General Manufacturing Sector Profile
Large and Mass Manufacturing
The main drivers of commercial viability and profitability in
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
- 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.
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.
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
New technologies employed in manufacturing demand higher levels
of technological literacy amongst employees at all levels.
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.
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 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
- 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.
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.
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
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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