Last week, MPI with the American Small Manufacturers Coalition (ASMC) — an association of manufacturing extension centers that work to improve the innovation and productivity of America’s manufacturing community — released the results of the 2011 Next Generation Manufacturing (NGM) Study.
NGM Study Highlights
The Next Generation Manufacturing (NGM) Study provides a path for U.S. manufacturers to achieve success in the next generation, offering:
- Strategies that can help them capture competitive advantages,
- Best practices to support execution of those strategies, and
- Performance goals against which to measure their progress.
Following the NGM path — or ignoring it — will likely be the difference between success and failure for individual manufacturers and U.S. manufacturing in general.
Most manufacturers recognize the importance of NGM strategies…
Most manufacturers recognize the importance of NGM strategies (rated 4 or 5 on a scale of 1-5, where 5 equals highly important) to their business success. Manufacturers across the country identify superior process improvement (86% of manufacturers rated it “highly important” or “important”) and customer-focused innovation (85%) as the most important NGM strategies to their firms’ success over the next five years. The perceived importance of sustainability increased by 24 percentage points since the 2009 NGM Study (Figure 1). The perceived importance of supply-chain management and global engagement also increased. But many firms still ignore NGM strategies or pay little attention.
But manufacturers face an “execution gap”
Many manufacturers are progressing toward world-class status with individual NGM strategies (rated 4 or 5 on a scale of 1-5, where 5 equals world-class), but there is a large execution gap — the difference between the number of firms that recognize the importance of a particular NGM strategy and the number of firms near or at world-class status in that strategy. For example, 72% of manufacturers believe supply-chain management is important or highly important, but only 29% of manufacturers are near or at world-class status in supply-chain management (Figure 2). The execution gap represents a substantial barrier to long-term success for U.S. manufacturing.
Figure 1: Rate the importance to your organization’s success over the next five years:
(rated 4 or 5 on a scale of 1-5, where 5=highly important)
|
|
2009 |
2011 |
%-point change |
|
Process improvement |
86.3% |
86.5% |
+0.2 |
|
Customer-focused innovation |
84.6% |
84.0% |
-0.6 |
|
Human-capital management |
76.7% |
77.7% |
+1.0 |
|
Supply-chain management |
68.2% |
72.2% |
+4.0 |
|
Sustainability |
35.1% |
59.2% |
+24.1 |
|
Global engagement |
46.3% |
50.4% |
+4.1 |
Figure 2: Rate your organization’s progress toward world-class status:
(rated 4 or 5 on a scale of 1-5. where 5=world-class)
|
|
2009 |
2011 |
%-point change |
|
Customer-focused innovation |
45.5% |
43.2% |
-2.3 |
|
Process improvement |
43.8% |
42.7% |
-1.1 |
|
Human-capital management |
30.5% |
30.4% |
-0.1 |
|
Supply-chain management |
27.6% |
29.4% |
+1.8 |
|
Sustainability |
20.1% |
27.5% |
+7.4 |
|
Global engagement |
24.6% |
25.3% |
+0.7 |
Many manufacturers lack key success factors
Many U.S. manufacturers lack key success factors — talented people, business systems and equipment, company-specific strategy — and face competitive disadvantage. For example:
- “Sufficient leadership and talent” is in place to drive world-class process improvement at 61% of U.S. manufacturers (the highest percentage among any of the six strategies) — yet many firms report “insufficient talent” and/or lack development programs to grow leadership and talent.
- 82% of manufacturers have business systems and equipment to support “current requirements” for customer-focused innovation (the highest percentage among any of the six strategies) — but only a small percentage of manufacturers describe their tools as “state-of-the-art,” capable of providing long-term support for this or other NGM strategies.
- 32% of manufacturers have no strategy for global engagement, 25% have no strategy for sustainability, and 15% have no strategy for human-capital management.
Small manufacturers face additional challenges
Smaller manufacturers face additional challenges, especially in an era of global manufacturing competition. They often lack the expertise and resources available to larger and more established firms. For example:
- 25% of small manufacturers (less than $10 million in revenues) are near or at world-class supply-chain management vs. 41% of large manufacturers ($100 million or more revenues).
- 10% of small manufacturers have both sufficient talent and skills development programs to drive world-class human-capital management vs. 33% of large manufacturers.
- 41% of small manufacturers have business systems and equipment able to support current requirements for global engagement vs. 65% of large manufacturers.
A generation of U.S. manufacturing leaders is about to retire
Transformation to a Next Generation Manufacturing model requires leadership consistency in the face of unrelenting competition — yet a majority of U.S. manufacturing firms anticipate a possible change in leadership within the next five years:
- 30% anticipate a planned succession, and
- 29% report a succession is possible.
The percentage of manufacturers reporting a succession or possible succession rose by approximately 5 percentage points since 2009. Among manufacturers with older executives, the likelihood of succession is even higher. As aging baby boomers reach retirement age, a next generation of leadership must take their place. U.S. manufacturers should be identifying and developing tomorrow’s leaders today; their actions — or lack thereof — will determine the fates of thousands of U.S. manufacturers.
U.S. manufacturers are looking for help beyond their own walls
Manufacturers — whether small or large — routinely seek external support from outside organizations. And a majority of manufacturers report their organizations have been positively impacted by industry associations, state manufacturing associations (including Manufacturing Extension Partnerships), and consulting firms.
A majority of manufacturers have sought support services (as needed or on an ongoing basis) for:
- Regulatory/compliance issues (67% of manufacturers),
- Operations improvements (64%),
- Workforce skills development (64%),
- Strategic planning (52%),
- Innovation/R&D (52%), and
- Business development (52%).
Sustainability is much more important to U.S. manufacturers than it was even two years ago
Manufacturers are far more likely in 2011 to cite sustainability as important to their organization’s success than they were in 2009: 59% rated it important or highly important in 2011 vs. 35% in 2009. Not surprisingly, the percentage of manufacturers progressing toward world-class sustainability grew as well: 28% of manufacturers reported they were near or at world-class sustainability in 2011 vs. 20% in 2009. Customers are demanding social responsibility, and U.S. firms are beginning to listen. Yet overall sustainability performance results have not improved substantially since 2009. When will green initiatives achieve critical mass among U.S. manufacturers?
Download a free copy of the 2011 NGM Executive Summary.
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