Next Generation Manufacturing

2012 Global Manufacturers Benchmarking Toolkit

MPI's Global Manufacturers Benchmarking Toolkit offers 24/7 online access to detailed best practice and performance benchmarks — from world-class manufacturers — that help to boost performance now.

This powerful benchmarking tool allows you to sort data from more than 1,500 companies in the United States and around the world. Metrics and best practice information are available for human resources, plant operations, supply chain, green/sustainability, and capacity and equipment. Click here to see a complete list of available benchmarks.

View a demo or visit MPI's website to purchase an online subscription today.

Outsourcing for Growth

The 2011 Manufacturing Study revealed that manufacturers with rising sales will look for outsourcing partners in 2012 to help meet rising demand. Which activities are most commonly outsourced? Three critical functions:

• Transportation (88% of plants in 2011 vs. 72% in 2010),
• Information technology (68% in 2011 vs. 53% in 2010), and
• Maintenance (62% in 2011 vs. 44% in 2010)

Outsourcing (% of plants outsourcing activity)

Fabrication		Maintenance		Customer service
All	13.6%	All	5.0%	All	1.7%
Some	48.5%	Some	56.6%	Some	9.0%
None	37.9%	None	38.4%	None	89.4%
Assembly		IT		HR management
All	5.0%	All	12.9%	All	1.7%
Some	30.6%	Some	54.6%	Some	19.5%
None	64.5%	None	32.5%	None	78.8%
Electrical		Purchasing		Sales and marketing
All	15.3%	All	2.7%	All	2.7%
Some	42.0%	Some	6.6%	Some	25.3%
None	42.7%	None	90.7%	None	72.0%
Design and/or R&D		Transportation
All	5.6%	All	52.1%
Some	36.4%	Some	35.4%
None	58.0%	None	12.5%

What will you outsource for growth in 2012?

Inventories Grow — Can They Be Managed?

As the manufacturing sector continues to recover, inventories are on the rise. For example, inventories of manufactured durable goods rose for the 25th consecutive month in January 2012, according to the U.S. Census Bureau. For nearly two years during the recession, manufacturers have tried to satisfy demand from existing inventories whenever possible. Many manufacturers now will need to re-familiarize their operations with inventory-management practices as they and their markets enter a growth mode. For some, inventory management will be entirely new.

A majority of U.S. manufacturing plants do not use many common inventory-management practices and techniques: just-in-time supplier deliveries are the most common inventory-management practice (in use at 44% of plants), followed by pull systems with kanban signals (38%), and vendor-managed or -owned inventories (38%), according to the 2011 MPI Manufacturing Study. (Plants outside the United States were even less likely to be using most of these practices.) Approximately 17% of U.S. plants use none of the practices identified by the MPI study.

Practice	% of plants
Just-in-time supplier deliveries	47.30%
Pull systems with kanban signals	46.40%
Vendor-managed or -owned inventories	42.70%
One-piece flow techniques	24.10%
Quick equipment changeovers	23.60%
Production leveling/heijunka	18.60%
Parts/goods supermarkets	18.60%
RFID and computerized inventory tracking	10.00%
None of these	16.80%

Source: 2011 MPI Manufacturing Study, U.S. plants

In a rush to satisfy reemerging customer demand, manufacturers are unlikely to allow inventory shortages — raw material and components that go into their products or finished-goods — to prevent them from filling customer orders. And satisfying customer orders should be the first objective. But at what cost will manufacturing executives grow their inventories beyond rational levels of safety or buffer stock and risk profitability? Obsolete inventory was 2% (median) and 5.4% (average) in 2011. More is not necessarily better.

by George Taninecz, VP of Research, The MPI Group

Small Investment — Big Return

The Manufacturing 2011/2012 Executive Summary allows a look at a large sample of manufacturing plant performance benchmarks and identifies how top performers around the globe are succeeding in key performance areas.

Easy-to-understand charts and tables provide insights into five critical plant functions: plant operations, supply-chain, green/sustainability, and capacity and equipment. Download a sample report or click here for a complete list of metrics included in the executive summary.

