Each year, as I prepare for our annual Evolution of Manufacturing event, I embark on a deep dive into the issues affecting American manufacturers.
There’s little doubt we operate in a global economy, where the same basic economic factors of supply, demand and pricing affect all manufacturers, no matter their location. However, several elements that American manufacturers must deal with distinguish them from their global brethren.
First, American manufacturers are being squeezed at an accelerated pace never seen before. Prices are down. Service standards and customer expectations are up. And the demands of quicker turnaround times are on the rise as well. Further, American manufacturers must increase production levels using fewer employees and less overtime in order to effectively compete.
These new global realities extend beyond the manufacturing realm and are reflected in the slower-than-expected economic recovery — represented by lagging pace of employment growth and only gradual reduction of the national unemployment rate. Simply put, the future American manufacturing work force will look and operate much differently than it did just five years ago.
My deep dive included visits to manufacturing facilities in industries as diverse as snack foods, steel, personal care products and labels. Despite any obvious differences based on products and methodology, several commonalities stood out.
Chiefly among them is the pressure by customers for greater quality at a better price. Big-box retailers, such as Walmart and Target, have accumulated such immense purchasing power that they’re effectively able to dictate their own payment price. This has done little to help American manufacturers get their expenses in line.
Next, American manufacturers must be more agile in all aspects of operations. While forward-thinking activities like forecasting and planning will always remain, there will be more of an emphasis on quickly identifying quality problems, supply shortages and demand shifts. Manufacturers will no longer have the luxury of these being lagging indicators they can analyze after the fact. They must monitor them in near-real time and be able to act accordingly.
Finally, underlying all of this is the grim realization that the hangover from the Great Recession of 2008 will continue to linger far into the future. And that, it seems, means more changes are on the way. Those who understand and are willing and able to adapt will do well. The others will just simply fade away.