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Posts Tagged ‘manufacturing trends’

manufacturing-vs-all-industriesERP consulting firm Panorama Consulting just released its 2015 Manufacturing ERP Report which includes a listing of “Top ERP Vendors” by market share.  While earlier reports showed SAP, Oracle, and Microsoft Dynamics leading the pack among ERP vendors in all industries, the new report shows Microsoft Dynamics holds the largest share in the manufacturing space.  The recent rankings are:

  • Microsoft Dynamics: 38% share of ERP manufacturing space
  • Epicor: 25% of that space
  • Oracle: 13%
  • SAP: 11%

The report also divulges that “unpredictability is more rampant among manufacturing ERP implementations,” and… “that manufacturers are just as likely to take longer to implement than expected, but when they do, they are more likely to extend their timelines by a greater amount than in other industries.”

The report also noted that “manufacturers implement at a lower total cost of ownership than those in other industries.”  They add that “when normalized to account for variation in company size by looking at total costs expressed as a percentage of annual revenue, manufacturers come out ahead with costs of 7.5% of annual revenue compared to 8.4% in all other industries.”

Manufacturers are also more likely to customize their ERP software than those in other industries.  Still, it’s interesting to note the report indicates that virtually every company, manufacturers or not, does some level of customization to their software.  Some 75% (of manufacturers) and 90% (overall) report “minor, some, or significant” modification.

And finally, one interesting note, which we’ll quote directly from Panorama’s report verbatim:

“Adoption of manufacturing-specific functionality is relatively weak. While most manufacturers adopt core modules such as sales and distribution, materials management and MRP, relatively few are actually implementing more advanced functionality in areas such as product lifecycle management, advanced planning or CRM. Many of these same companies actually paid to acquire the software, but didn’t acquire those modules for whatever reason. It is important to be cognizant of the propensity for manufacturers to invest significant money in shelfware and to make sure they are getting a good ROI from some of this advanced functionality offered by ERP vendors.”

Benchmarks, the report concludes, are key.  Everyone needs them to ensure goals are met during implementation and beyond.  You can view the Panorama report here.

 

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ge_mfgA December article in Time Magazine by Rana Foroohar uses one company’s plans for manufacturing success – General Electric – to reveal a few key trends in manufacturing.  As our previous two posts were all very much about “Trends” we thought we’d push our off-topic luck once more by noting herein her observations about GE’s progress.  They provide some good food for thought for other manufacturers too.

Foroohar points out that in the recent economic recovery, 3 out of 4 Americans don’t feel the economy is getting stronger, and points out how this is likely most related to the fact that personal incomes are not rising much (except at the top).  Historically, she notes, “the key to achieving broad income growth has been creating more middle-class jobs.  And those have traditionally come from… manufacturing.”

She points out that GE borrowed $3 billion from Warran Buffett to retool while moving away from complex financial schemes (e.g., GE Capital) and toward making things (e.g., drilling equipment, LED lighting).  GE’s goal is to get “finance” down to about 25% of its business.  As its CFO pointed out, “We had to decide whether we wanted to be a tech company that solves the world’s big problems or a finance company that makes a few things.”

GE is thus betting on a few megatrends, like the fact that emerging-market economies are entering a period much like the U.S. did after WW II, where they’ll need roads, houses, bridges and airports.  GE sees a growing demand for all manner of consumer goods.  McKinsey Global Consulting estimates that these emerging economies will spend more than $20 trillion a year this way by 2025.  This serves to illustrate that future economic growth may very well be centered on making things, “rather than trading on their value.”

To that end, GE is copying Silicon Valley methods.  They’ve set up a “growth board” that operates like an internal venture capital firm, vetting employee ideas and then dishing out time and money to explore them.  The result so far has been dramatically shortened production cycles for products: ideas that previously took two years to test might go from paper to production in 45 days, says Foroohar.  GE is also sourcing new ideas from outside, and here she notes the 22-year-old in Indonesia who designed a bracket on a jet engine by tapping into a GE website where the company posts problems and offers rewards for solving them.

