Next Generation Manufacturing

Stat of the Week: Why Manufacturers Seek Outside Help

Manufacturers, whether small or large, routinely seek external support from outside organizations. And a majority of manufacturers report that their organizations have been positively affected by industry associations, state manufacturing associations, Manufacturing Extension Partnerships and consulting firms.

Here, according to the 2011 Next Generation Manufacturing (NGM) Study, are the disciplines for which manufacturers are most likely to seek outside assistance:

• Regulatory/compliance issues (67% of manufacturers)
• Operations improvements (64%)
• Workforce skills development (64%)
• Strategic planning (52%)
• Innovation/R&D (52%)
• Business development (52%)

The NGM study was prepared by The Manufacturing Performance Institute on behalf of the American Small Manufacturers Coalition.

A free copy of the NGM Study executive summary is now available for download.

Stat of the Week: A Leap in Concern about Sustainability

Manufacturers are far more likely in 2011 than they were just two years ago to cite sustainability as important to their success. That’s one of many conclusions contained in the just-released 2011 Next Generation Manufacturing Study, which was prepared by the MPI Group on behalf of the American Small Manufacturers Coalition.

According to the study, 59% of manufacturers surveyed rated sustainability as important or highly important in 2011 vs. 35% in 2009. Just 6% say sustainability isn’t at all important, compared to 16% in 2009.

Not surprisingly, the percentage of manufacturers progressing toward world-class sustainability grew as well: 28% of companies 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.

Stat of the Week: Why Some Industries Do More Than Others to Develop People

In researching human capital management — a strategy of “engaged people/human-capital acquisition, development and retention,” the Next Generation Manufacturing study revealed that industries with the largest percentage of companies operating at or near world-class status include electrical equipment and transportation equipment manufacturers (38 percent and 37 percent, respectively) — both of which typically involve complex assembly processes and rely on employees skilled in specialized roles. But other industries with a high percentage of participants at or near world-class status are paper manufacturing (35 percent) and non-metallic mineral products (37 percent) — the latter accounting for a range of goods, from sophisticated refractories and advanced ceramics to bricks and concrete. What does it mean?

Some industries rely on specialized skills that are less transferable than others and that can encourage stable employment — therefore suppressing efforts and investments in practices aimed at recruiting, hiring, and retention. For example, furniture manufacturers (18 percent), printers (19 percent), and wood products manufacturers (23 percent) had the lowest percentage of respondents at or near world-class status. These “old-time” industries typically have more traditional, command-and-control management structures and older employees with long tenure.

For more statistical insights and important benchmarks for your operation, view The MPI Group’s Next Generation Manufacturing Study and other data products for details and pricing for immediate access.

Stat of the Week: Who Does the Most with Supply Chain Management? You May Be Surprised

Supply chain management is a complex discipline, and larger companies are more likely to report that they do it well. But overall, there isn’t a large disparity between companies of different sizes with respect to their achievements in a supply chain management strategy, according to the Next Generation Manufacturing study. The smallest companies in the survey (those with less than $10 million in annual revenue) are most likely to report that they haven’t made any progress toward world-class supply chain management—14 percent compared to a range of 6 percent to 3 percent among the categories of larger companies. But that difference fails to hold as companies reach or approach world-class status: 26 percent of manufacturers with less than $10 million in revenues claim to be at or near world-class status in supply chain management; compared with 27 percent of those with $10 million to $50 million in revenues; and 24 percent of those with $51 million to $100 in million revenues. Only the largest manufacturers, with revenues in excess of $100 million, show a meaningful difference in achieving world-class status—and even then, at 33 percent, the difference is more a matter of degrees.

Stat of the Week: Getting Everyone Involved in Process Improvement

Ideally, everyone in a company is engaged in a company’s improvement method or approach, from shop-floor operators to office staff to sales representatives. But in reality, that’s rarely the case, according to the Next Generation Manufacturing Study.

Only 10% of manufacturers have 100% of their workforces engaged in their improvement approaches; 44% of manufacturers have a majority of the workforces engaged.

Two-thirds of manufacturers at or near world-class status for their strategy of superior processes and improvement (65%) have a majority of their workforces engaged in their improvement approaches vs. 28% of manufacturers furthest from world-class status. Two-thirds of manufacturers (65%) invest 5% or less of sales in capital equipment (three-year average). Half of manufacturers at or near world-class status (50%) invest more than 5% in capital equipment vs. 25% of manufacturers furthest from world-class status.

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.

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.

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

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.

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.