processes and supplier network electronically.
“I tell people it’s a good thing that there’s
an ocean between us and China,” jokes Gary
Baldwin, Capgemini’s vice president of manufacturing. “I’m not sure how successful U.S.
manufacturing would be without that water
separating us.” Baldwin’s allusion to the logistical costs and risks associated with importing more goods from overseas supports
Johnson’s contention that U.S. manufacturers
have a unique opportunity by dint of their
proximity to end consumers.
Cost-cutting and top-line are not discrete. To leverage this
opportunity, however, U.S. manufactures need a lot of help cutting
costs and growing revenue. “Manufacturers must focus on growing the top line as well as managing their cost structures,” says
Gardner. “Manufacturers are finding themselves in the position
of simultaneously investing in growth opportunities while carefully managing costs. This balancing act takes into account products, customers and regions, all of which have to be rationalized
around profitable growth opportunities.”
That’s a tall challenge in light of new competition and all the
cost-cutting that has taken place in the past decade. “
Manufacturers have wrung costs out of supply operations for a long
time,” says Ferreira. “They’ve done a good job, but
that need will never go away.”
Yet, Ferreira and other manufacturing consultants
also emphasize that one-off process-improvement
and cost-reduction efforts no longer suffice—at least
not in isolation. Change is required. Cost-reduction
engagements have grown more expansive; they more
frequently include applying Six Sigma methodologies to back-of-fice processes, shared services reorganizations and outsourcing.
Schwalm uses the term “legacy costs” to describe the burden
U.S. manufactures confront, and his definition expands well beyond the pension costs troubling the Big Three automakers. He’s
referring to the legacy cultures and infrastructures that linger
from 1970s and 1980s-era business models.
“Given the volume and cost of manufacturing: They have an
enormous overhead infrastructure they need to support, which includes operating costs and the costs of capital that they have to depreciate over time,” he notes. “The challenge becomes: how can
you reinvent the enterprise quickly?”
Supply chain management no longer means “
cost-reduction” and “standardization.” The supply chain represents an area
ripe for reinvention. Consider the concerns that respondents to a recent Bearing Point-Industry Week survey on manufacturing challenges identified—the list zeroes in on sales and marketing issues:
acquire new customers topped the list, followed by increase cus-
tomer satisfaction, increase customer loyalty
and develop new products and services.
This makes sense because top supply chain
executives at leading manufacturers seem to
be thinking more like their sales and marketing counterparts these days. Procter & Gamble’s supply chain group, for example, has
spent several years on efficiency improvement
and partner-collaboration projects designed to
generate gains that equate to one of the company’s dozen-plus billion-dollar brands.
Customer-driven supply, says PA Consulting Head of Supply Chain Chris Poole, is about designing the supply chain from the point of sale backward. “You invest in supply
chain to deliver excellence for the customer,” he says. “That’s a
180-degree turn from what supply chain management was five to
10 years ago. Then, it was about cost-reduction and simplification.
Now, it’s about investing in products and services differentiation
and innovation to deliver a better deal for the [end] consumer.”
The consulting projects that help clients achieve this goal include innovative approaches heavy on client-supplier collaboration. Ferreira reports that Archstone is beginning to help
manufacturing clients use business intelligence (BI), the decision-support capabilities and applications that previously resided predominantly in the finance function, to “drive decision-making and
“There used to be a sense that if you’re not in
China you’re a fool… . Now, it’s much more
complicated, because it’s not just China. Martin Smith, PA Consulting ”
reporting capabilities across the broad partner network to
develop differentiated capabilities” that help drive top-line growth.
For its part, PA Consulting is borrowing techniques it has used
with automakers and applying them to an aerospace client.
“We’re going back down the supply chain of a major blue-chip
[company] and managing the competencies of their suppliers,”
Smith reports.
Brand and service matter. In a PA Consulting survey of 65
large global manufacturing companies, “brand strengthening”
ranked a hair below efficiency improvements and higher on the
CEO’s agenda than priorities such as quality improvements, man-
ufacturing advancements and technology improvements.
Brand management has long figured as a prominent issue in
certain manufacturing industries (think cars), but other industries
also are beginning to extend brand-strengthening activities deeper
into their supply chain management activities. Phillips’ simplicity brand campaign, for example, very much ties to how it designs, sources and assembles its consumer electronics products.
