Next Generation Manufacturing

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.

Of Interest for Manufacturers

How U.S. Manufacturers Can Compete Abroad? By leveraging the power of partnerships and working more closely with their suppliers, manufacturers can gain an edge in the global marketplace. Business Week explains.

A predicted population explosion will put intense pressure on critical resources such as water, energy, and land. How will this scenario affect packaging, you might ask? Find out from Greener Package.

A survey reveals that mid-size companies are more confident compared to six months ago about economic growth for U.S. manufacturing in 2011. Read more at the Supply Chain Brain.

Will the wave of green energy start-ups crash? A survey reveals that private equity firms are concerned about an investment bubble occurring in the green energy sector, among other hot industries. From Reuters.

A Report for Food and Beverage Manufacturers on Going Green

Here’s a pulse-check on business-performance challenges and opportunities for food and beverage manufacturers from Grant Thornton. The Fast Facts on Food Processing series includes analysis and translation of the findings from six mini-polls to form a series of reports for its food and beverage clients. This particular report examines the green movement and how food and beverage companies are focusing on the three Rs (reduce, reuse, recycle) as they green their facilities, supply chains, products and packaging, in order to capitalize on the growing consumer appetite for environmentally friendly products.

Download the sixth report in the Grant Thornton Fast Facts on Food Processing series.

15 Rules for Manufacturers – Unless You Want to Add a Few of Your Own

Everybody has a set of rules that they live by, but not everybody follows the same rules the same way. That’s why the 10 Commandments haven’t stopped adultery or abuse of the elderly – despite their apparent clarity on the matter.

It’s also true that not everybody works from the same list at all times. If you play golf on Saturday mornings, you probably use a different set of rules (never press the Nassau with the well-tanned stranger carrying a worn set of 1971 Ben Hogans) than if you prosecute alleged criminals during the week (never ask a witness a question to which you don’t already know the answer).

So with that grain of salt, here are 15 rules to live by for manufacturing leaders:

1. A spreadsheet may reveal problems, but it can never fix them.
2. Profit is a byproduct of success; success is a byproduct of everything else.
3. Don’t try to B.S. an engineer.
4. Silver bullets are too rare to be part of the business plan.
5. You’ll be a better leader if communicating is the only thing you do than if it’s the only thing you don’t do.
6. A dollar in savings is worth more than a dollar in sales, but…
7. …You can’t save your way to growth.
8. Conditions always tend to favor the leader.
9. There is no job title so important that it precludes continued learning.
10. Success and failure are two phases of the same cycle.
11. Under-promise and over-deliver. (No, it’s not original, but it’s indisputably effective.)
12. It takes 100 steps to make a great product – and one misstep to ruin it.
13. The right answer is never in the extreme.
14. When bean counters start running your business, your business becomes the counting of beans.
15. If nothing else, treat people well.

Do you have any personal rules that you operate by? Feel free to share by commenting.

By Bob Rosenbaum, Editor

Dominance Isn’t a Sustainable Form of Energy – in Business and Politics Alike

Next Generation Manufacturers wondering about whether sustainability is a fad or for real might want to take a look at “A National Strategic Narrative” by Capt. Wayne Porter of the U.S. Navy and Col. Mark Mykleby of the U.S. Marines. As reported by The New York Times, the report urges leaders to recognize that “security means more than defense…dominance, like fossil fuel, is not a sustainable form of energy.”

In its place, the report — published by the Woodrow Wilson International Center for Scholars — suggests that long-term success for a nation is ultimately about education, social policies, justice and diplomacy, rather than military might. From the Times: “The first priority, they write, should be, ‘intellectual capital and a sustainable infrastructure of education, health and social services to provide for the continuing development and growth of America’s youth.'”

Doesn’t sound a lot different from what it takes to be an NGM company, either.

In Baseball and Manufacturing, Some Stats Matter the Most

I like baseball, and I like baseball statistics – especially sabermetrics. These advanced statistics, referring to the acronym for the Society for American Baseball Research, are transforming how those in the game and those observing the national pastime gauge performance. For example, wins above replacement player (WARP) is, according to Baseball Prospectus, “the number of wins this player contributed, above what a replacement-level hitter, fielder, and pitcher would have done, with adjustments only for within the season.” WARP quickly reveals the value of a player to an organization.

Imagine having a go-to metric for manufacturing that similarly and quickly gauges the value of a plant to an organization. To that end, MPI computed overall plant efficiency (OPE) for U.S. manufacturing facilities, using 2010 MPI Manufacturing Study median and weighted data and U.S. labor data. OPE is a multiple of the following three factors:

• Overall equipment effectiveness (OEE): multiple of three subfactors for an equipment effectiveness metric.
• Labor operating efficiency (LOE): multiple of three subfactors for a labor effectiveness metric.
• Capacity usage: measure of production volume as a percentage of designed capacity.

OPE for U.S. plants was approximately 18% in 2010 (see below). How do your plants — or functions and departments within your plants — stack up?

Overall equipment effectiveness (OEE)	Machine availability % Quality yield % Run rate as % of optimal run rate	80.0%
Labor operating efficiency (LOE)	Empowerment % Annual labor retention % Nonabsenteeism %	38.2%
Capacity usage	Production volume as % of designed capacity	60.0%
Overall plant efficiency (OPE)	OEE X LOE X Capacity usage	18.3%

Source: MPI 2010 Manufacturing Study and U.S. Bureau of Labor Statistics.

By George Taninecz, VP of Research, The MPI Group

Supply-chain Management Strategies for Manufacturers

The whitepaper SAP Next Generation Supply-Chain Management analyzes responses from more than 2,500 manufact-urers—presenting their best practices and benchmark perfor-mances. Based on data from MPI's Next Generation Manufacturing Study, this paper was written by MPI for SAP and explains how leading manufacturers are implementing supply-chain management strategies that will allow them to compete today and into the future.

Click here to download SAP Next Generation Supply-Chain Management.

Of Interest

What's the biggest headache in the supply chain today? After dealing with volatile demand and rising commodity prices, supply chain managers today are most worried about basic transportation. The Supply Chain Shaman explains.

Ready or not, businesses are preparing for the state of California to launch its carbon-trading market. The biggest opposition is coming from an un-expected source. Read more at Reuters.

Why is anybody surprised that oil is staying at more than $100 a barrel? Why the free market alone isn’t likely to solve our energy problems. By Brent Erickson in the Environmental Leader.

Stat of the Week: Pricing and the recession

Nothing sharpens the pricing pencil like a recession, and a before-and-after look at MPI’s benchmarking toolkit makes that clear.

In early 2008 (several months before the recession), respondents were asked how per-unit pricing had changed in the previous 12 months. They were asked the same question in the most recent survey—at the recession’s tail end. Here’s how their answers compare: In 2008, 16.4% had cut prices—compared with 23.6% that had cut prices in the 12 recessionary months prior to the 2010 survey.

In 2008, just 15.0% of respondents reported that prices had remained the same during the previous year—compared with 33.8% of respondents in 2010.

As expected, price increases were harder to come by during the recession. In 2008, 68.6%—more than 2 out of 3—had raised prices within the previous year. Just 42.6% said the same in 2010.

For more statistical insights and important benchmarks for your operation, visit the MPI Global Benchmarking Toolkit for details and pricing for immediate access.