In speaking with executives at National Manufacturing Week in Chicago, I found optimism on the rise. By most accounts, the recession is seemingly fading into history and sales are increasing and profits will likely follow. There are even speculative plans to increase hiring in a number of sectors.
To be sure, manufacturers are still struggling. Many executives echoed the consensus view that U.S.-based manufacturing starts off its day with a built-in disadvantage of at least 22 points.
Moreover, other familiar problems still threaten manufacturer competitiveness such as China, rising healthcare costs, a shrinking base of qualified employees to draw upon, and intellectual property rights to name a few. Also lurking in the background is tort reform, which is elusive and of particular worry to manufacturers that consider themselves targets in the inevitable next round of asbestos litigation.
There is a belief that many manufacturers emerged from the recession stronger than before, and lean manufacturing was given much of the credit. The fat has been trimmed to the bone and productivity has increased. The principles and managing processes that are now in place will carry forward and the gains will not be reversed. As sales continue to grow, profits will drop to the bottom line and soon new investments and hiring will be necessary to sustain momentum.
I also discovered an emerging and still unanswered question. Is there life after lean? Lean manufacturing helped manufacturers survive and morph into more competitive business models, but aside from the grail of increase exports and international trade, many executives are looking for a next frontier to cross. A few executives offered a glimpse of the future.
Some executives are attempting to extend their newfound competitiveness to the way they take their products to market, through the supply chain and ultimately to the customer. Often, this means an extension of lean initiatives. Lean is now more than an initiative -- it's a way of doing business.
With supply chain partners and distributors, lean manufacturers are seeking to build partnerships based on finding common ground for mutually reducing costs and increasing productivity. With customers, the goal is to reduce the customers cost of acquiring products, and ultimately, improve the efficiency of the customer's own business. If successful, these companies will transform lean initiatives into a market positioning, a force for driving competitive results and distancing themselves from long-term rivals.
Manufacturing executives are looking for a new life after lean. These companies are looking to the customer and seeking to deliver new value-added, differentiation and innovation. Far from seeking to be merely customer-driven, market leaders will seek to redefine and upgrade the customers' total experience. This new focus includes the traditional realm of manufacturers, namely the products they produce and the results that can be delivered. But, they also go further.
The emerging mantra seems to be that the strength of a company's brand is not only defined by product experience of consumers and users, but also by the activities and excellence of the supply chain that delivers it.
Manufacturers can no longer be successful by floating their products in the supply chain, and hoping for distributors, mass merchandisers, specialty retailers and logistics companies to land it safely on the customer's distant shore. They must seek ways to influence, upgrade and control the channel's value add.
Brands go lacking when the customers' shopping, buying, fulfillment and after-the-sale experiences are less than exemplary. In today's competitive world, bad experiences stick to a brand, detracting from its equity and negating a potentially powerful force for the manufacturer.
In my client experience, I find that leading manufacturers are rationalizing, unbundling, and restructuring their distributor supply chains. Others are seeking to create and perhaps franchise new dealer, contractor or aftermarket service models that can upgrade the customer experience and effectively represent the manufacturer's products.
Still others are expanding the roles of supply chain service companies to offer pick, pack and ship, order fulfillment, and post-sales support. These initiatives all share the common theme of extending the manufacturers influence downstream, directing and redefining the supply chain for efficiency and effectiveness.
What does the future hold for manufacturers? It's not clear if a "next new thing" will emerge to replace the discipline and creativity fostered by lean manufacturing techniques. A new trend might emerge, but it may also come to pass that reinvigorated entrepreneurship and a renewed focus on the customer will create many new and unique strategies, adding profits and growth, and continuing the current trend toward an increasingly competitive manufacturing sector.
Today's cautious optimism may yet turn to excitement in the manufacturing sector. U.S. manufacturing executives must begin looking beyond the four plant walls and seeking life after lean.
Mark Dancer is Vice President and Principal with Pembroke Consulting. He is based in Chicago and may be reached at www.PembrokeConsulting.com