What Makes a Manufacturing Company Competitive? Labor Productivity

Aug. 6, 2012
The survey showed that both developed and emerging economies are impacted by a shortage of skilled production employees, with 68% in Brazil, 36% in China, 22% in Germany, 44% in Mexico, and 26% in the U.S. agreeing to a shortage.

With manufacturing  cited (70%) as the single most important industry for a country’s economic health, a recent survey asked global manufacturers which factors are necessary for achieving success in the segment.

Manufacturers in Australia, Brazil, Canada, China, France, Germany, India, Mexico, Spain, the U.K., and U.S. ranked labor productivity (74%) at the top.

The study,  by Kronos Incorporated and conducted by IDC Manufacturing Insights, reported that while emerging nations rated the need for modern infrastructure higher than mature economies, labor productivity still topped as the main driver of success among all countries.

Brazil, Mexico, and Spain scored the highest regarding labor productivity, with 82% in all three countries noting it to be very or extremely important. China, France, India, and Germany scored relatively low, with 66%, 66%, 68% and 68%.

 “Manufacturers today are judged on a world stage and their treatment of labor is under the scrutiny of governments, downstream supply chain partners, and end consumers,” explained Gregg Gordon, senior director, manufacturing practice group, Kronos and author of Lean Labor.

With developed countries facing high levels of un-employment and falling wages, emerging nations can no longer rely on low cost labor as a growth strategy," he added. "They will need to develop a skilled, productive workforce to compete globally. Also, as manufacturers seek growth internationally, they are required to invest in economic development by foreign governments; specifically good paying, local jobs. With increased global scrutiny, competition, and supply chain complexities, the workforce is becoming a competitive differentiator for manufacturers everywhere.”

Issues Impacting Productivity

When asked if absenteeism was not a problem, Australia, Canada, U.K., and U.S. respondents agreed the most, with 42%, 48%, 46%, and 44%t respectively, demonstrating absenteeism to be a smaller issue. Brazil, France, and Mexico cited absenteeism as a bigger problem in manufacturing, with 24%, 26%, and 22% respectively agreeing.

The survey also showed that both developed and emerging economies are impacted by a shortage of skilled production employees, with 68% in Brazil, 36% in China, 22% in Germany, 44% in Mexico, and 26% in the U.S. agreeing to a shortage.

How does the future of manufacturing look as a career option for the next generation? Eighty-eight of all respondents were very or somewhat positive about encouraging younger relatives to consider manufacturing as a practical career option. In the U.S., 90% agreed and other nations fared similar. Australia and China ranked the lowest, with 74% and 70% respectively.

Other Factors Affecting Manufacturing Sector

Looking at other factors, Brazil respondents ranked the need for modern infrastructure the highest, with 88%t rating it as very or extremely important. China, India, Mexico, and Spain followed with 82% in all four countries, and 66% in the U.S. agreed about modern infrastructure’s importance.

With regard to access to foreign investment, Brazil, India, Mexico, and Spain respondents rated access to foreign investment the highest, with 50%, 50%, 70%, and 62% respectively citing it as very or extremely important. Canada, Germany, and the U.S. ranked the lowest, with only 12%, 16% and18% respectively.

Government support ranked high with China (82%) while the U.S. did not rank this factor as high 42%).

When asked about factors that can improve workforce productivity, training and continuous improvement of the existing workforce was the top choice, with 68.2% of all respondents noting it as effective. Investment in technology followed next, with 63.3%.

 “The modern manufacturing workforce is going beyond its proud legacy of continuously driving higher levels of productivity through continuous improvement and is augmenting that legacy by being the pivotal resource in creating strategic advantage,” says. Bob Parker, group vice president of research, IDC Manufacturing Insights.

“Complexity is a given in our global supply chains and it is not just information that gives us advantage, but people with the skills to use that information.  As our surveys and detailed interviews confirmed, managing corporate capabilities through the workforce is a competitive necessity.” 

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