Next Generation Manufacturing

The Top Three Inventory-Management Practices

Customer demand is again booming in many markets — and manufacturers are boosting inventories back to prerecession levels to keep up. Savvy execs at these firms will adopt recognized best practices to guarantee timely deliveries, minimal inventory, and maximum cash flow.

The top three inventory-management practices (in place at more than one-third of plants around the world) are:

• Just-in-time deliveries (in place at 41% of plants)
• Pull systems with kanban signals (35%)
• Vendor-managed or -owned inventories (34%)

Inventory-Management Practices

	All Plants	U.S. Plants	International Plants
Just-in-time supplier deliveries	40.6%	44.5%	31.6%
Pull systems with kanban signals	34.8%	41.3%	19.6%
Vendor-managed or -owned inventories	34.1%	37.1%	27.1%
One-piece flow techniques	28.0%	31.0%	21.1%
Quick equipment changeovers	25.1%	29.7%	14.3%
Parts/goods supermarkets	18.3%	19.7%	15.0%
Production leveling/heijunka	13.8%	14.8%	11.3%
RFID and computerized inventory tracking	13.1%	10.0%	20.3%
None of these	19.2%	16.8%	24.8%

Source: 2010 MPI Manufacturing Study.

About 10% of manufacturers have all three of the top practices in place (14% of U.S. plants and only 3% of international plants). Yet 19% of manufacturers have no inventory-management best practices in place (17% of U.S. plants and 25% of international plants) — a troubling sign for these firms as production volumes rise.

Does your firm have all three top practices in place?

By John R. Brandt, CEO, The MPI Group

Six Key Strategies for Process Manufacturers

Process manufacturers face unique challenges in partnering with suppliers thanks to complex automation schemes and regulated operating environments. In the Next Generation Supply-Chain Management in Process Industries Webinar--created by The MPI Group for Infor--highlights how leading manufacturers are rethinking the very concept of supply-chain management in process industries for Infor customers. 

Visit Infor's website to download the recorded webinar.

Sustainability Key to a Healthier Bottom Line

On March 31, the price of oil hit its highest level since September 2008 – which was just about the time that the world realized it had been falling into what has since been dubbed the Great Recession.

The main culprit isn’t what you might think, according to some analysts. My mind immediately goes to regime disruptions in the Middle East – where any uncertainty seems to send oil prices upward.

But the bigger reason for the rising price of crude, apparently, is economic recovery in the United States and elsewhere. Factory orders are up, trucks are getting full, and the engines of commerce are using more oil – which is exactly what we’ve all been waiting for.

In the context of competitive manufacturing, this news makes current environmental debates irrelevant. Discussion of peak oil, global warming, and alternative energy policy all become mere academic exercises.

What’s important to know is that the cost of doing business will rise simply because people are doing exactly what they’re supposed to do – i.e., buying the stuff you make.

And yet, many executives still view the cost of oil and other basic commodities as a necessary expense that affects them and their competitors equally. By extension, they view sustainability investment as a touchy-feely do-gooder exercise that doesn’t help the bottom line.

They are wrong.

Businesses that are serious about sustainability simply recognize that when you use less stuff, the next price increase has less impact. Read it another way: The next price increase makes them more competitive.

The common complaint against green initiatives is that their cost exceeds the return. In the short run, that may be the case. But does anybody really believe that oil, chemicals, paper, basic metals, and landfill space – to name a few – are going to cost less in 2021 than they do today?

By Bob Rosenbaum, contributing editor, The MPI Group

Of Interest

Rising costs and wages may signal an end to coastal China's role as a low-cost manufacturer to the world. Read more at the Chicago Tribune.

Meanwhile, if labor issues at Ikea's only U.S. manufacturing plant are an indication, the Swedish furniture maker may view the United States as a source of low-cost labor. Seriously. From the Los Angeles Times.

And if all that wasn't surprising enough, Walmart has emerged as a paragon of sustainability – just five years after receiving skeptical reviews at the launch of its first corporation-wide green initiative. By Leon Kaye at Triplepundit.com.

Of less surprise, new data from the Commerce Department answers the question, Where are the jobs? For every 10 jobs cut here in the past decade, U.S. mulItinationals created eight jobs overseas. From the Wall Street Journal.

Podcast: Readying for the Manufacturing Rebound - How to Prepare When the Economy Stabilizes

Invest 15 minutes to find out how Next Generation Manufacturers are getting ready to profit from the recovery—no matter how slowly or quickly the economy heats up. This lively podcast features John Brandt, MPI’s CEO and a co-director of the Next Generation Manufacturing Study, as well as Microsoft executives. Don’t miss the NGM tips in this installment of Microsoft's Manufacturing Conversation Series.

Dowload and listen as a WMA.

Where Is the Well-Oiled Education System?

Manufacturing strengthens the financing balance of a country. The countries that have a strong manufacturing base have a healthier financial situation. Loss of manufacturing contributes to debts and impoverishment. Manufacturing clearly is a must to keep the rest of the economy going. Over time, leadership in manufacturing determines the economic winners and losers.

But manufacturing, invention and innovation depend for a very large part on the highly skilled employees. The most important thing to grow the industry is the quality and availability of the labor force.

