Innovation: More Than a Buzzword for Manufacturers

Leading companies are building cultures focused on identifying and realizing new opportunities to satisfy customers.

By Jason Tuma

While some business sectors use “innovation” as a non-specific buzzword, innovation has a precise meaning within manufacturing. It means identifying and capitalizing on new opportunities to improve products and services, internal processes and functions, and even management practices.

At leading manufacturers, innovation has become a structured part of daily activities, as well as a consistent plank in planning. Unlike in the past — even as recently as a decade ago — innovation in manufacturing goes beyond product design and engineering. It applies to functions such as sales, marketing, distribution, after-sales service, sourcing — essentially, all of the ways that manufacturers create value in a highly competitive global economy. Common denominators of successful innovation strategies are that they are focused on increasing customer satisfaction and have a long-term focus.

“Innovation is certainly about more than just products, and it doesn’t stop with process innovation,” says John Schober, Director of Innovation at MAGNET, which serves as a networking and advocacy agency for Northeast Ohio manufacturers. “Innovation is about creating value for your customer, and manufacturers have the opportunity to create value for their customers by also looking at their business models, their service offerings, or their delivery channels, to name just a few.”

In March of 2010, executives from some of the country’s largest manufacturers testified before Congress in support of government-funded programs that further manufacturing innovation. Their message: Innovation is what will keep the United States competitive in a global marketplace, and without it, overseas manufacturers will take away market share.

“In order to be relevant, we need to ensure that government R&D programs are focused on ways to provide high-quality assembly, non-destructive evaluation, and high rates of repeatability at large volumes,” Susan Smyth, Director of General Motors’ Manufacturing Systems Research Lab, told the House Committee on Science and Technology. “We need to focus attention on technologies that enhance our virtual and flexible manufacturing capabilities at the project level. Areas such as robotics, virtual manufacturing, and sustainability are key technology areas . . .”[1]

In Northeast Ohio, there are obvious opportunities for product-related innovation in technology-driven markets, such as medical instrumentation, biotech (industrial and medical), electronics, and automation. But what about manufacturers tied to “traditional” industries such as steel, autos, and heavy equipment? What are the opportunities there?  

“We expect that these non-traditional sectors will provide opportunities for manufacturers in our more-traditional industries,” Schober said. “GrafTech and Cardinal Fastener are telling examples. GrafTech found opportunities in the electronics market for its flexible graphite technology, and Cardinal Fastener found opportunities in the wind market for its fasteners.

“And for companies that remain focused on traditional industries, many opportunities will come from trends related to the cost and availability of energy — for example reducing weight in cars, minimizing waste energy [or material] in steel making, and optimizing energy usage in heavy equipment.”

Schober said one of the things limiting small- to medium-sized manufacturers from reaching their full potential through innovation is the struggle to find the right balance between supporting the current business and developing the future business.  Small to mid-size firms are more inclined to use the same internal resources for managing the current business and developing the future business.  In this battle for organizational resources, developing the future business often loses out.

Manufacturers can address this problem by adopting best practices in their organization that facilitate a focus on the future, and thus innovation. Outside service providers can help in this effort, but they often are tailored to meet the needs of large firms and startups — both in terms of cost and content — leaving small to mid-size firms without this option.

“MAGNET has an initiative in the works right now to address this gap for firms here in the region,” Schober said.  

 So is now — as the economy rebounds — a good time to start an innovation initiative?

 “The ‘right’ time to expand efforts to innovate is very unique to the circumstances of a company,” Schober said. “What is most important is not that manufacturers expand efforts to innovate now, but that they find the right way to manage innovation over the long term. Too many manufacturers never give innovation its appropriate attention.”

[1]Alpern, Peter; “Congress Hears Call for Manufacturing Innovation,” IndustryWeek, March 22, 2010

Share

No Comments

Jason Tuma, March 23rd 2011 | Tags: , , , ,
Posted in Economy, Globalization, Innovation

Innovation – The Key to Recovery

Innovation is a hot topic and a word I have heard or read repeatedly over the last year. Coming out of this last recession, particularly if tied to the construction or automotive industry, the need to constantly innovate and enter new markets was a lesson hard learned by a lot of companies.

