what_nextIn our prior post we looked at some of the data revealed in a recent report by The Economist which highlights the changing complexity of manufacturing, including fewer jobs overall, muddled in part by the ways those jobs are accounted for – or often not accounted for – as we move up the manufacturing supply chain.  We noted that those higher-paying manufacturing jobs in the “rich world” still account for a sizable share of nations’ GDP, and how much of the intellectual property retained by countries like the U.S., Germany and the U.K. continues to account for much of manufacturing’s overall value-add.

Still, keeping those jobs, and the future of manufacturing, are topics ripe for debate.  Today we’ll finish up our two-part post with what a few of the experts think.

For one thing, we can turn manufacturing from a product into a service, as Rolls Royce pioneered in the 1980s by providing its engines, service and maintenance at a fixed price, bundled package, or “power by the hour.”  The result was more stable revenues and more locked-in customers.

More recently, machines are being equipped with internet-connected sensors (the Internet of Things, or IoT, of which we’ve written before), which can gather data on how machines perform in the real world.  The accumulated data provides a trove of knowledge from which manufacturers can sell additional services to clients, and entice new customers as well.

Yet another bright spot will be 3-D manufacturing.  Here, we’re not speaking about creating playful little plastic widgets or toys, but rather complex manufacturing tasks in which design and manufacturing can be tightly coupled to produce things from motorbikes to high fashion.

But the real key, experts agree, lies in education.  Companies who offshore assembly and production work often suffer from reduced product innovation. Opportunities to learn how to do things better on the home front are often lost.  This is the natural synergy of production, where design meets reality, and the shop floor can provide feedback to designers; break that bond, and innovation suffers.  But those high-value design and innovation jobs require skill, adaptability and education.  These jobs will change over the lifetimes of workers, and they will not provide the mass employment of the past.

So it’s important to start with modest expectations, as is noted by James Manyika of the McKinsey Global Institute.  Improved education to ensure engineers are in good supply would be a good start.  A recent Bloomberg BusinessWeek article noted that nearly 75% of U.S. graduate-level advanced degrees in engineering and computer science are now going to non-American graduates.

Vocational training, where Germany proves a world-class model, and retraining programs that create new skills or refurbish current ones among displaced workers, have never been more important.

One way not to benefit manufacturing as a whole, many argue, is to disrupt global supply chains, nor will threatening companies that seek to move jobs overseas or the companies that host them.  We are reminded that it’s not so much foreign nations that have replaced so many of our low-skill manufacturing jobs, but rather, the inexorable march of industrial innovation, just as it’s done for the past 200 years.  Thus, policies favoring line workers over investments in automation will only make our industries less competitive.

Better to focus on the advanced manufacturing opportunities that lie ahead (i.e., 3D, IoT and manufacturing related services, to name three).  Educating our young talent – and providing ongoing education and retraining for new skills – is where our best hopes lie.

The sooner our leaders figure out what our manufacturers already know, the more robust will be our manufacturing prospects in the next generation.


old_mfg_plant“Manufacturing exerts a powerful grip on politicians and policymakers in the rich world.”  So note the editors of the The Economist in a January, 2017 article on the changing face of manufacturing.  Their point is that manufacturing is central to what most national and political leaders across the world believe is what they want, and what their nations need.

Unfortunately, the sentiment gets a bit cloudy when they talk about “bringing back” the jobs of yore.  As Bruce Springsteen once noted, “those jobs are going boys, and they ain’t comin’ back.”

The truth is, as always, a bit more nuanced.

For starters, manufacturing has not really gone away.  But it also hasn’t stood idle.  Indeed, there has been plenty of change in manufacturing – it’s just gotten a lot more sophisticated.  It’s the less skilled jobs that are not going to return.

Manufacturing has long offered among the most desirable wages, and its products often tend to be exports, which make it especially desirable in political circles.  In the early part of the prior century, manufacturing brought lots of good-paying, semi- (or low-) skilled jobs.  That’s all changed, of course.  And as the Economist article points out, those changes included the advance of I.T. and the underlying ability to allow firms to unbundle the different tasks from design to assembly to sales so that “it became possible to coordinate longer and more complicated supply chains, and thus for various activities to be moved to other countries, companies or both.”

