1 May 2008

New manufacturing strategies

By Jim Pinto

Companies are adopting new strategies for manufacturing, collectively labeled “new wave manufacturing.” Whole arrays of new initiatives are coming on line, taking competitiveness to new levels.

Speed, quality, service, flexibility, and global focus are identified as the essential elements for successful manufacturing for the next decade. Manufacturers are measured by their ability to respond quickly to sudden, often unpredictable changes in customer needs and wants.

In this new era, manufacturing strategy is a set of coordinated objectives applied to manufacturing functions and aimed at securing sustainable advantage over competitors. Issues generally addressed include manufacturing capacity, production facilities, technology advances, vertical integration, quality, production planning/materials control, organization, and personnel. Of course, the strategic approach must combine with a pragmatic approach to continuous improvement at an operational level to ensure competitiveness in global markets.

A key part of a manufacturing strategy is the definition of whether products will continue to be produced at the traditional manufacturing sites, or if the cost advantages make it beneficial to set up manufacturing in geographic areas with a lower cost base. The Boston Consulting Group, among others, has advocated that not considering this strategy is tantamount to giving up on a major cost benefit.

The initial rush to offshore manufacturing has given way to a more cautious approach. Many companies are taking into account the practical and logistical difficulties and the full financial implications of setting up and operating facilities in remote countries. Greater care will ensure product quality issues are addressed properly in the outsourcing or off-shoring exercise, along with recognition of the requirement for active management and control.

The trend over the last several years has been for companies to manage their inventories very tightly to keep costs down. If there is any unpredictability in demand, it is difficult to rely on suppliers that will take months to respond to their needs. In dealing with this uncertainty, they cannot expect a supplier to keep buffer stocks to meet their changing demands, with inventory liability if the market dictates that products must change. The ability to provide fast delivery presents an opportunity to offer significant value beyond the actual price of the products supplied.

So, offer customization, modifications, and quick product improvements in response to market demands. Search for customers that have this need. They will be more loyal to demonstrated ability for fast turn-around on modifications and improvements. For the supplier, this means developing the ability to modify production quickly. All employees should recognize this represents the company’s strengths, and every customer change-request should be welcomed as a compliment to the company’s ability to accommodate them.

Related links:

• Winning Strategies and Best Practices for Global Manufacturing:
  http://www.manubiz.com/channel/event.asp?event=G9KI0LD9
• Automated Custom Manufacturing:
  http://www.technologyreview.com/Biztech/19678/
• Manufacturing strategy:
  http://www.advancedmanufacturing.com/index.php?option=com_content&task=view&id=180&Itemid=141

Behind the byline

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.