General Manufacturing Sector Profile

Large and Mass Manufacturing

Key Drivers

The main drivers of commercial viability and profitability in manufacturing include:

Globalization

Globalization is affecting almost every aspect of manufacturing. Global supply chains and global markets are the norm for most U.S. manufacturers. Success depends upon manufacturers finding ways to exploit the advantages of globalization of production and markets in such a way as to benefit all stakeholders.

Many manufacturers have moved part or all of production operations to emerging overseas countries. This is driven by:

• Market Expansion - globalization of production has created opportunities for many companies to capture new market growth in developing regions around the world.
• Ecomonics - the lower costs for labor, insurance and taxes, energy, compliance with environmental or efficiency regulations, or for legal liability
• Quality – The advantage of low labor costs in developing countries is now supported by quality control infrastructures, allowing the manufacture of goods with reliable quality.
• Technical Capability - Quality goods produced in the newer plants that utilize more advanced technology.
• Transportation and Communication Infrastructure - needed to support manufacturing is often also more advanced in emerging nations than in many local markets. Transportation and communication systems are also more robust than in the past, with systems built on newer technologies, often with capability not available in local markets.
• Regulatory Constraints - Varying financial and regulatory environments offshore can provide a distinctive competitive advantage in new or existing markets. Manufactures gain by channeling resources into functions and activities that will result in a competitive advantage to them.

NOTE: In spite of commonly held perceptions, it is doubtful that transportation costs will limit globalization. For high-tech manufacturing products, transportation are only a small percentage of the total cost of production and delivery. On the contrary, globalized production enables more efficient distribution of engineering and manufacturing responsibilities, with the retention of intellectual property.

Outsourcing

The complex interrelationship of productivity increases, domestic market limitations, technological change, and trade policies is driving overseas outsourcing of manufacturing capacity. Local manufacturing and services that support manufacturing are finding it difficult to compete with with facilities in low-cost, low-wage locations.

The real challenge will be balancing the need to preserve strategic manufacturing and technological capacity domestically, with the perceived cost advantages associated with globalization and the increasingly virtual nature of manufacturing supply chains.

Domestic Labor

Whilst labor organizations claim that if manufacturers produced products cost effectively, they would still be able to retain market share and manufacture locally. This is totally unrealistic considering changing business models.

The reality is that manufacturing workers must become agile, willing to learn new skills and adapt their capabilities to new roles as the effect of both globalisation and innovation combine to drive a highly volatile workplace.

Serious workforce shortages are predicted by 2020, as the focus on training skilled workers has been usurped by the emphasis on the fundamentals of basic employability skills. Skill deficiency impacts the manufacturers’ ability to maintain production levels, implement new productivity improvements, or deploy quality initiatives.

New technologies employed in manufacturing demand higher levels of technological literacy amongst employees at all levels.

Innovation

Sustainable growth in innovation is necessary to create new industries and jobs, manufacturers must continue to strengthen technological innovation and engineering design capabilities.

Established production processes must be re-engineered to drive improved quality, functionality, and reduced time to market.

Advances in technology can give rise to more ideas for new products and automated, precision manufacturing of components. Likewise, emerging fields such as biotechnology and nanotechnology create both new processes and new products.

Technology

Opportunities in manufacturing are constantly emerging. Lower-cost processes, new materials and faster technologies able to interconnect with legacy environments are becoming readily available. New approaches in learning technologies are assiting in the retraining of workers to cope with the new technology. New collaboration capabilities are also driving new business and operating models and well as new products and services.

Research and Development

Innovation is dependent on research and development within the manufacturing sector. During difficult economic times, companies tend to decrease their investments in research and development. Yet, this is the very time when more efficiency and new products can drive new markets and new revenues.

Most countries have governmental agencies to support ongoing R&D, recognising that innovation is critical to the health and vitality of a countrys overall production capacity. Unfortunately, most struggle on inadequate and underfunded infrastructures.

Standards

Standards underpin all aspects of manufacturing, including innovation. Effective standards for research, production, and product development can drive a sustainable future for manufacturing. Every aspect of manufacturing depends on standards:

• Documentation and specification
• Component sizing
• Materials content
• IT interfaces
• Electromagnetic compatibility
• Interoperability between machine tools or robots
• Transaction standards – payment, identification, verification
• Warranties
• Energy efficiency

In consumer electronics alone, the lack of standards are well known for the battles between HD-DVD and BluRay, and lack of interoperabiltiy between different standards adopted by mobile phone manufacturers. Agreed, common standards need to be negotiated according to widely accepted criteria for products or services.

Infrastructure Costs

Rising health-care, legal, and regulatory costs are affecting all sectors of manufacturing.
Rising insurance costs could force many small manufacturers to cut back on technology investment.

In an attempt to conform to environmental standards, the high cost of compliance with regulations and protection against litigation are undercutting business competitiveness.

Manufacturing Sector Transformation

The landscape of manufacturing has changed from one of large capital budgets to one of limited budgets and scaled back investments. This means manufacturers no longer find it easy to ramp up production or implement new production lines.

The focus on automation is now being balanced with workforce skilling and retention, transofrming enterprise models into complex integrated systems more focused on developing innovative production methods to achieve greater benefits. Technology is seen as the key to achieving efficiencies and maintain competitiveness. There is also greater interest in collaboration, sharing the risk, and sharing the cost.

Key Challenges

The key challenges in manufacturing include:

Reduced capital pools - decreasing time-to-money cycle times are driving the need for speedy responses to manufacturing issues

Less primary focus on R&D - work previously done in house is now being done by first, second, or third-tier suppliers who do not have the budget to invest in further innovation.

Strong globally distributed competition - resulting in a more volatile workforce

Global sourcing and logistics - delivery times, shipping, communications, warranty issues, and more.

Security and IP protection - with increasing susceptibility to attack and/or security breaches, information and infrastructure assurance is becoming increasingly important along with physical security. Assuring operational continuity and continued productivity requires vulnerabilities to be identified and critical assets protected.

Environmental issues - EPA and conventional environmental regulations are driving increased consideration of the impacts products have on the environment. In turn, this impacts purchase decisions and responsibility for disposal or recycling at the end of the products useful life. This new paradigm is for designing and manufacturing for total life-cycle responsibility and by developing take-back strategies for their products.

Greater knowledge needs - exponentially increasing volume of data, information, and knowledge to be managed. Workers need more knowledge to manage new technologies, processes, materials etc.

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