular order:

IBM's 100 years in 100 seconds
A great snapshot of the evolution of a company and communicating its achievements, some of which you may not know about.

The myth of quick innovation adoption
An innovation normally takes up to 25 years to be adopted, when the perception is that it usually happens overnight.

The cuckoo clock vs Michelangelo
Does chaos stimulate innovation and order breed stagnancy?

Why doesn't Britain make things anymore?
Things are cheaper at the cost of expertise.

Santa's supply chain - the best in the world?
Reasons why Santa delivers.

Here's a solution: why not declare a war on manufacturing
Use the logic: declare a war on something and see it grow

The Music of Innovation (and vice versa)
My first real post.

Mature-aged workers - an unrealised resource?
The first post by a non-blogging colleague - and our most read post to date. Grrr! :)

I hope you've found the blog informative and entertaining. Let me know if you ever think I've 'jumped the shark' like Fonzi.

Monday, April 16, 2012

Offshoring in the west. Viable in the long-term or just lucky?

I found this a very interesting article to come out of WalesOnline. Major multi-national Tata, which makes everything from trucks to tea, has invested £800M in Welsh steelworks facilities. The Tata Steel spokesperson said the reasons for this investment were because of the quality of the workforce, strong industrial relations and a supportive Welsh government.

It's welcome news for the 8000 people employed by Tata in Wales, but more broadly offers an interesting twist on the offshoring issue and its implication for Western manufacturers.

Could manufacturers in the US, Europe and other western nations be genuinely considered as viable offshoring alternatives for the big manufacturers? eg those from India and China. The majority of economic arguments up to now would say otherwise.

Two of the reasons why you might think western manufacturing nations were unattractive offshoring alternatives; a quality (highly paid?) workforce and industrial relations practices, were some of the reasons why Tata were drawn to investing in Wales. Are these features that much of an enticement for overseas investment?

Another byproduct of the success was the Welsh government was able to 'on-sell' education via its FE colleges to the Indian education department - this may have helped seal the deal.

What do you think? Is it a viable alternative for western manufacturers to attract BRIC-type (Brazil, Russia, India, China) investment?

When companies shouldn't outsource manufacturing

An excerpt from an article in Industry Week, by Jeff Wallingford, vice president, Supply Chain Strategy, Riverwood Solutions.

* * * *

The trend to outsource manufacturing has been going strong for two decades. Recently, it has been popular to speculate on whether this trend has gone too far... There are still many cases where a company may benefit by choosing in-house manufacturing over outsourcing - but only when these cases truly apply:
  • a company's manufacturing process is the source of its competitive advantage
  • a firm does something in a unique way and does not want competitors to know how to do it
  • a competitive market for the specific manufacturing service does not exist
  • there is no opportunity for the service provider to leverage their fixed capital, common overhead, specific purchasing power, or expertise
  • to capture a limited and critical resource or channel
  • it is too costly to outsource the manufacturing process because of the additional costs driven by outsourcing
Click here to read the full article.

Friday, April 13, 2012

ABP AllBoards kickstart change

QMI Solutions provided an essential “outsiders’ perspective” for family-run ABP Allboards that helped  the company kick start change.
The manufacturer has so far identified $120,000 in possible savings by reducing inventory costs and the potential to save $150,000 a year in rent by rearranging the factory layout or using smaller premises. Here's some compelling pics of some of the changes ABP have made to their factory layout:

ABP AllBoards factory before

ABP AllBoards factory after

Click here to read the full article.

Thursday, April 12, 2012

A global perspective on NextGen workforce

Manufacturing Executive poses some good question on its website regarding the features of the next generation workforce:

"Next-gen workers in the US and Western Europe, for example, have high - some say unrealistic - expectations of well-balanced home/work lives and work that has meaning beyond a pay check. But...the expectations of Millennials in Asia are significantly different. There it's all about rapid advancement and compensation. If such opportunities aren't readily available, next-geners in China will quickly bolt for greener pastures.."

What do you think? Comment below or at the Manufacturing Executive blog.

Wednesday, April 11, 2012

Companies that are terrible at innovation

Tim Kastelle, on his blog, dissects the types of innovation based on an Innovation Matrix that measures companies based on Innovation Commitment and Innovation Competence.

He argues some companies don't need to innovate, i.e.:

  • well-established firms in stable industries
  • monopolies and oligopolies
  • some startups
  • established firms that have forgotten how to innovate

  • I like his reference to Schumpeter regarding innovation in startups:

    "..all new firms are founded on an innovation, but there are two groups that don’t: startups in bubbles and startups in trouble."

    Click here to read the full article.

    Monday, April 9, 2012

    US Automotive Sector: "I'm Not Dead Yet!"

    Apologies in advance... as a long-time Monty Python fan, I had to re-post this given the headline. Besides that, the article provides an interesting take on the resurgence ot the US auto industry from Manufacturing Executive.
    * * * *
    The U.S.automotive industry has reprised the role made famous in a classic Monty Python sketch: One lucky soul about to be cast atop a heap of bodies cries out, “I’m not dead yet.”

    It’s hard to believe, but just a few years ago, many in the United States saw fit to toss the Big Three automakers on the undertaker’s pile. Through a powerful combination of innovation, regulation, and reconciliation, mixed with a healthy dose of luck, the automotive industry has picked itself up off the pile.

    In the afterlife, Ford has made billions. Across town, GM has done the same. Meanwhile, Chrysler has managed to turn its red ink black, albeit at a slower pace. The troika’s March sales numbers, released this week, show an industry on the rise.

    The question is how it happened. The answer, of course: It took a crisis. Most of us are familiar with the basic plot of this epic resurgence.

    Click here to read the full article.

    Friday, April 6, 2012

    There's no point curing mice

    Quite a thought-provoking piece from Dr Tim Kastelle at the Innovation Leadership Network. He refers to a quote from Dr Ian Frazer, developer of the  his development of the vaccine for papillomavirus associated cancers, regarding how to turn innovation into real practical applications. Dr Frazer said:
    "There’s no point curing mice. They’re not even grateful."
     Kastelle then asks three pertinent questions for researchers:

    For business research, there are three things that you have to consider:
    1. Is your research question interesting?
    2. Is your research idea doable?
    3. Does your research have a practical application?
    Click here to read the full article.

    Thursday, April 5, 2012

    GE embraces Lean Manufacturing as a sustainable competitive advantage

    The opening of a new GE Refigeration factory in Kentucky is good news for US manufacturing. However it is important to note that GE built the high-tech plant with the reduction of environmental impact foremost in mind.

    Click here to read the full article.