In the 1940s, one in three non-farm American jobs were in manufacturing.  Today it’s one in eleven.  Even in manufacturing-intensive Germany, it’s one in five.  Over time, as manufacturing became more productive and prices dropped, its share of GDP fell too.  Over time, more jobs moved overseas – but these were mostly low-skilled jobs, it’s worth noting.  The complicated work stayed home, while the “routine work was easily moved to poor countries,” and cheap labor.

So in a very real sense, the promise to bring jobs back rings hollow.  Low and semi-skilled jobs are not going to return to America, or the most developed nations, because they were not simply shipped abroad.  Rather, they were “destroyed by new ways of boosting productivity and reducing costs” which only served to heighten the distinction between routine labor and the rest of manufacturing.

But here’s the thing: today it is said that one-sixth of all manufacturing jobs are found in “the rich world.”  But those workers produce two-thirds of the final value of today’s manufactured goods.  Most of the low-value work shipped overseas involves final assembly that “adds little to the finish product’s value.”  For example, assembly of Apple iPads in China accounted for just 1.6% of the retail selling price.

In the U.S. the 11.5 million higher-value jobs that officially count as manufacturing jobs were, according to Brookings Institute, outnumbered by two to one by jobs in manufacturing-related services down the supply chain, after accounting for the outsourcing of accounting, logistics, HR and IT services that were once counted as “manufacturing” jobs in an earlier era.  In short: that’s a lot of manufacturing related jobs – the good ones – which we still retain.  That’s about 33 million U.S. “manufacturing” jobs, all told.

So the next time you hear someone bemoan the loss of manufacturing jobs, or herald a new era of returning jobs to America, keep in mind: the best manufacturing jobs continue to remain in the U.S. and other developed countries —  even more so when you count the related supply chain jobs.

But keeping these well paid jobs is the real and continuing task at hand.  And to see what that will take, we’ll add a few opinions, and some Economist commentary, in our next post, as we conclude this look at manufacturing today.  Stay tuned…

time_riskIn a recent post from Panorama Consulting, CEO Eric Kimberling – using the article title “Five Reasons Executives Say “No” to ERP Implementations (and How to Overcome the Resistance)” – points out some of the common pitfalls of ERP implementations.  Today we’ll blend his comments with ours, based on three decades’ of implementations on our part, and about half that much from Mr. Kimberling’s firm as well.  Together, we’ve seen a few things…

  1. They are worried that the project will take too long and cost too much. And he’s right.  Most projects, as notated in both annual surveys and real-world experience of implementers such as them and us, run long and go over budget.  There are several reasons for this, most all having to do with the fact that the projects involve humans.  Strong project controls and limits can help.  But in the end, no one can predict all the nuances and twists and turns and unexpected glitches and changes of heart and new things learned… that all occur along the way.  The key to managing this lies deeply in the partnership, agreement and underlying trust and confidence between the client team and the implementation team.  Communication is key.
  2. They are afraid of the project disrupting their daily operations. Statistics confirm this happens in about half of all projects.  We’ve experienced it ourselves in at least some parts of implementations.  We find that a thorough “quote-to-cash” testing scenario prior to going live – while usually easier said than done – can mitigate most of this risk.  It takes time, effort and investment, but it is possible to predict and correct most potential errors, albeit not all of them.  We recently did an implementation that by all measures was really successful – except, there were too many snafus in shipping, where more testing should have been done, earlier.  Live and learn.  Won’t happen again.
  3. Their own people are the real sources of resistance. This varies by company.  We always remind clients that while their employees are busy up to the ears in the final pre-go-live stages of implementation, they still have a regular job!  Be careful what you ask of your team.  Invest in thorough training of the users.  Have a realistic timetable (noting that projects nearly always take longer than predicted).  Be ready to hire temps to handle parts of their ‘regular jobs’ when needed.  Conduct frequent, regular, well-announced project meetings.  Involve all your stakeholders.  Communicate freely and openly about project goals and tasks.  Make your users central to your process analysis and organizational change management.  And listen to them.
  4. They don’t have the budget to pay for the initiative. Within some limits, the more detailed the pre-project spec, the more accurate the budget.  But, there are  You need a working relationship with a provider who can give you their best good-faith estimate as to cost and time.  Some items can be quoted accurately and/or on a fixed price basis, but many (i.e., exact amount of training required, change orders, sudden exposure of previously unknown processes or issues) cannot.  Here we like Panorama’s advice: “Define a realistic business case that captures not only the project costs, but also the potential benefits that your company is currently missing out on.”
  5. They are concerned that the new ERP system will not improve their business. No one’s interested in an investment with no return.  ROI matters most to execs.  To ensure your goals are met, begin  A process analysis can usually uncover numerous areas of redundancy, inefficiencies, recommended process changes, technology touch-points and advantages… the list goes on and on.  Quantify, and then monetize these.  Whether you use time studies or back of the napkin calculations, you can pretty quickly – if you’re honest and complete in your analysis – come to a fair calculation of all the cost savings inherent in an IT project, especially ERP.  Take the time to do the calculations.  Then recognize (and keep reminding yourself) that once you’re up and running, those cost-savings will repeat themselves year after year after year…