Visit MPI's website to purchase for just $95.

Got Global?

President Obama recently encouraged American manufacturers to bring production back to the United States, promising new tax proposals to encourage “insourcing.” That’s a lot of potential insourcing — because the vast majority of manufacturing plants import material and/or components from outside their home countries.

In fact, 75% of U.S. and international plants in the 2011 MPI Manufacturing Study import goods from other countries, representing 10% (median) of their material and components (as a percentage of dollar volume). Among the U.S. plants in the study, 76% import from outside the United States, representing 8% (median) of material and components.

China is the source of choice for outsourcing; 59% of plants imported materials and components from China in 2011, importing 2% (median) of material and components. Among U.S. plants, 56% import from China, for 1% (median) of their material and components.

How well-connected is your firm with global suppliers and customers? And would tax incentives change your strategy?

by John R. Brandt, CEO, The MPI Group

How well-connected is your firm with global suppliers and customers? And would tax incentives change your strategy?

Measuring What Manufacturers Measure

The adage is that you can’t manage or improve what you don’t measure. That is good news for many manufacturing plants that report strong measuring capabilities for a range of fundamental operations performances.

A majority of plants have strong capabilities to monitor and measure location-specific inventory levels (58% of plants rated 4 or 5, where 5=real-time capability); process-specific quality (58%); process-specific safety (56%); and process-specific pace or speed (51%), according to the 2011 MPI Manufacturing Study of 322 plants in the United States and abroad. The bad news is that a surprisingly high percentage of plants have “no capability” to monitor and measure their operations, especially external logistics/distribution performance (18% of plants); in-plant material-handling performance (17%); and process-specific sustainability performance (16% of plants).

Plant’s capability to monitor and measure (% of plants)

	1=No capability	2	3	4	5=Real-time capability
Location-specific inventory levels	6.9%	8.7%	26.3%	30.5%	27.7%
Process-specific quality	3.8%	10.7%	27.6%	30.7%	27.2%
Process-specific safety	7.3%	10.1%	26.1%	35.2%	21.3%
Process-specific pace or speed	6.3%	11.8%	30.9%	28.5%	22.6%
Process-specific productivity (i.e., value vs. waste)	6.9%	14.9%	30.9%	30.9%	16.3%
Individual equipment or machine performance	6.6%	15.6%	32.3%	30.6%	14.9%
Supplier performance	6.2%	17.0%	38.8%	29.4%	8.7%
Process-specific sustainability performance	15.5%	16.6%	35.9%	24.3%	7.8%
External logistics/distribution performance	17.5%	18.2%	34.6%	24.1%	5.6%
In-plant material-handling performance	16.6%	20.7%	34.5%	19.0%	9.3%

Plants that have achieved or made significant progress toward world-class manufacturing status are more likely to have strong monitoring and measuring capabilities (rated 4 or 5) for all of the operations performances. For example, 59% of plants at or near world-class status have strong monitoring and measuring capabilities for process-specific productivity vs. 39% of plants that have made no progress or only some progress toward world-class status.

What can your company monitor and measure? What can your company improve?

By George Taninecz, VP of Research, The MPI Group

 

 

	1=No capability	2	3	4	5=Real-time capability
Location-specific inventory levels	6.9%	8.7%	26.3%	30.5%	27.7%
Process-specific quality	3.8%	10.7%	27.6%	30.7%	27.2%
Process-specific safety	7.3%	10.1%	26.1%	35.2%	21.3%
Process-specific pace or speed	6.3%	11.8%	30.9%	28.5%	22.6%
Process-specific productivity (i.e., value vs. waste)	6.9%	14.9%	30.9%	30.9%	16.3%
Individual equipment or machine performance	6.6%	15.6%	32.3%	30.6%	14.9%
Supplier performance	6.2%	17.0%	38.8%	29.4%	8.7%
Process-specific sustainability performance	15.5%	16.6%	35.9%	24.3%	7.8%
External logistics/distribution performance	17.5%	18.2%	34.6%	24.1%	5.6%
In-plant material-handling performance	16.6%	20.7%	34.5%	19.0%	9.3%

 

Demo MPI's Benchmarking Toolkit

Every year (and going on now), The MPI Group conducts its Manufacturing Study. This study is known to be one of the world’s most comprehensive annual surveys of manufacturing performance data. But did you know that the data from the study is published in one of the world's largest sortable databases on performance metrics?

