U.S. Manufacturers Must Now Race To Win

April 26, 2007
Sticking to the old ways won't work.

A problem with American industry is that despite pretences that suggest the opposite, it has basically stuck to its traditional ways and methods. Methods that made it very successful when the rest of the world was pretty much asleep are no longer relevant. It is short-sighted for anybody to want to stick to the ways of the past in today's rapidly changing world economy.

Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future, a congressional study, offers the following statistics about the global economy:

The U.S. is today a net importer of high-technology products. Its share of global high-technology exports has fallen in the last 2 decades from 30% to 17%, and its trade balance in high-technology manufactured goods shifted from plus $33 billion in 1990 to a negative $24 billion in 2004.

Chemical companies closed 70 facilities in the U.S. in 2004 and have tagged 40 more for shutdown. Of 120 chemical plants being built around the world with price tags of $1 billion or more, one is in the U.S. and 50 in China.

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In Germany, 36% of undergraduates receive their degrees in science and engineering. In China, the figure is 59%, and in Japan 66%. In the U.S., the corresponding figure is 32%.

In 2005, more than 600,000 engineers graduated in China. In India, it was 350,000. In America, it was about 70,000.

As we all know, this means we have a truly global economy and the international marketplace will grow at an increasingly faster rate.

Staying with traditional ways and methods is exactly what many manufacturers and distribution companies are doing. There is too much fear to shift to the unknown and unfamiliar and that is the reason why many unconsciously feel that it is better to fail with the familiar rather than have a fighting chance with the new and unfamiliar. This, of course, isn't a roadmap for success.

So, the real question is this: Are we doing enough to ensure that our organizations continue to provide services to meet increasing customer expectations?

Customers will continue to want the materials and products when, where and how they choose. Fluctuations in the international marketplace will change their needs at an increasingly accelerating rate. Continued pressure to reduce total operational cost, increase efficiency and other improvements will be required to satisfy customers. Customer service may, in fact, be the only competitive advantage for companies in the distribution industry.

As the needs of our customers throughout the globe change, operating more effectively, reducing cost and current levels of customer service are not enough. Industrial distribution is not a commodity, lowering prices may entice some lookers, but keeping customers demands more than just a lower price. Corporate strategy needs to not only relate to attaining corporate goals, it must focus on competitive advantage. The strategy becomes one of seeing opportunities and racing to win.

Even though we have expanded from local marketplaces to a global market, the cycle time of identifying an opportunity, choosing a path for success, and implementing the strategy, continues to shrink. We need to revisit the way we think about distribution.

Is it about building more warehouses, adding labor and trying to manage remote teams, finding new material handling systems or developing new software? Or is it really about making sure that the customer has what they need, when they need it. Sometimes the right solution may be warehouse space in many markets and containers filled with inventory on ships navigating the high seas. Other times one or two distribution points, along with an efficient delivery method, and minimal centrally located inventory makes more sense.

If choosing a path for winning makes sense, where do we need to focus our efforts? We know what causes much of the waste in distribution -- outdated materials, damage during handling and mistakes during order fulfillment. Restrictions such as container size, minimum ship quantities and delivery frequency create excess inventory. Many times these restrictions are self-imposed in the belief that they are based on operating efficiently. Excess handling and the need to repackage materials are two more examples of waste in industrial distribution. Doesn't it make more sense to focus on understanding and satisfying customers than creating remote teams which will continue to struggle with these wastes?

Racing to win requires a better use of our corporate leaders. They need to understand customers in multiple markets. They need to find the opportunities and swiftly find the path to winning.

Companies need to engage all their people in continuous improvement of the business. Employers need to harness the ingenious human mind of the worker to come up with ways of solving problems and improving the work they are involved in. Since getting the right materials or parts to the customer when and how they want them requires a supply chain or network, all parts of the network need to be involved.

Companies should establish a system for encouraging and communicating improvement ideas across the network and find ways to train the various parts of the network so that they understand what improvements can be implemented. Study groups and implementation teams can include people from suppliers and customers working toward a common goal. Everyone in the network needs to understand that continuous improvement is their priority.

Chuck Yorke is an organizational development and performance improvement specialist, trainer, consultant and speaker. He is co-author of All You Gotta Do Is Ask, a book which explains how to promote large numbers of ideas from employees. Yorke can be reached at [email protected] www.peoplekaizen.com

Jim Garrick is an industry consultant with FedEx Services. Garrick is a Lean process improvement professional with over twenty years of consumer packaged goods, HVAC, automotive, and consulting experience. Garrick can be reached at [email protected].

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