small-biz-challengeIn a recent Wall Street Journal article (1/19/17), columnist Ruth Simon points out that small businesses are slow to hire.  As it turns out, statistics show that the median small business adds fewer than one full-time position a year, despite being thought of usually as “the engine of U.S. job growth.”

In 2015, about one in six small firms lost one FTE (full-time equivalent) and only one in five added more than two, according to J.P. Morgan Chase Institute, which analyzed payroll records for 45,000 small firm customers.

The truth is: the lion’s share of small business job gains in the U.S. comes from new businesses being formed, not the expansion of older small firms.  This, in a nutshell, synopsizes the challenge for American small business today:  most small firms employ just a few workers and struggle with unpredictable results.

The article goes on to quote Scott Stern, a professor at M.I.T. who notes that “There is a great disconnect between the belief that entrepreneurship in general is a driver of economic growth and prosperity, and the simple fact that most small businesses remain small.”

Nearly 90% of employer businesses with paid employees – representing just under five million firms – had fewer than 20 employees in 2014 according to U.S. Census data.  These firms account for 17% of all workers at companies with employees.

Moreover, employment and payroll spending in general prove to be “very unstable” according to the Chase Institute.  “The reality is that most small businesses do not have a steady flow of customers and a steady flow of revenue.  They have good months and bad months,” notes CEO Diana Farrell.

Creating a company is a messy and dynamic process.  Small companies have smaller cash cushions and are “more likely than big companies to adjust hours or head count to meet the ebbs and flows of demand,” according to research done at the E. M. Kauffman Foundation.

Entrepreneurship has always been challenging.  And the data show that it’s never been truer than it is today.


digital-transformA recent post by our friends at Panorama suggests there are some myths about “digital transformation” – the process of transforming a company into a 21st century digital enterprise worthy of a quick recap today.  They make 4 points of distinction that companies should heed in the process of their continuous improvement and digital initiatives.

  1. Myth: digital transformation is the same thing as an ERP implementation. Their first point is that digital transformation is not ERP – at least, not ERP alone.  They do not assume a single off-the-shelf ERP solution.  Rather, they are open to best-of-breed, or sometimes hybrid, solutions.  Rarely is one company’s base ERP offering sufficient to serve the complete needs of a company.  We ourselves have found that with any of the variety of ERP solutions we’ve sold over the years, it’s still necessary and useful to utilize that software’s companion, third-party options to extend the reach and capabilities of the core system into areas often better handled by vertical subject matter experts.  Moreover, notes Panorama, ERP solutions are often about incremental improvements.  A digital transformation often requires “a more revolutionary approach to operational and organizational change.”
  1. Myth: your digital transformation software needs to be provided by one ERP vendor. As implied above, a digital transformation opens doors to all manner of new thoughts, processes, ideas and technologies.  So ERP may come from one source, your e-commerce from a second and your warehouse management from a third.  There’s no harm in that if all can be well-integrated.  And that requires people and process analysis, before anyone touches much software or hardware, we might add.
  2. Myth: digital transformations should be run by the IT department. Most enterprise software initiatives must be viewed first as a business project, and then as a “computer” or “IT” project.  We always remind prospective clients: ERP (and by extension, digital transformation, is first and foremost a strategic business investment.  Business and executive involvement here are more important than ever.
  3. Myth: digital transformations are best for every organization. Not always, Panorama points out.  Sometimes, incremental, slow change is best.  They note that… “The key is to identify what type of project you want this to be, and then ensure that you have alignment in how you allocated resources, focus and measures of success for the project.”