I recently attended a MAGNET Management Leadership Series, where Jim Carroll, the world’s leading futurist, trends and innovation speaker (as proclaimed on his website), spoke on innovation. Jim started his discussion with three of the following observations:

  1. 65% of today’s preschoolers will work in careers that don’t exist yet.
  2. 50% of the information you learn your first year of college is obsolete/revised by the time you graduate.
  3. More than 70% of products manufactured today will become obsolete in 10 years.

If these statistics are true, what a compelling argument for the need for innovation. Will your product be obsolete in 10 years? Will the method in which you manufacture your product be obsolete in 10 years? With technology changing at a faster and faster pace, it becomes increasingly more important to spend time thinking and planning for ways to innovate. 

When I think innovation, the first thought that enters my mind is getting out into the marketplace, talking to clients, prospects and thought leaders then brainstorming new ways  to develop or enhance our own services and procedures to adapt to market trends. Innovation should span all facets of your business from the products or services you sell to the way you sell them to the way you run your internal operations.  Jim went on to discuss the three questions companies should constantly be asking themselves:

  1. What can I do to run the business better?
  2. How can we grow the business?
  3. How can we transform the business?

One thing history has shown –moving forward “business as usual” with no plans for change, improvements or innovation means your business may not be around for today’s preschoolers.

Share

No Comments

Jason Tuma, February 15th 2011 | Tags: , ,
Posted in Innovation

Economic Update

By: Jason Tuma, CPA

Last week, I attended a  meeting hosted by the Regional Manufacturing Coalition (RMC) in Shelby, Ohio.  The RMC is a coalition of approximately 50 manufacturers in Ashland, Richland and Crawford Counties. The coalition’s mission?  To help north central Ohio manufacturers prosper through education and networking. 

During the meeting, Linda A. Duessel, Senior Vice President and Senior Portfolio Manager for Federated Investors in Pittsburgh, gave an update on the economy.  Although many of the things she had to say were a bit depressing, she had a great presentation style and delivered her message with the perfect mix of humor and gravity. 

Some key points from her message:

  • The unemployment rate in the U.S. has been above 9% for the longest period of time since the Great Depression.
  • Although 2010 showed very positive signs of recovery, the manufacturing industry is still not in the mood to spend.
  • Biggest issues impacting manufacturers right now; growing sales and dealing with uncertainty in government regulations.
  • For all the hype and oftens time negative press, the auto bailout from 2008 appears to be showing signs that it worked.  In 2010, U.S. automakers are showing a 4% increase in production, 12% increase in sales and 49% increase in profits.

Duessel also spoke at length about the growing national debt. She believes that a value added tax (VAT) is coming to help alleviate the national debt. Currently about 100 countries, including Canada, Mexico and European Union countries assess the VAT.  A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products from another business. 

Duessel also pointed out that most people think raising taxes is bad for the economy. She points out that history has shown if the extra revenue from a tax raise is put directly towards paying down debt, there is little impact on the economy. However, if the extra revenue from taxes is turned around and spent on various government programs, then this has historically had a negative impact on the economy.

As 2011 is finally setting in I think we can expect to see gradual growth in the manufacturing industry as a whole, but those who will come out on top are those who innovate. As leader of the firm’s Manufacturing Practice Group I am digging down into innovation and plan on sharing what I find on this blog. We will also again be holding our Impact Manufacturing Forum this fall which will focus on Innovation for today’s manufacturer.

Stay Tuned…

Share

1 Comment

Jason Tuma, February 9th 2011 | Tags: , , ,
Posted in Economy

Economic Recovery Underway, But Ohio Manufacturers Face Challenges

By: Jason F. Tuma C.P.A., Senior Manager, Assurance Services

The economy is slowly but surely recovering, but the Ohio manufacturing industry may have further to go. We recently hosted the Impact Manufacturing Forum to discuss the challenges that still remain and how Ohio’s manufacturer’s can face them today.

Speaker Summations

Sept. 10, 2010


William Sinn, Sinn & Company: Doing Business Globally

 

Global Recession Recovery:

In November 2008, essentially all orders stopped for U.S. manufacturers.

“It is going to be a very slow recovery period because the drop was so strong. We may have another year, or year and a half to go. I am not a believer in the double dip.”

