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Focus: Manufacturing

Feature Article from Our Manufacturing Subject Area - See All

From SCDigest's On-Target E-Magazine

- June 4, 2013 -

 
Supply Chain News: Will Manufacturers Shift Focus from Capacity to Capability?

 

Focus on Flexibility will Start to Compete with Cost, Yield, IDC Manufacturing Insights Says; Make-to-Stock Models will Continue to Decline

 

SCDigest Editorial Staff

Worldwide, both developed and developing countries are putting renewed emphasis on growing their manufacturing bases, and increasing the percent of GDP that comes from the manufacturing sector.

This is in part due to the experience of the recession and beyond, where the financial sector lost much allure for investors and governments, and during which economies such as Germany and the US that had relatively stronger manufacturing sectors took take less of an overall economic hit than those countries that were more service sector focused. Add to that the fact that each manufacturing job usually is connected to 6 or 7 additional jobs that support that manufacturing operation in one way or the other, and it's clear why so many countries have manufacturing growth on the from burner.

SCDigest Says:

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The IDC survey also found that only 43% of respondents said they have a formal process in place to look at how production plants will be organized in the future.

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But for countries and companies, the question of course is what is required for manufacturing success. In many developed countries, the sad fact is that many manufacturing companies failed to really invest in their manufacturing operation, especially in developed markets, in the late 1990's through the recession in 2008-09, because the overwhelming trend was to move offshore to low cost countries, notably of course China. Why invest in plants that are going to be mothballed one day, and maybe soon?

But that is starting to change, say the analysts at IDC Manufacturing Insights. Regional manufacturing strategies and the apparent trend towards "reshoring" are encouraging companies to relook at manufacturing investments.

In a recent research note, a trio of IDC analysts say that manufacturers themselves "are going back to basics, to their manufacturing roots. They are putting a renewed premium on production knowledge driven by the need to protect and enhance their proprietary technology. They realize now that the direct involvement in production operations fosters innovation and improves customer service."

It is now time to think again about the "factory of the future, IDC says, and make the perhaps substantial changes needed over the next decade that will become the manufacturing platform for a generation.

From Capacity to Capability

The key challenge in today's manufacturing industry essentially resides in the inflexibility of manufacturing assets in meeting two essential capabilities, IDC says:

• Fulfilling variable customer demand globally

• Producing innovative products' variants at the pace the market dictates

IDC notes that what is emerging is manufacturers say that they have the capacity - indeed, often overcapacity - but not the capability to fulfill customer needs at an acceptable cost.

"This is the major competitiveness issue that manufacturers have to solve going forward, along their journey toward the factory of the future," IDC says.

And that recognition is starting to chip away at the long dominant focus on factory cost and yield to one more balance with order fulfillment effectiveness and flexibility.

What are the keys to making this transition? There are two, IDC says. They are:

• Introducing more flexible manufacturing capabilities and enabling a single plant to produce multiple products and variants

• No longer considering each factory as an isolated entity but seeing factories as part of a global network of flexible production capabilities aimed at fulfilling global customer demand

Manufacturers today, IDC says, need to focus on their capability to fulfill customer requests rather than just making sure production capacities are fulfilled.


(Manufacturing Article Continued Below)

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"This is really about breaking the productivity-vise loop, by creating more flexibility in production environments," the analysts say, in an era of increasing demand variability. "By all means, efficiency is still important, but manufacturers need to fulfill customer requirements better and not merely saturate their production capacity."

IDC finds support for that position from a survey of more than 80 manufacturing company executives. Among the responses to a series of survey questions was one related to how manufacturing success will be measured in the future.

While cost/efficiency/yield related metrics came out on top, not far behind were "the perfect order, on time and in-full delivery to customers" and "flexibility/capability of fulfilling customer needs rather than making sure production capacities are fulfilled" (see graphic below).

Source: IDC Manufacuring Insights

Part of that transition will come as companies continue the evolution from make-to-stock production models to ones that are more make-to-order oriented. In fact, the same survey found that the percent of companies embracing make-to-stock models will fall from 20.5% currently to just 9% five years from now.

IDC says we will see a new paradigm emerging that it calls "make-to-individual" (MTI), where manufacturers will be able to fulfill each single client with a single, specifically tailored product.

How can that kind of model deliver products at the right cost and price point?

"Globally integrated manufacturers will follow a modular platforms strategy with a push-pull supply chain model," IDC says. "Common components, modules and platforms will be manufactured centrally following mass production principles, while a network of local factories, suppliers, distributors, or retailers will customize final products according to local demand requirements. This is make-to individual implemented."

Interestingly, that shift may just put more emphasis back on the workers, who will be required to be smart "knowledge workers" to manage this flexibility and customization, not just "factory labor." Yet, for a variety of reasons, manufacturers are likely to encounter challenges finding the talented workers needed to fill these roles.


The time to start planning for this future factory world is now, IDC stresses. Its survey also found that only 43% of respondents said they have a formal process in place to look at how production plants will be organized in the future.


Do you agree with IDC's manufacturing perspective? Are flexibility and order fulfillment
rising in importance? Will we continue to move away from make-from-stock? Let us know your thoughts at the Feedback section below.



Recent Feedback

Good article overall and as predicted manufacturing is slowly moving to the US and other western economies from China and other low cost countries. Mass customization as a concept is a cool idea, but very difficult to implement from a manufacturing perspective. The reasons for japanese and other asian success stories is also partially attributed to their cultural roots and the western economies might not even suceed in getting it right. Make to Individual is practically possible, but at what cost is what one has to see.


venkataraghavan
Lead Consultant
Infosys
Jun, 11 2013

Manufacturing shifting from make to stock to make to order, this is a major step the manufacturing industry taken. Through this, manufacturing will surely improve the bottom line, reduce the inventory carrying cost and risk of osolete goods. It should improve handling and quality of goods.


Rajnesh Dagar
Sr. Manager
Usha International Ltd
Jun, 12 2013

I imagine that 3D printing will speed up the transition from make-to-stock to make-to-order, especially for spare parts. What are your thoughts?


Kyle Ephraim
Student, University at Buffalo
UB
Jun, 21 2013
 
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