In the end, the question remains: How many new American jobs can thus be created?  Early indications are positive.  A recent Boston Consulting Group annual survey of senior manufacturing execs found a 20% increase in companies bringing production back from China in the past year.  A GE division launched two years ago to explore the Internet of Things (see our earlier posts) and machine-to-machine communications has gone from zero employees to over 1,000.  And they’re using more locally sourced suppliers here in the process, especially thanks to new 3-D printing technologies.

While there may still be a long way to go to replace the 1.6 million manufacturing jobs lost in the recession, such progress highlights the fact that “our post-crisis economy is smarter and nimbler and growing in the right sectors.”  While it may still have not created enough good jobs to fill the gap, the way forward is getting clearer.  Of course, as the article concludes, getting there may be another story.  But for inventive and creative manufacturers, as always, there is optimism.

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trends picIn recent articles on topics including the Internet of Things and Big Data, we’ve talked about technology’s increasing impact in business, particularly in manufacturing.  A recent blog post by Brian Oulton, an Industrial Director of Marketing at Belden, Inc. a century old producer of industrial products that include networking, IT and connectivity under a variety of brand names, discusses 4 of the biggest trends, and what to do about them.

Oulton’s “big trends” encompass topics we parsed before, but his ‘What To Do About Them’ comments are worth passing along.  In his view, the four big trends that manufacturers need to be aware of are: Internet of Things (IoT), Big Data, Cloud Computing and Industry 4.0.

As would befit a supplier of industrial networks, Oulton’s first recommended step is to make sure your own network is up to snuff, or as he puts it: “make sure your network is well-designed and that it lets you scale-up dramatically, easily and reliably.”  Of course.

But it’s his ‘brainstorming’ that’s worth giving a listen.  For example, on the subject of “Big Data”: You may already be collecting lots of data, but struggling to understand it, thus making it hard to act upon.  If you had it at your fingertips, what would you do with it?  Suggests Oulton:

“Could it be used to provide super customized products for customers, based on market trends and sales / demand data? Or, what if you could share trend and other data in real-time, directly with customers, have them decide what they want made, then make it and delivery it really fast?

What if algorithms could be applied to big data that would allow you to smooth out production? What benefits would that give you?

Big data can be used to accelerate business by quickly matching production with demand. What do you dream about being able to do in this area?”

On today’s so-called Internet of Things (interconnectivity across machines, sensors and appliances):

“This is about having information from disparate sources, some of which are in the factory and some of which are outside of it, available at your fingertips.

For example, let’s say you have trouble with a machine. Imagine that you could troubleshoot the problem using data not just from sensors, actuators, PLCs, etc. but also from drawings, videos and help text. Now add in information from patches and updates from the Internet, plus voice and video connections with the machine building company and other remote resources.

Now what other problems could be solved faster by being able to bring together a wide variety of information quickly?”

As to cloud computing and storage, Oulton suggests:

“With information available anywhere anytime, what advantages can you gain from that? Does it enable closer collaboration between different facilities? Can it connect you closer to your customers?”

Give Mr. Oulton credit for framing the questions companies today could be asking themselves – once they have the underlying infrastructure to warrant asking them.  In doing so, he’s framing the questions that are really at the heart of the future of manufacturing.

Read his full post here for further information.

 

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abe APICSOur friends at APICS, via their weekly newsletter written by President Abe Eshkenazi, made a couple interesting observations worth sharing about the current state of manufacturing, and where it’s headed.

He references two articles, one originally published at CNNMoney titled “Are You Paying More than Your Parents” about advances in manufacturing and supply chains enabling cheaper manufactured goods, and the other from the Economist, entitled “Factory of the Future” detailing manufacturing’s shift from production to a suite of activities.

In the first article, Mark Perry of the Univ. of Michigan points out the ‘miracle of manufacturing’ – how anything that is manufactured has become cheaper over time.  Supply chain management, of course, is one of the drivers of those cheaper prices.  Automation is the other.  And experts expect these trends to continue.

In the Economist article, the authors note that “ ‘Manufacturing is no longer just about production. Production is now the core of a much wider set of activities.’ Those activities encompass a wide range of services. For example, the article describes how Rolls-Royce now leases jet engines to airlines and ARM designs chips produced and used by smartphone manufacturers.”

