Next Generation Manufacturing

Production Output Rising, Work Coming Back to Plants

Almost two-thirds of manufacturing plants (64%) increased total production output (unit volume) in the previous 12 months. One-third of manufacturers (34%) increased production output by more than 10%. While increased demand is driving increased output, it is also occurring because many manufacturers have evaluated their core competencies and found that they are willing and able to pull work back into their facilities, thereby sustaining or growing employment and/or avoiding cutbacks. 

Manufacturers have worked to improve their in-house performances, prompting many to increasingly rely on their own plant’s expertise rather than that of an outsourced or offshore contactor. The MPI Manufacturing Study of U.S. plants found that an average of 7.8% of total production volume was brought back into plants from outside suppliers in the previous 12 months.[1] While most plants reported no change to insourcing, 30% of plants indicated an increase in insourcing. Conversely, an average of 5.2% of production volume moved out to external suppliers of plants in previous 12 months; 35% of plants reported an increase in outsourcing.

For some plants, insourcing and outsourcing form a two-way street with decisions made specific to regularly changing product, capabilities, and capacity. Approximately 18% of plants reported changes to both insourced volumes and outsourced volumes in the previous 12 months. The difference for these plants moving work in both directions was an average of 6.8% of volume insourced.

 

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[1] 316 U.S. study participants, October 2012 through January 2013.

Super Human-Capital Management

World-class manufacturing is impossible without word-class talent. Yet 70% of U.S. manufacturers aren’t anywhere near having world-class human capital management.

So, how can U.S manufacturers compete in a global economy without great talent?

Attend the the IndustryWeek Webinar Super Human-Capital Management: Transforming Your Workforce into a Competitive Weapon on April 24, 2013 2:00 p.m. for the answer.

Register on IndustryWeek's website.

International Plans for 2013?

Most manufacturers recognize the importance of global awareness for their businesses. Yet less than half are actively participating in international business: Only 46% of U.S. manufacturers operate or partner in one or more production facilities outside the United States, and just 47% have one or more sales and/or distribution facilities outside the United States.

Other firms have more aggressive global plans: 9% of manufacturers have production facilities in more than 10 countries, and 12% of manufacturers have sales and/or distribution facilities in 10 or more countries.[1]

Unfortunately, Next Generation Manufacturing research finds that a majority of manufacturers don’t measure their return from global-engagement strategies, while 47% describe the quality of their business systems and equipment to support global engagement as either “none” or “inadequate for current requirements.”

The NGM findings paint a grim picture for those organizations without global engagement strategies. Without systems, equipment or monitoring procedures, these firms will struggle to manage even the most rudimentary international opportunities — while globally minded competitors continue to expand their reach, and their revenues, farther from home.

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[1] 2011 Next Generation Manufacturing Study, The MPI Group, 2011.

Of Interest to Manufacturers

Leading innovators in search of a competitive advantage are combining knowledge and capabilities by redesigning their innovation practice to enable far-flung people to work together on complex ideas. Read Overcoming the Global Innovation Trade-Off by Strategy & Business and learn how to successfully build your innovation network for profits and growth.

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Harvard Business Review offers a perspective on how business leaders and HR leaders can align their strategies to meet corporate goals. It starts with asking a simple question: Does the initiative cause friction in the business or does it create flow? Friction is anything that makes it more difficult for people in critical roles to win with the customer. Flow is doing everything possible to remove barriers and promote better performance.

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The world is changing much more rapidly than most people realize, says business educator Eddie Obeng — and creative output cannot keep up. In this spirited TedTalk, he highlights three important changes we should understand for better productivity, and calls for a stronger culture of “smart failure."

GDP in Balance

By John Brandt

As the world’s largest economy, attention is rightly focused on U.S. economic growth and gross domestic product (GDP). Now with additional attention on the country’s “fiscal cliff” — or gradual fiscal slide depending on the severity of economist projections — concern is growing that U.S. GDP will decline sharply in early 2013 and reverberate worldwide. Unfortunately, the timing of this occurs on top of better-than-expected U.S. GDP growth in the third quarter of 2% (second quarter to the third quarter), according to a U.S. Bureau of Economic Analysis advanced estimate in late October. In the second quarter, real GDP grew by 1.3%.^[1]  

 

U.S. GDP grew by 1.7% in 2011, a rate that pales in comparison to China (9.3%) and India (6.9%) and lags world growth (2.7%), but still hovers above OECD member nations (1.5%), according to the World Bank, which tracks annual percentage growth rate of GDP at market prices based on constant local currency; aggregates are based on constant 2000 U.S. dollars.^[2]

 In the past 50 years, U.S. GDP growth bottomed out in 2009, declining 3.5%. That drop was reflected in many nations and regions around the world (2.2% GDP decrease worldwide), with the notable exception of China (9.2% increase).^[3] China GDP is predicted to pass U.S. GDP within the decade. Will the fiscal cliff accelerate that schedule, and will China have the same impact on U.S. and world fortunes going forward?

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[1] U.S. Bureau of Economic Analysis

[2] The World Bank

[3] The World Bank

 

Unfortunately, the timing of this occurs on top of better-than-expected U.S. GDP growth in the third quarter of 2% (second quarter to the third quarter), according to a U.S. Bureau of Economic Analysis advanced estimate in late October. In the second quarter, real GDP grew by 1.3%.^[1]  

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[1] U.S. Bureau of Economic Analysis

Of Interest to Manufacturers

Could Africa be on the brink of an economic take-off much like China was 30 years ago and India 20 years ago? IndustryWeek examines why companies like Caterpillar, Chevron, and Wal-Mart are anxious to start doing more business in Africa.