Whether yours is an ERP project, a true digital transformation, or something in between, begin with a clear definition of the what the project is, and the pace of change the organization believes it can support.  These will often dictate the steps that should – or should not – be taken after.


top-tenWe first posted the results of an interesting survey done by the accounting firm Deloitte about five years ago, but it’s time for a reprise.

In their study, conducted across a broad range of people who bought business management software systems a few years back, Deloitte undertook to see how experiences varied between inexperienced (first-time) and experienced (or ‘second-time’) buyers.

Asked to rank the importance of critical purchase factors, each group ranked their concerns as follows…

First- Time Buyers

  1. Price of the software
  2. Ease of implementation
  3. Ease of use
  4. Ability to fit business
  5. Functionality
  6. Ability to work with existing hardware
  7. Growth potential
  8. Level of support provided by reseller
  9. Quality of documentation
  10. Developer’s track record of performance

Now let’s look at what the more seasoned buyers had to say in their rankings:

Second- Time Buyers

  1. Level of support provided by reseller
  2. Developer’s track record of performance
  3. Ability to Fit Business
  4. Growth potential
  5. Price of Software
  6. Quality of documentation
  7. Functionality
  8. Ease of Use
  9. Ease of implementation
  10. Ability to work with existing software

As we noted back in 2012 when we first wrote about this:

We know.  We’re prejudiced.  But it’s also nice to know… we’re right.  It’s a lesson we preach every day.  No, not about being right… the part about how critical it is that your system provider be capable of providing experienced hands, a high level of support and deployment assistance.  That’s the real number one factor to consider.  But don’t take it from us – take it from the folks who matter: the customers who bought.


ERP Selection Tips

tipsERP blogger Eric Kimberling of Panorama Consulting recently posted some advice about selecting an ERP system, along with a few comments about specific systems, which we thought we’d share today (while adding a couple of our own).

We know that most clients think (or hope) an implementation can be accomplished in a few short months.  We usually try to let them down gently when we will tell them that a year or more is the norm – with large and comprehensive systems often taking considerably longer.

Kimberling, who owns an ERP consulting firm on Colorado, notes that his firm’s experience is indeed the same: about 18-24 months for the “average implementation.”  And that’s regardless of whether the system chosen was SAP, Infor, Oracle or Microsoft Dynamics.

Among those particular choices (SAP, Infor, Dynamics, Oracle, Dynamics), his firm’s experience showed that Microsoft Dynamics was the lowest cost on average to implement, but generally took longer too.

Some of Kimberling’s advice to shoppers includes:

  • Define and prioritize your highest priority business requirements to quickly arrive at a short-list
  • Leverage independent experts who can help you quickly narrow the field
  • Don’t forget to consider implementation while evaluating ERP systems (Don’t just focus on the software: understand how it will be implemented.)

And we would add one that’s maybe a bit of a surprise: the software is not what matters, at least not entirely.  There’s lots of good software: it’s the team you work with, and their understanding of how to apply the software to your business processes, that will yield the most superior results in the end.  We know it from years of experience.

He reminds us that 50-70% of all the implementations his firm sees experience significant operational disruption.  The industry average, he notes, has hovered just above 50% for many years.  So… expect some disruption.  Just emember, ERP is a strategic investment.  It takes time, and it’s not turn-key.  Work with your consultants and providers as a team – and we can assure you, you’ll get there.  Patience on both sides goes a long, long ways.

According to some statistics Kimberling shares at his website, payback tends to come in greatest at years 3 and 4 after purchase.  But we would add: after that, the ROI and savings are permanent.

Finally, Kimberling advises that you can quickly narrow the field down to the top ten or twenty percent by prioritizing those that meet two key requirements:

1) they are critical to your business, and

2) they are differentiating functions of various ERP systems in the market

Only those that meet both criteria should be used to narrow down your short-list.