Global Trends in Manufacturing

Kronos have recently released the results of their research, carried out in conjunction with IDC Manufacturing Insights, which reveals interesting trends and strategies for manufacturers around the globe.

Global trade and foreign investments are expanding rapidly. In 2011 global imports and exports grew at twice the rate of GDP according to the 2012 WTO World Trade Report (https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report12_e.pdf). There are two reasons for this: first, emerging economics such as China are increasing their manufacturing sector and therefore their appetite for natural resources; second, the economic slowdown has forced developed countries to expand into new international markets. The same WTO report highlights the 21 countries selected as the top destinations for investment by multinational enterprises (MNEs). The top six, in order, are: China, US, India, Indonesia, Brazil, with Australia and the UK taking joint sixth place. As manufacturers expand globally, they must adhere to the unique labour laws and culture in each country while ensuring that their supply chain partners do the same.

The research presents findings from 11 countries (Germany, UK, Brazil, Mexico, Spain, Australia, Canada, France, China, US and India). With the exception of India, respondents from  other  countries rated manufacturing as crucial. Respondents from almost all countries rated labour productivity as the most important factor contributing to success in manufacturing. In fact, China was the only country to rank productivity second to another factor – government support. All countries rank continuous improvement as the best method to improve productivity within their organisation.

When asked about metrics to measure labour productivity, quality was ranked as most important. Interestingly, although Germany is known for its high levels of quality, it did not rank the quality metric nearly as highly as other countries. This is probably because German manufacturers build quality into their processes allowing them to maintain high levels of quality while simultaneously increasing productivity. Furthermore, Germany has been less affected by the skilled labour force shortfall than other countries. This is probably because the German economy experienced minimal disruption as a result of the global downturn.

The research shows that while the typical American believes the US manufacturing industry is dying a slow death, in fact the volume of production has risen over the past few decades. This success however is overshadowed by the steep drop in employment within the US manufacturing sector and the growth of China’s manufacturing economy.

For the UK, the Eurozone crisis casts a growing shadow over economic activity along with record unemployment levels, an ageing workforce and offshoring to the Far East and Europe.

For developed economies gaining and retaining competitive advantage through strategies for improving productivity, controlling costs and developing the workforce skill base. Automation and outsourcing to lower cost countries are options to increase productivity. However both these alternatives are problematic: outsourcing can displace workers and reduce domestic consumption and shrink the tax base; automation required large capital investment, reduces the flexibility of production while also displacing employees. A continuous improvement strategy, however, maintains employment while increasing profits.

Manufacturers can increase the value of what they produce by two methods: providing value added services at a competitive rate or increasing the complexity of what they produce to reduce their competition.

Finally manufacturers can also consider building their global brand by controlling more of their own supply to earn profits previously earned by supply chain partners.

Whatever their chosen strategy or combination of strategies, engaging their workforce is likely to be crucial to chances of success. In order to learn more about how to increase the productivity of your workforce while keeping them engaged to deliver your chosen strategy, join myself and Professor Peter Hines for the third our Lean in the 21^st Century series of webinars.

https://www.sapartners.com/the-principles-of-the-lean-business-system-3-people/

We will be broadcasting the webinar three times on 15^th July to accommodate as much of the globe as we can. Finally if you would like to read the full research report, visit the Kronos website (https://www.kronos.co.uk/).