Europe’s economy mirrors what’s happening in the U.S., but Asia is a bright spot. China’s stimulus program is a larger percentage of GDP than the U.S. program; and the stimulus is based on increasing consumption — especially in north and west parts of the country. This expansion is kind of like the U.S. expansion into the Western Territory.

“They are essentially building a city the size of Houston every month.”

Also in China, the retraction in manufacturing capacity usage did not pull as much commerce out of the market as in the U.S. because most Chinese plants do final assembly, as opposed to OEMs. “They are a small part of the product chain.”

China Today:

  • Massive government investment in higher education, healthcare and social security.
  • On the way to becoming the largest car market in the world.
  • Growing at 6% in population; adding 8 million people a year. (“As U.S. companies, we have to have strategies to tap into that growth.”)
  • Growth is not helping U.S. recovery because U.S. investment in China is tiny compared with other countries — only 5%. Most investment coming from other Asian countries. (“We really don’t sell there, and [in general] U.S. companies don’t have aggressive plans to sell.”)

Long-Range Economic Outlook for China

  • Labor costs will go up.
  • More commerce in the northern and western parts of the country.
  • In five to ten years, will no longer be considered a low-cost country.
  • Today’s government investments in education and social programs will spawn a big increase in consumption because consumers will feel more confident.
  • Within 30 years will surpass the U.S. as the world’s largest economy.

What U.S. Needs To Do To Strengthen Economy:

“We are caught in a vicious cycle. We want higher employment, which will cause higher consumption, but companies are not investing in assets yet because jobs are still scarce.”

The solution is to increase exports, which are one-fifth of GDP; companies need to continue to invest in education; and governments need to offer export assistance and keep the R&D tax credit.

China as Export Opportunity:

Two of his clients have doubled their revenues within two years by starting to sell in China: one Indiana company from $200 million to $400 million a year within two years; and another from $3 million to $6 million in 1.5 years.

But selling in China is very difficult, and for companies to be successful, there needs to be long-term commitment from the CEO. Also, U.S. companies don’t understand the Chinese market as well as they could and therefore often have the wrong products for the market.

“We think the world is different from us, but really, we are different from the world. Our measurement systems and electrical systems are different from the rest of the world, for instance.”

Summary:

“If you are only selling in the U.S., you are only selling to 10% of the world. If you are going to sell to anyplace else in the world, China is the place.”

Pat Grischow, Pat Grischow Consulting: Government Regulation

“It is imperative for employers to be aware of what’s happening in Washington and Columbus. If you don’t, these things are going to hit you upside the head and affect your business.”

On The Healthcare Reform Bill:

“This is the worse I have ever seen. It is going to be a nightmare.”

She recommended audience go to website of The Henry J. Kaiser Family Foundation (www.kff.org) for a timeline of how the reform will be implemented through 2018. The open markets for health insurance are supposed to open in 2014.

On the Obama Administration:

The Federal Dept. of Labor (DOL) is changing from a culture of cooperation with employers to a culture of punishment. DOL is hiring hundreds of new inspectors and is seeking additional funds to implement a “worker-misclassification” initiative (full time vs. contract labor).

FMLA: Proposal would extend benefits to workers who need to take care of children who are not biologically theirs.

401k Plans: Under increased scrutiny.

Unions: Proposal (Employee Free Choice Act) would make it easier for unions to be voted into a location. Currently, they are voted in by secret ballot conducted by NLRB with unions taking hold with a majority vote. The proposal would change that to a union being voted in if a majority (50% plus 1) of employees sign authorization cards (no secret ballot).

“You can go home Friday night and come back Monday morning and have a union without 49% of your employees voting.”

In Ohio:

Unemployment Compensation: Changes coming: The state fund has an $8 billion shortfall of its $50 billion budget. The state has borrowed $6 billion from the federal government and will need to pay it back. Will look to businesses for that money.

Workplace Death: For the first time she is aware of, criminal charges (including manslaughter) have been filed against company officials in a workplace death. (June 21, 2008, 45-year-old Thomas Rogers of Colerian Twp died of hydrogen sulfide poisoning while working for United Oil Recovery Services Inc., Middletown.)

Summary:

Encouraged audience members to write and call their lawmakers and get involved with associations and lobbyists who are looking out for their interests. She directed them to pick up the pamphlet “Business in Politics,” which has was offering.