Call it "fuel without fossils". Scientests are working on a plan to grow new biofuel by farming micro-algae in floating offshore pods that eat wastewater from cities. Hear the bold vision for Project OMEGA (Offshore Membrane Enclosures for Growing Algae) and how it might power the future by listening to this inspiring TED talk by Jonathan Trent.

The 2012 elections brought the liberalization of marijuana laws in both Colorado and Washington. But what effect is it likely to have on workplace drug policies, workers, and corporations in these states? If decrimanlization spreads, what can you expect? JDSupra gives their analysis and some advice for HR departments on the subject.

Redirection of the World’s Manufactured Goods?

By John R. Brandt, CEO, The MPI Group

The United States continues to be the world’s great consumer. Imports to the United States of manufactured goods were nearly $1.72 trillion in 2011, and since 2001 have increased by 79%. China is by far the leading exporter of manufactured goods to the United States ($390.6 billion in 2011), nearly double that of second-place Canada ($207.3 billion).[1]

 

More telling is how imports have changed in the past 10 years. China manufacturing exports to the United States rose 292% as that nation achieved manufacturing expertise combined with low-cost labor; among the top 10 manufactured-goods exporters to the United States, only Ireland achieved a similar triple-digit increase. Other global exporters experienced only modest growth over the decade, or none at all (Japan).

The United States exported $1.29 trillion in manufactured goods in 2011 for an overall negative trade balance of $441.9 billion. But U.S. exports are expected to grow as U.S. firms onshore their manufacturing to take advantage of decreased production costs. At the same time, non-U.S. companies are adding U.S. plants as a base of export. Boston Consulting Group projects that by 2015, the United States will have an export cost advantage of 5% to 25% over Germany, Italy, France, UK, and Japan in many industries.[2]

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[1] International Trade Administration, U.S. Dept. of Commerce.

[2] “Rising U.S. Exports—Plus Reshoring—Could Help Create up to 5 Million Jobs by 2020,” Boston Consulting Group, Sept. 21, 2012.

Of Interest to Manufacturers

Achieving breakthrough improvements in sustainable packaging is more difficult than simply substituting one material for another. The next frontier in this area requires a radical re-think of the value chain, with an eye on achieving improvements that not only reduce waste, energy, and raw materials but also improve time-to-market, quality, and margins. To this end, Deloitte offers the white paper "Thinking outside the box: Throw away your current approach to packaging".

Legendary lean practitioner Art Byrne says he didn't have to accept excuses from employees when he requested dramatic improvements on the plant floor. That's because Byrne had become a "lean expert" and knew what type of changes were possible. Read "The Lean CEO Effect" from IndustryWeek and find out why there's a big difference between CEOs who engage in lean and those who simply encourage it.

Michael Sadowski explores the valule of sustainability ratings to companies and asks if the pain ratings cause are worth it in his blog post "How Are Companies Using Sustainability Ratings?" from Sustainability.com's blog.

Take part in the 2012 MPI Manufacturing Study

Participants in MPI's 2012 Manufacturing Study and 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.
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.

Manufacturing Performance in 2012

A year ago, manufacturing executives expected that their 2012 plant sales would increase by 9% (median) and 10.5% (average), according the 2011 MPI Manufacturing Study.[1] Those projections may yet turn out to be true given recent U.S. Department of Commerce data. Despite a modest drop in value of manufacturing shipments from May to June this year, the value of all manufacturing shipments year-to-date rose 5.8% across all industries vs. 2011 (not seasonally adjusted).[2]

Both durable goods and non-durable goods shipments posted year-to-date increases, 9.1% and 3%, respectively. Primary metals lead the durable goods sector with a 20.9% increase; plastics and rubber products lead the non-durable goods sector with a 6.5% increase.[3]

Value of Shipments
	June 2012 year to date	June 2011 year to date
All manufacturing industries	$2.857 trillion	$2.701 trillion
Durables goods	$1.343 trillion	$1.232 trillion
Non-durable goods	$1.513 trillion	$1.469 trillion

U.S. Dept. of Commerce, figures not seasonally adjusted and rounded

Year-to-date June 2012 vs. June 2011 data also shows that:

• New orders increased 5.2%.
• Value of unfilled orders increased 8%.
• Value of total inventories increased 3.3% — materials and supplies increased 4.3%; work-in-process inventory increased 3.4%; and finished-goods inventory increased 2.2%.[4]

Is the manufacturing recovery as strong as hoped midway through 2012? Probably not. But it still looks far, far better than 2009, when value of shipments for the entire year totaled just $4.42 trillion.[5]

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[1] 2011 MPI Manufacturing Study, The MPI Group. Based on current-year and next-year revenue or value of shipments (if plant is a cost center) statistics for individual U.S. plants.

[2] Full Report on Manufacturers’ Shipments, Inventories and Orders June 2012, U.S. Census Bureau, U.S. Dept. of Commerce, Aug. 2, 2012.

[3] Ibid.

[4] Ibid.

[5] Annual Survey of Manufactures, 2009, U.S. Census Bureau.