The article authors also predict increased traction in remanufacturing, an industrial process that restores used products to like-new condition.  “In the future, companies will not be able to afford to throw things away,” says study leader Sir Richard Lapthorne, a British industrialist.

In the end, while manufacturing is likely to need fewer workers, a wider view of manufacturing and its related services is that it will eventually be an overall booster of employment.  Leaders in business, education and government all need to learn – and all have a stake – about these new and increasingly complex value chains built around the world of manufacturing.

As always, Eshkenazi ends on his common refrain: the importance of a well-trained workforce, and the education that an organization like APICS can provide to workers in today’s fast evolving manufacturing environment.

(We are long-time supporters of the work of APICS, and regularly put our own staff through APICS CPIM training in the long-held belief that a consultant who knows the business side of production, manufacturing and distribution – as well as the technical side expected of any IT consultant today – will be a consultant that holds far greater value to our clients, who we believe will also benefit accordingly.)

You can learn more about our local APICS chapters here.

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time_madeUSAWe periodically comment on news from the world of manufacturing, as most of our clients live in that world.  Today, some encouraging news…

Last week’s Time Magazine cover story (“Made in the USA,” April 22nd issue) confirms much of what we and others have been noting for awhile now… that U.S. manufacturing is back, and in meaningful ways, though the impact this will have on future direct employment trends may leave some less than satisfied.

The article points out most notably that while direct manufacturing employment overall may only be responsible for 9% of U.S. jobs, this statistic belies the importance of the sector for the overall economy, because manufacturing represents “a whopping 67% of private sector R&D spending as well as 30% of the country’s productivity growth.”  In fact, every $1 of manufacturing activity overall returns nearly $1.50 to the American economy.

A number of reversals have occurred when compared to the offshoring trend of recent years.  Companies from Apple to Airbus to Ashley Furniture, among many others, are making serious returns to U.S. manufacturing.  As one economist quoted in the article notes “The offshoring boom does appear to have largely run it course.”

When you add in factors like newfound, cheap U.S. based energy courtesy of shale oil and the natural gas boom, and the increasing (and tighter) alliances among government, academia and industry… and combine these with the rising wages of other nations, even as U.S. wages overall have fallen due to reworked labor contracts… the overarching conclusion is that America has once again become truly competitive in the world marketplace.  In fact, while U.S. wages on a per capita basis are still about seven times greater than those in China, that disparity is down significantly from years past.

Meanwhile, speed to market has increased markedly, thanks to new technology.  The new wave of 3-D printing – not of the plastic toys & widgets variety, but of actual metal and machine parts fabrication now being “printed” in a similar manner (called “additive printing”) – means that companies can get parts produced and shipped within a week by such specialty printers, without ever having to own the means of production.  That kind of turnaround time, combined with today’s Just-In-Time manufacturing ethos, makes it a lot harder for foreign producers to manufacture and transport from there to here, given the competitive time and cost factors.

One Illinois provider of parts to Caterpillar says he is increasingly getting business that otherwise would have gone to China, and his comments are telling: “We can do faster delivery with higher quality.  By the time you factor it all in, it makes sense to keep some of that work here.  I think the insourcing trend is going to be huge.”

However, the workers required for today’s factory need to be the most educated, well-prepared ever.  As Time’s article points out, employers today often look for college grads for the shop floor.  The technologies involved… the expectations to “step up their game”… and the new emphasis on continuous improvement, employee adaptability and acquiring new skills, all require a new kind of worker.  There may be fewer of them in tomorrow’s plant (thus extending a century long trend), but these folks are the future manufacturing jobs of America.

I heartily recommend picking up a copy of Time’s April 22nd issue and reading the full article for yourself, if you want to feel good – or even better — – about where we’re heading as a country, as employers and as an economy as a whole.

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workers_mfgAs noted in our prior post, we were intrigued by comments made by TRENDS, the subscription publishing arm of AudioTech in Willowbrook, IL in a recently published article titled “Advanced Manufacturing: The Key to America’s Innovation Advantage” in December (Vol. 9, No. 12).  (www.crucialtrends.com).

Read our first post for the run-up to today’s conclusion, in which we look at what the TRENDS article’s authors say are three key forecast trends for the future of manufacturing employment.