M. Judith Crocker ED.d. MAGNET, Dir. Of Education & Training: Skilled Labor

 

Ohio as Manufacturing State:

  • Third-largest as percentage of GSP.
  • A $38 billion annual payroll.
  • Average hourly wage is $18.83.

“We know we have an aging workforce. We need to be filling that pipeline with skilled workers.”

Workforce Pipeline Challenges:

Education: High school dropout rate is 30%; and in 2005, 60% of manufacturers said HS grads were not prepared for entry-level jobs.

Other: massive worker retirements, increasing global competition, and the evolution of a smaller, more mobile world, waning interest in STEM (science, technology, engineering and math)

Future National Workforce:

Next three bullet points credited to Edward E. Gordon, 2009.

  • By 2020 high-pay/high-skill jobs will rise to 74% of U.S. labor market, 123 million people needed, 43 million likely to be qualified.
  • Low-pay/low- skills jobs will shrink to 26%; 44 million needed, over 142 million available.
  • Large companies will poach talent from smaller companies.

Next five bullet points credited to 2009 Deloitte study “People and Profitability: A Time For Change” based on interviews with employers.

  • 38% foresee increased shortages.
  • 38% of most-profitable companies vs. 25% of least-profitable companies.
  • 51% report shortage in skilled production (machinist, operators, craft workers, technicians).
  • 36% moderate-to-serious shortage of engineers & scientists.
  • Not a worker shortage, a talent shortage.

Solutions:

 

  • Value & invest in technical education (T.E.)
  • T.E. must reflect the knowledge economy requirements: critical thinking & problem solving
  • Develop real-world curricula with relevant industries to match content with employer needs
  • T.E. must be rigorous & continuously improved so students can translate learning to workplace quickly
  • Attract students early, feed their interest in manufacturing and benefit their professional careers
  • Take a broad view of manufacturing workforce development
  • Encourage close cooperation between industry and academia to keep focused on results
  • Inform educators about career options & requirements in today’s changing economy
  • Employers must articulate their current and future employment needs
  • Educators must encourage students to explore emerging careers & take the STEM subjects necessary to succeed

 

What’s Happening Now at MAGNET:

 

  • Implementing the NAM Dream It! Do It! program to improve the image of manufacturing and grow the pipeline of advanced manufacturing workers
  • Partnering with Lorain County Community College to implement the NAM-endorsed Skills Certification System
  • Developing pathways with educational partners from non-credit to credit to certificate and degree programs to meet employer needs
  • Ambassador program, which connects manufacturers (demand side) with the educational community (supply side).
  • Activities include:
  • Plant tours
  • Internships
  • Externships
  • Classroom speaking engagement

Read more by Jason Tuma in his latest article on IndustryWeek.com:

Economic Recovery Underway, But Ohio Manufacturers Face Challenges

Share

No Comments

impactmanufacturing, October 28th 2010 | Tags: , ,
Posted in Economy

Top Distribution Industry Key Trends and Issues

Original post by BCG&Co. affiliate BCG Systems, Inc.

By: Walt Hopkins

The distribution industry is facing changes. Many distributors recognize the need to achieve a smarter, more profitable organization. Here are, in my opinion, the top trends and issues in the industry today.

New Technologies: The internet, e-commerce, and electronic data interchange (EDI) have allowed distributors and their customers to better gather price data, track deliveries, obtain product information and market products. This technology trend will increasingly allow customers to purchase goods and track deliveries electronically. Customers frequently order and pay for goods in order to process fewer paper transactions.

Demand-Drive Supply Chains: Many businesses are relying on distributors to replenish shelf stock. Visibility from manufacturers through to customers is driving the need for order automation. A distributor must stock products from hundreds of suppliers facilitating the need for product information and electronic orders.

RFID: Radio frequency identification (RFID) technology is being used by larger wholesale distributors with warehouses. RFID allows distributors to track goods in stock and through transit to ensure delivery. Many smaller companies are looking at RFID to become more cost-effective in the marketplace.

Additional Services: Many distributors have started providing additional services to help increase margins and provide a competitive advantage. Some of these services include the financing of purchases, customer service and technical support, product marketing such as advertising and promotion, technical advice, and installation and repair services.

