Humans are terrible at gauging speed. Jets never seem to be going 550 mph in the sky and 20 miles per hour in a school zone. Sometimes this seems slower than walking. But, the speed of business in definitely accelerating and the implication of this on manufacturers is telling.
Several manufacturer profiles have emerged in recent years. Some still yearn to run their firms in nostalgic, time-tested ways. Some have never snapped back from the 2008 recession and restricted credit days. Some, though, are possessing new forward looking views, processes and technologies that will enable them to match the speed of change in business and eclipse competitors.
Look how quickly certain products have been embraced in the consumer world. The Apple iPod went from a simple product announcement to a runaway success in a matter of months. And, just as quickly, some products, like the Sony Walkman, can disappear almost overnight. Change, therefore is not linear and we do our businesses and employers no favours by pretending that it is.
For many manufacturers, especially long-lived manufacturers, change has been something to assimilate on their own schedule for decades.
If typical, your company possessed a straight line ability to change and adapt that was far in excess of the changes occurring within your business and competitive environment. You probably maintained this ability for decades and it represented a great opportunity for your company. Recently, you may have begun to notice that the industry, your competitors, customers and/or suppliers are changing and demanding changes that are faster than your firm has an ability to manage.
This is becoming a growing problem and it won’t get any easier.
For example, look at the growth in patent issuances over the last few decades. Patent grants act as a good proxy for understanding the overall growth and innovation within an economy.
What’s even more important is to understand what is facilitating the growth in patents and innovation. It is precisely the same kinds of new tools and capabilities found in more modern manufacturers and suppliers. Your firm and its peers can now take advantage of low-cost CAD/CAM, 3-D printing and other technologies which dramatically reduce time to design and time-to-market.
Something has changed in the past few years. Technology has made collaboration, telecommunications, shipping and other things faster, more efficient and more cost-effective. The barriers to competition have fallen and competition has grown keener.
Some manufacturers may lack of awareness of the changes going on in the environment or lack the ability to make the requisite changes in speed and flexibility within their companies to remain relevant.
The best manufacturers today are finding ways to change at the speed of business. But what are those requirements?
The Nostalgic manufacturer is dated. The plant, equipment, IT, business practices and possibly their management are stuck in some sort of time warp.
The Functional manufacturer has made some adaptations over time. Rarely is this company the first to adopt a new technique, tooling or technology. Rather, this company possesses many of the very same commodity capabilities of its competitors. Its survival is often due to good luck and a handful of just-in-time life-saving changes.
The manufacturer of the Last Decade was materially relevant a few years ago. Their technology, manufacturing practices, etc. served them well for several years but they have fallen behind their peers in adapting to change.
The Hunker Down manufacturer has been beaten down by the economic recession that began in 2008. Their credit lines have been constrained and their investments have been almost nonexistent. Cost-cutting has driven every decision within the company. Tensions between owners, management and workers are strained. Going forward doesn’t happen in this company as the hunker down mentality has created a no growth culture of stifling dimensions.
The Forward Focused manufacturer does not live exclusively in the here and now. They are focusing their plans, market strategies and more on events they believe will transpire within the next one to five years. They are big consumers of information and use it in
ways competitors have yet to understand. These are cosmopolitan firms that are very aware of macro economic, political, commodity, consumer, and other factors that will influence markets and drive growth for their firm.
The World of Manufacturing is Evolving at an Accelerating Rate
Fifteen to twenty years ago, most manufacturers had disparate, often divisional business systems. Multiple MRP software packages were connected to different accounting solutions while significant amounts of work were performed on PCs or paper-based systems.
The most sophisticated business-to-business systems involved EDI (electronic data interchange). Collaboration from a business-to- business perspective was expensive and slow given the state of the telecommunications industry at that time. Simply put, operations had to be efficient and effective at the local level and anything beyond that was often cost prohibitive to coordinate.
Improvements in logistics, cargo container technology, lower-cost telecommunications and more ubiquitous communications globally started to lay the groundwork for a more interconnected business world. Simultaneous with these changes, the economies of the BRIC (Brazil, Russia, India and China) nations began to soar as did the economies in many Eastern European, African and other nations.
This combination of factors created both more markets for manufactured goods, but also made numerous new suppliers available to serve a greater global customer base. This new generation of manufacturing was further fuelled by more open trade agreements (e.g., NAFTA), cross-border manufacturing opportunities and other opportunities frequently begun as a result of one simple
Question: What’s your China price?
Another round of changes is beginning to impact the manufacturing world. Technologies such as CAD/CAM are now cost-effective for even the smallest companies. Three-dimensional printers and prototyping devices continue to increase in availability and decrease in cost. Manufacturers are learning to deal with new kinds of problems related to the ownership and/or theft of intellectual property.
New kinds of super tier suppliers are emerging that provide incredible global supply chain and manufacturing capabilities. Even basic ERP software has begun to change and can now be found in a variety of different on premise and cloud options.
Compliance costs continue to add costs and affect competitiveness. And, supply chain uncertainties driven by natural disasters (e.g., volcanoes, earthquakes, pandemics and fires), rail and ship delays, etc. are pointing out painfully weak areas in too many companies and their over-extended supply chains.
The typical manufacturing plant can be depreciated over 25-30 years. Accounting rules that were devised many, many decades ago during the Industrial Age assumed that a large physical asset like a manufacturing plant would operate continuously for that time.
Nowadays, it is hard to imagine any product or product line lasting even a fraction of this time. In essence, the speed with which manufacturing companies must launch, make products, and retool themselves once again has shrunken dramatically.
The processes, strategies, technologies and more that manufacturers use to run their businesses must also change at this newer, more dynamic speed of business. Continuous change and adaptation must become a core business capability for any manufacturer to survive.
The gap between successful and unsuccessful manufacturers will only continue to widen. Businesses that have prided themselves in maintaining constant from decade to decade will come to realise that this previous strength is becoming a critical weakness of the organisation. The best manufacturers will possess exceptional competencies in reinvention, retraining, global awareness market savvy and information expansion.