Their first conclusion: “Over the next decade, high schools and universities will redirect their vocational training and guidance efforts away from the liberal arts toward the skills demanded by advanced manufacturing.”  Schools will need to make students more aware of the opportunities inherent in the new, advanced manufacturing.  Look to Germany’s trade school model for inspiration here – it works for them.  Businesses have tremendous stakes in the success of our schools.

Their second conclusion: “Over the next seven or eight years communities will actively encourage ‘high-impact technology clusters’ that will help advanced manufacturing take off.”  Innovation thrives when related companies and educational institutions are co-located.  Collaborative networks will (in fact, in many areas, already are…) encouraging greater innovation and new forms of technology startups (we’re seeing a Renaissance of idea formation and corresponding startups, even in small towns like our own, in South Bend, Indiana).

Their third conclusion: “In an effort to re-energize the economy, government will play a role in supporting the growth of advanced manufacturing.”  We’ll need joint cooperative (government and private sector) collaboration in efforts including development of intellectual property.  Just as importantly, we’ll need tax policies that encourage investment in R&D, human capital, IP development and fixed assets.  Some of these exist today; more can be done.  Policies that reward venture capital will help make the most of this opportunity.

As suppliers of software and consulting to America’s manufacturing and distribution breadbasket, we see on a daily basis the strength and vigor or our small business manufacturing sector.  They’re smart, experienced and agile.  We can only hope that America’s policies and educational institutions have the same smarts and vigor to keep up with, support, and provide the future talent for these difference-making companies of the 21st century.

 

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worker_mfg_2Many would agree that a strong manufacturing base is key to a vital economy, a point we’ve emphasized in this blog over the years.  True, we’re biased, as we earn our living selling software solutions for manufacturers, and have for 25 years.  But that doesn’t make us wrong – just keenly interested in the topic.

And so when TRENDS, the subscription publishing arm of AudioTech in Willowbrook, IL recently published an article titled “Advanced Manufacturing: The Key to America’s Innovation Advantage” in December (Vol. 9, No. 12), we paid attention.  We’ve used some of their comments, in addition to our own, to survey the current playing field in U.S. manufacturing.  To give credit where due, TRENDS can be reached at www.crucialtrends.com.

The article notes the result of a Deloitte Consulting survey of American manufacturers who reported that they had 600,000 jobs open, “for the simple reason that workers with the right skill sets for the open positions were not available.”  The result, as one might imagine, is that this limits the ability of those firms to grow, or improve productivity.

America, the articles notes, developed its manufacturing strength in the first place because of a wealth of natural resources, a lack of government restrictions, and an “undying spirit of innovation”.    But as those assets waned – that is, as prices rose while our edge in materials costs diminished and we absorbed the rising cost of regulatory compliance —  U.S. companies lost market share.  And jobs.  In fact, we lost over 6,000,000 jobs just in the first decade of the 21st century.

So it is surprising perhaps to learn that despite the decline in many industries, according to the American Enterprise Institute, over 75% of America products are still manufactured… in America!

One key reason, notes TRENDS, is our ability to adapt by working smarter.  There has been a 40% increase in high-skill manufacturing jobs since 1980, which exploit things like cutting edge materials,  and new technologies and capabilities.  Any future growth, TRENDS points out, will surely rely on growth in these areas.   And the effect transfers beyond just manufacturing.  Since R&D “tends to follow manufacturing as it crosses borders, a domestic increase in manufacturing will not only aid manufacturing jobs, it will also ensure R&D activity remains in the U.S.”

Along with this trend is expected to come a greater protection of intellectual property — notwithstanding the latest hacking efforts by international competitors, as we’ve described in our previous PSSI blog post.

When Deloitte looked at the sectors facing the worst shortages of skilled employees, many of them were from the manufacturing sector, including automotive, aerospace & defense, and industrial and consumer products.

And while major manufacturing companies like GE, Boeing, Alcoa and others are working closely with community colleges and veterans groups, the TRENDS article points out that such efforts are merely a “good start” and that a better trained workforce will only come from a “broader approach.”  We’ll look at that broader approach in the second of this two part series.  Stay tuned…

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