Going Green: Manufacturers, trade associations, and other entities are seizing the opportunity to help distributors go green, offering everything from green products to software that helps monitor environmental sustainability efforts. Companies are looking more to their overall operations and ways to distinguish themselves on environmental attributes that transcend their products.

Rising Costs: Costs are increasing, causing direct downward pressure on distribution margins. Distributors are looking for ways to manage costs and provide their customers with value. Many distributors are turning to private label goods to reduce the costs of their profits.

Channels: New distribution channels continue to grow, while existing channels are expanding with new approaches such as outsourcing, creating partnerships and utilizing new technologies. Companies need to implement more advanced business management solutions to cope with these changes.

Competitive Supplier Pricing: This is a must. Many distributors have issues with arriving at competitive price points with suppliers. Price points must be quantity sensitive. Requirements have to be communicated and forecasted.

Streamlined Business Operations: To run a cost-effective business, distributors need to automate critical business processes that will help minimize inventory levels and reduce waste.

Enhanced Supplier/Customer Relationships: Distributors live and die by the service levels they can provide. They must maintain excellent relationships with their customers and suppliers. A CRM system is a great tool to help achieve this.

Visit BCG Systems, Inc. Blog

What new technologies are you using to succeed with these current trends and issues?

Interested in learning first-hand how you can achieve a smarter, more profitable organization? BCG Systems is launching a special event series for the distribution industry. This free series launches October 7th. Breakfast is provided at office locations. Get details and reserve your spot for BCG Systems’ Distribution Series today!

Share

No Comments

impactmanufacturing, September 21st 2010 | Tags: , , ,
Posted in Technology

Where Is the Economy Headed?

Industrial-equipment producers indicate an upward trend.

By Jason Tuma

Recent news on where the U.S. economy is headed can be very confusing. Housing sales are down, and the jobs outlook remains bleak; but a closely watched index from the Institute for Supply Management has been positive for 15 months, indicating an upswing in orders and production. Additionally, recent earnings reports have been largely positive, and companies have more cash in the bank than they’ve had in years.

While predictions about U.S. economic growth and performance for 2011 vary, North American manufacturers that make smart choices about deploying their assets and managing their finances could see substantial improvement in orders. Here’s why.

One of the most prophetic indicators of which way the economy is headed is the health of manufacturers in the industrial-equipment sector. This is true for several reasons:

  • Supply chains in this sector are both lengthy and diverse. Lots of different companies, in lots of different industries, in lots of different places, are producing raw materials, extruded and molded parts, electronics, user interfaces, and other components that comprise finished industrial machinery. When one of these companies is doing well, it’s a sign that their suppliers and customers are, too.

 

  • Industrial equipment tends to be very costly. Buyers plan purchases far in advance and plot them according to budget cycles. An upswing in orders in industrial equipment says that buyers are confident enough in their markets to reinvest in their most-expensive hard assets.

 

  • The industrial-equipment sector is less affected by changing consumer taste than other sectors. For example, car buyers might be buying fewer cars (and car companies producing fewer cars), but cars are still selling, and cars can’t be made without machinery. Similarly, consumers who are still stinging from the Great Recession might not have regained their taste for luxury goods, but they still need to buy groceries, clothing, appliances, and other manufactured goods. All of these are made with industrial equipment.

 

  • Industrial-equipment producers in North America are some of the leanest companies in the world. They have learned to respond to fierce competition with hypervigilant cost-control: lowering inventories, using strategic sourcing, removing non-value-add activity, etc. This means that when they do hire back workers and restart their plants — as they are doing — it is in response to genuine demand — that is, actual orders from customers. This is a truer indicator of economic activity than industries that are more forecast-based, such as retail sales and construction.

The most recent earnings reports from three Northeastern Ohio manufacturers in the industrial-equipment sector reveal a positive trend. Parker Hannifin, Timken Co., and Lincoln Electric are all in growth mode.

Cleveland-based Parker Hannifin, a highly diversified global producer, reported an increase in revenue of 27 percent in its most-recent quarter compared with the same period last year. In North America exclusively, revenue improved by 32 percent. The company’s profit margin more than tripled, from 2.2 percent in the same quarter last year to 8 percent this year. And in a final sign of positive expectations, Parker Hannifin is expanding its capabilities through acquisition. It recently announced the purchase of Micro Thermo Technologies of Quebec, Canada, from Carrier Corp.