Read more at the Bert Maes Blog

Participate in the 2011 MPI Manufacturing Study

MPI has extended the deadline to participate in the 2011 MPI Manufacturing Study. Participants receive a free 24-page Executive Summary of this year’s findings and six months of free online access to benchmarks from four years of the study ($495 value). Participation is anonymous:

1. Go to www.MPIManufacturingStudy.com
2. Complete the study questionnaire anonymously and submit by the extended deadline of September 26, 2011.
3. After submitting, you can provide contact information at a separate website to receive your free Executive Summary and free six months of online benchmarking.

Why Manufacturing Is Exactly Like a Hike in the Cloud Forest

I recently visited Costa Rica. We hiked in the cloud forest (the view from the continental divide… amazing), zip-lined over the rain forest, and chilled afterward with an Imperial beer or two (the only bit of high school Spanish I could recall, it seems, was “Dos cervezas, por favor.”). It was a life-changing trip, and I feel privileged to have seen one of the most ecologically diverse (and fragile) regions in the world.

Yet in getting ready for my vacation, I was struck by how unprepared I was for a new adventure. And that got me to thinking about Next Generation Manufacturers. I was unprepared because for the past 10 years I’ve primarily traveled for speeches or business—and in true Boy Scout/Lean fashion, I always have my business travel “tools” ready to go:

• A garment bag preloaded with a toiletries kit (including duplicates of everything I use at home) and workout clothing (again, duplicates)
• A briefcase preloaded with every charger, connector, and cable I could conceivably need
• Preselected “meeting ensembles,” including sport coat, shirt, and pants that all work with the same black belt and black loafers (to ease passage through the TSA maze at the airport)

This system lets me pack and get out the door in minutes for a business trip—but was next to useless for an expedition that required hiking boots, insect repellant, headlamps, a multi-tool knife, GPS, etc.

In short, the trip that I was prepared to take wasn’t the journey that I actually found myself on. Which meant that I had a steep learning curve and a not-inconsiderable amount of pre adventure stress, even though I really did want to reach that vista over the cloud and rain forests.

It’s similar (though with less beer) for would-be Next Generation Manufacturers. These execs have spent so much time just surviving over the past few years—cutting costs, rationalizing product lines, shoring up capital structures—that in some ways they’ve arrived at an economic recovery with the wrong tools in their bags. Success over the next few years will require dramatically different thinking about:

• What customers really want
• What it really means to be a global or green manufacturer
• What talent it takes to really seize the opportunity to grow

Most companies don’t yet have those answers. And for those that do, few have them arranged neatly in a bag that they can carry confidently to the future.

By John R. Brandt, CEO, The MPI Group

Walk with Womack

Ever wish you could walk a plant floor alongside Jim Womack, the founder of the lean manufacturing movement, seeing what he sees? Now you can, literally, walk with Womack as he visits companies and facilities around the globe.

The Lean Enterprise Institute has just published Gemba Walks, a collection of Womack essays from the past decade that includes his reflections on the original essays and new material that looks ahead for the lean movement. Gemba Walks reveals how Womack accurately predicted the reshaping of the global auto industry (including Toyota's triumphs and challenges)—as well as the spread of lean (and need for lean) well beyond manufacturing.

I had the pleasure of assisting Womack as project manager for the book. What I came to realize is that Gemba Walks is so much more than a grouping of old stuff. But, ironically, I think its strength is that it is a body of work that has emerged over many years as Womack’s thoughts about lean were refined and expanded. Because of this it offers readers an opportunity to grasp what really makes lean succeed—or not. That solution has very little to do with lean tools and techniques, but very much to do with the heart of Gemba Walks: “Go see, ask why, show respect.”

Click here to purchase Gemba Walks from The Lean Enterprise Institute.

By George Taninecz, VP of Research, The MPI Group

It’s Not Whether to Improve, but How

Process improvement appears to be of equal importance to manufacturing operations around the globe. But how that improvement is achieved appears to have some geographic correlation.

When asked which process improvement methodologies they employ, similar percentages of U.S. manufacturers (85%) and international manufacturers (86%) indicated that they use at least one process improvement system.

The difference is in which systems they use.

In order of acceptance (respondents were allowed to make multiple selections), the improvement methodologies favored at U.S. plants are:

• Lean Manufacturing (69% of respondents pursue it)
• Total Quality Management (29%)
• Six Sigma (28%)
• Theory of Constraints (17%)
• Other system of systems (16%)
• Toyota Production System (12%)
• Agile Manufacturing (8%)

Among international plants, the order is different:

• Total Quality Management (50%)
• Lean Manufacturing (41%)
• Other system or systems (23%)
• Six Sigma (22%)
• Agile Manufacturing (18%)
• Theory of Constraints (12%)
• Toyota Production System (8%)

Also interesting is the large lead in the United States that a single system— Lean—commands over all other methodologies. While 69% of facilities report using Lean, the next-most-popular methodology, TQM, is 40 percentage points behind in adoption.

The results around the rest of the world are more fragmented. While TQM leads international plants with 50% adoption, Lean comes in second, just 9 percentage points behind.