The MPI Benchmarking Toolkit offers on-demand access to three years of user-defined manufacturing performance data from U.S. and international manufacturers in a multitude of industries and across a wide range of performance metrics, including essential benchmarks for scorecard analysis, Six Sigma and Lean initiatives, and other process-improvement programs.

There really is no substitute for good competitive intelligence, and The MPI Group offers one of the most comprehensive benchmarking tools available today. Watch this demo of how the toolkit operates or click here to visit our website for subscription information.

Stat of the Week: Selling Globally

The economy may have gone global, but the success of companies selling their goods around the world is less than uniform. In general, U.S.-based companies seem to do less of it than their non-U.S. counterparts.

In the most recent manufacturing study by The MPI Group, when asked what percentage of total sales volume was generated overseas, here’s how respondents answered:

• The average among U.S.-based manufacturers was 13.2% – that is, a bit over one-eighth of all sales is generated overseas.

• The average among foreign manufacturers was more than twice as high – 28.2% of sales.

• As manufacturers get better at tapping overseas markets, the gap between those in the U.S. and their non-U.S. counterparts persists.

• At the 90th percentile – those who claim the highest share of revenue from overseas sales – U.S. manufacturers generated 45.0% of revenues overseas, compared to 84.4% for foreign manufacturers.

The Opposite of World Class – Do You Know These Plants?

Many organizations are motivated to improve by seeing and witnessing operational excellence among their peers and exploring neighboring plants or leaders in their industry. Good companies or facilities seek to set stretch targets and become world-class; other sound operations benchmark for ways to get better and establish more competitive goals. Many plants, though, are looking to simply stabilize dysfunctional operations and apply some means of improvement.

Manufacturing metrics from U.S. plants that participated in the MPI Manufacturing Study, years 2006-2010, reveal operations challenges that face about one in 10 manufacturing facilities. (And these are the plants that at least have the will to improve — they participated in the annual study and are interested in what other companies and facilities are doing.)

• On-time delivery: 13% of plants report on-time delivery rates of 80% or lower.
• Scrap and rework: 11% report scrap and rework rates, as a percent of sales, of 10% or higher.
• Labor turnover: 17% report annual labor turnover of 20% or higher.
• Warranty costs: 9% report warranty rates, as a percent of sales, of 5% or higher.
• Machine availability: 13% report machine availability of 50% or lower.
• Customer retention: 10% report customer retention rates of 80% or lower.
• No improvement method in place: 12% report the plant has no methodology in place to improve – none.

If you’re a customer of plants with metrics like these, you probably know their struggles firsthand and have been on the receiving end of their problems. Or do you recognize your plant in these numbers? How does your operation stack up? Take the 2011 MPI Manufacturing Study to find out.

By George Taninecz, VP of Research, The MPI Group

Stat of the Week: Labor Unions and Employee Turnover

Labor turnover is expensive – and even in these times of elevated unemployment, manufacturers try to minimize it.

Interestingly, there appears to be a correlation between turnover and the presence of labor unions – though it may not be what you expect. Among non-U.S. facilities, turnover tends to be higher where there is significant union presence.

Average turnover in this international set is 27% where more than a quarter of the workforce is union – compared to 17% where less than a quarter of the workforce is union. As turnover rates decline (toward zero in the 90_th percentile), so too does the difference between union and non-union shops.

The story is different for U.S. plants, where the correlation between unions and turnover all but disappears. But if anything, the data lean slightly toward lower turnover in facilities with significant union representation. The average turnover is 10% for shops with more than a quarter of workers in unions; it’s 12% where fewer than a quarter of workers are in unions.