The Timken Co. increased sales by 37 percent in its most-recently reported quarter compared with the same quarter last year; and the company is investing in its steel-producing capabilities in its hometown of Canton.

“Our company has rebounded extremely well from the challenges experienced during the most recent recession,” said James W. Griffith, president and CEO. “We are leveraging increased customer demand and growth in attractive markets.”

Global arc-welding equipment producer Lincoln Electric reported an increase in revenues of 24.8 percent compared with the same quarter in 2009. Profit more than doubled in the same period, from $15.1 million to $32.5 million. 

CEO John M. Stropki cited investment in new product development and production facilities for the company’s ability to take advantage of an improving market.

“Our second quarter results were excellent and demonstrated a steady and significant improvement in operating results,” Stropki said. “While demand levels have significantly improved in most markets and geographic regions on a year-to-year basis, volume trends are stabilizing. Although recent economic forecasts are more guarded, we remain cautiously optimistic…”

Share

No Comments

Jason Tuma, September 2nd 2010 | Tags: , , ,
Posted in Economy

Globalization Benefits U.S. Manufacturing In Multiple Ways

By Jason Tuma

Globalization. Outsourcing. Off shoring. These words have joined “religion” and “politics” as subjects to avoid in polite conversation. It seems everyone has an opinion about whether U.S. companies doing business overseas has been beneficial or harmful to U.S. manufacturers and manufacturing workers.

Really, both are true.

Companies such as Lincoln Electric and Caterpillar have increased revenue and market share by locating plants overseas and either selling finished goods to local markets or shipping components to another company plant for assembly into final products. Both of these companies — and many others — have maintained significant operations in the U.S. while growing overseas and have reinvested profits from resulting efficiencies back into U.S. operations. This model ultimately benefits U.S. manufacturing, although restructuring (i.e., plant closings or job reductions) is sometimes a necessary part of creating an efficient and profitable global company. From a long-term perspective, however, smart global expansion makes companies stronger and positions them to create more jobs everywhere they do business.

“What happens is, globalization creates competition,” explains William Sinn, a Hong Kong-born U.S. citizen and owner of Sinn & Companies, which helps businesses tap into China as a purchasing resource, manufacturing base and marketing destination. “When there is more competition, there will be more choices for the customer. The company will need to do better in order to be able to keep the customer. It will force companies to develop better processes, or to invent better material, or to design new products to serve the customer. Ultimately they need to add more value to serve the same customer.”

Sinn gives the U.S. auto industry as an example of an industry that chose not to adjust as competitors such as Honda and Toyota embraced globalization. And while the recent “rightsizing” of U.S. auto companies has certainly been traumatic to displaced workers, there is universal consensus that the leaner reincarnations of Ford, GM and Chrysler will be stronger and have greater potential for long-term survival.

Another globalization-related mistake made by U.S. auto companies — and other manufacturers — was to use newly accessible markets such as Mexico in the 1990s and China in the early 2000s to chase low-cost supplier opportunities based solely on per-unit cost. Even in cases where these companies maintained relationships with U.S.-based suppliers, they used the threat of plentiful and cheap overseas labor to excessively beat down these long-standing suppliers on price. Many business leaders now recognize that this model eventually backfires and is the source of much of the negativity associated with globalization.

While there may indeed be beneficial opportunities to manufacture in or source from lower-cost environments or providers, this decision should be made after considering total cost of fulfillment and how the decision will affect customers.

“The total cost of fulfillment is all of the costs of moving materials from one end of the fulfillment stream [or supply chain] to the other. These go far beyond the transportation costs most firms calculate to include the carrying and storage costs of inventory, the cost of material-handling equipment and labor, and the management time devoted to gathering all of the information needed to constantly monitor performance. These costs also include all of the transport, inventory, handling and management costs incurred by customers and suppliers along the fulfillment stream. The senior managers of every firm in the stream would find the total cost surprising large once summed.”

— Robert Martechenko and Kevin von Grabe, Building a Lean Fulfillment Stream¹

According to Sinn, there are plenty of examples of companies of all sizes that have benefited from moving into overseas markets by making smart decisions with a long-term focus. One of his clients, for example, had $3 million in sales two years ago when he began selling his product in China. The company has since doubled its revenues.

“They produce a product here that satisfies a specific need, and the Chinese companies don’t know how to do it,” Sinn said. “Companies that embrace globalization and are willing to improve will progress. The rest of the world will catch up only if we let them. Control is in our hand.”

¹Building a Lean Fulfillment Stream, Robert Martichenko and Kevin von Grabe, Lean Enterprise Institute, April 2010

Share

1 Comment

Jason Tuma, August 19th 2010 | Tags: , , , ,
Posted in Globalization

Addressing the Skilled-Worker Shortage Head-on

Manufacturers that invest in the right training and employee development will gain competitive advantage.

By Jason Tuma, Senior Manager, Assurance Services, BCG&Co.

Economic news tends to focus on layoffs and job cuts these days, especially when it comes to plant closings and production slowdowns. While job loss certainly is a harsh reality for millions of former production workers, U.S. manufacturers themselves are dealing with a much different reality: They can’t find enough qualified employees to fill thousands of high-paying, high-skill jobs.

“This is certainly an employer’s market, but not as much with manufacturers,” Mark C. Tomlinson, executive director and general manager of the Society of Manufacturing Engineers (SME), said in November 2009 when addressing the shortage. “Manufacturers are looking for employees who are the opposite of the stereotypical factory worker doing repetitive, assembly line work. They are in need of 21st-century workers with specialized technical training such as machinists, operators, and technicians.”

The manufacturing skilled-worker shortage predates the 2008–09 Great Recession by at least a decade and is the result of combined demographic, technological, and societal changes. Groups such as SME, the National Assoc. of Manufacturers (NAM), and the nationwide Manufacturing Extension Partnership (MEP) network have been addressing the shortage with research, training partnerships, and outreach programs for years.

But these alone won’t solve the skilled-worker shortage, particularly with the sting of last year’s economic collapse still lingering. While many manufacturers have not laid off workers or closed plants, high-profile companies in industries such as autos did so in droves, and this has furthered the notion that manufacturing is no place for stable, rewarding employment.

Manufacturing companies will need to address this shortage head-on by taking a dedicated, innovate approach to training and labor management, and by working to reverse the negative image that continues to plague goods-producing industries.

Investing for the Future

One of the most insidious causes of the skilled-worker shortage is the corporate propensity to target labor and labor-associated costs (i.e., training) as an immediate reaction to a drop in revenues or profitability. While there are many good reasons to eliminate positions that no longer add customer value, manufacturers need to recognize that they are no longer simply providers of one-size-fits-most products. The most successful manufacturing companies are solving customer problems, and this type of value is directly tied to daily employee performance. What employees do – to say it another way – has become more important than what they make, and so production workers should no longer be seen as expendable, easily replaced resources. Companies that have recognized this and have invested in their workforces are solving their skilled-worker shortages.

For example, Ron Bullock, chairman of Bison Gear and Engineering Corp., said recently during a TV news segment about the company that Bison “has invested in building two balance sheets: a financial balance sheet and what we call a ‘human capital’ balance sheet.”

Bison, of St. Charles, Ill., recognized that in order to stay competitive in a global marketplace, it needed a briskly flowing pipeline of highly skilled employees. So the company implemented the nationally recognized Manufacturing Skill Standards Certification (MSSC) program. MSSC awards Certified Production Technician certificates for completion of training modules in safety, quality, practices and measurements, and manufacturing process and production. Bison awards employees financially when they complete a module.

SME, NAM, and community colleges also have developed various manufacturing certification programs, some of which focus on skills tied to growing markets and management practices, such as the merging of “lean manufacturing” techniques with environmental sustainability.

In addition to certification, manufacturers can create performance incentives to encourage employees to cross-train for other in-house production jobs. Having employees with multiple skills increases a manufacturer’s flexibility, which in turn increases its ability to serve customers and efficiently deploy resources. The U.S. steel industry came back from near-devastation early in this decade in part by working with its unions to rewrite contracts to encourage cross-training instead of rewarding employees based mostly on years of service. Union members at some companies now receive incentives tied to company performance, which tends to improve as the workforce becomes more flexible and efficient. Read more…

Share

1 Comment

impactmanufacturing, April 9th 2010 | Tags: , , ,
Posted in Skilled Labor



Videos, Slideshows and Podcasts by Cincopa Wordpress Plugin