by Elizabeth Hines | Mar 14, 2016 | Blog, Strategy, Supply Chain
There is no easy answer to the burning question why the onshoring movement refuses to truly take off.
The issue of onshoring is frequently painted in black and white. While the media often likens the return of companies to the United States from overseas to a stampede, skeptics may be too quick to downplay the positive impact of the recent movement in manufacturing.
Nevertheless, those who were looking for a true Renaissance of American manufacturing have reason, at least so far, to be disappointed. Even among some high-profile companies — most notably Apple and GE — that announced their return with great fanfare, reality has set in. GE has battled high turnover rates at its re-opened Kentucky plants, as workers reportedly refused to perform certain tasks, while Apple has been stumped by the shortage of engineers.
Although the number of companies bringing production back home has risen significantly in recent years — from 64 in 2011 to 300 in 2014 — they are still outnumbered by those going in the opposite direction.
However, the issue is more complex than net gains or losses. According to new research by Morris Cohen, a Wharton School professor of operations and information management, and Hau L. Lee at Stanford University, “There is an unprecedented amount of restructuring going on.” In some cases, departments within the same company are onshoring and outsourcing at the same time, each weighing the perceived pros and cons differently.
In a Knowledge@Wharton interview, Cohen elaborated on the trend: “I’m going to go to China. I’m coming back from China. The same company simultaneously is making what seemed to be opposing decisions. And when you asked them why, they would give the same reasons. It’s because of labor costs. It’s because of market access. It’s because of this and that.”
In fact, they found there appears to be no dominant reason why companies make one decision or another in favor of onshoring or staying put.
And barriers seem to remain the same as when the onshoring movement began to gain momentum: The lack of skilled workers, coupled with an aging workforce, still rank high on the list of negatives. The rapid pace of offshoring in 1990s and early 2000s made younger generations lose faith in the viability of a manufacturing career.
Patrick Van den Bossche, the Americas lead partner at A.T. Kearney’s Strategic Operations Practice — which released its inaugural Reshoring Index last year — explained the problem on Manufacturing.net: “Think about it — if you have a kid in school, with everything that happened in the last few years, with manufacturing moving overseas as fast as it did, would you feel comfortable to tell your kid to develop a career in manufacturing? I don’t think so.”
At the same time, countries like China, Brazil, and Eastern Europe, previously known for their low-skilled labor, are quickly improving and investing in high-tech industries. With a greater pool of skilled workers abroad, a move back to the United States will seem less urgent. And with the arrival of robotics, the issue of labor costs will likely take on even less significance.
So the big question is, how should the United States stand up to the competition? What do you think?
A version of this article previously appeared on EBN Online.
by Elizabeth Hines | Mar 10, 2016 | Blog, Manufacturing & Distribution, Strategy, Supply Chain, Talent
Manufacturing could offer a career with upward potential for STEM students at low-profile colleges.
The college graduates of 2015 were the most indebted ever — until the next round of grads wave their diplomas in the spring. But is sinking deep into debt really the ticket to a great career? If you have the means (and brains) to invest in an Ivy League degree, all stats seem to indicate you get ample payback for the $200,000-plus expense.
But among those high school grads who may not qualify for generous financial aid packages and at the same time cannot afford — or even want — an Ivy League degree, there are still lucrative options, especially if they study science, technology, engineering, and math (STEM).
The skills gap in U.S. manufacturing, for example, is well known. While as many as 60% to 70% of executives say their current employees lack sufficient skills in technology, computer, and math, the problem is exacerbated by the lack of qualified job prospects — an expected 2 million manufacturing jobs will go unfilled due to the talent gap during the next decade, according to a Deloitte study.
As I’ve said before, herein lies opportunity. There is no reason seeking a career in manufacturing should break the bank if students weigh their choices wisely. Picking a low-profile school may “pay off big both in terms of getting a good job and salary,”according to John Walsik, a Forbes contributor and author of The Debt-Free Degree.
The opportunity is best illustrated by Business Insider’s recent list of underrated colleges in America in which the US News and World Report’s rankings of the best universities was compared with PayScale’s 2015-2016 College Salary Report. Rather than pursuing degrees from the highest rated schools, high school grads should also consider schools that, although ranked relatively low on the US News list, yield high mid-career salaries.
Interestingly, Missouri University of Science and Technology, New Jersey Institute of Technology, and University of Massachusetts at Lowell, known for their science and engineering programs, all ranked in the top 5 (Pace University in New York City topped the list), with mid-career median salaries ranging from $94,700 to $102,000. Within six months of graduation, for example, 80% of New Jersey Institute of Technology graduates were either employed — top employers include IBM and ExxonMobil — or enrolled in graduate programs.
A college degree from a prestigious school means little unless your earnings quickly make it worthwhile. If only manufacturing could shake its lackluster reputation, a growing number of students may discover it holds the key to a career with a lot of upward potential — without necessarily going into big debt.
What is your take on the cost of college versus the payoff?
A version of this post previously appeared at EBN Online.
by Elizabeth Hines | Feb 29, 2016 | Blog, Manufacturing & Distribution, Strategy, Supply Chain
As companies “tiptoe” back to the United States from overseas, the “Made in USA” label should grow more common. However, ambiguous rules are costing some manufacturers hundreds of thousands of dollars in penalties and legal fees. So what’s the problem? The coveted “Made in USA” does not always mean the same thing to companies as to the Federal Trade Commission.
Although most cases stem from California, where every single component must be sourced domestically to earn the right to be advertised as American-made, the ambiguity of FTC’s rules is likely to bring more lawsuits nationwide. FTC rules state the “Made in USA” label can only go on goods that are “all or virtually all” made in the United States. But how should companies interpret “virtually?”
The latest to be slapped with a list of reprimands by the FTC is none other than Walmart, which recently was asked to not only remove “Made in USA” logos from all product listings, but also the country-of-origin information from all product specifications (unless required by law) and U.S.-origin claims that appear in product descriptions or titles. Walmart is also required to clear advertisement copy submitted by suppliers of any USA-origin claims.
A giant like Walmart can certainly handle adjustments to its Investing in America Jobs Program — redesigned logos will now disclose the percentage of U.S. content in the product — and transparency is obviously fundamentally important in sourcing and product advertisements. But the fact still remains: Companies can only guess what qualifies as U.S.-made. As reported by Supply Chain Digest, some have taken it upon themselves to include 70 percent of domestically made components before making any “Made in USA” claims.
The dysfunction is perhaps best illustrated by the case of Lifetime Products, whose basketball hoops ended up in the spotlight last fall when two consumer lawsuits claimed they were falsely labeled. Although the hoops are, to quote the Wall Street Journal, “made of parts that are almost entirely cut, shaped, painted and assembled” at the company’s sprawling Utah factory, some bolts and the net were imported from China. The costs were staggering, with the legal fees alone adding up to $535,000, and the plaintiff’s attorney’s receiving $485,000.
Sourcing every single component domestically is no easy feat, especially for companies that just returned production from overseas and want to capitalize on the move with the “Made in USA” label. After so many years of outsourcing, it will take time to rebuild the U.S. supplier base as well as upgrading aging manufacturing equipment to meet today’s demand for speed and agility.
Lasko Products Inc., a family-owned company based in West Chester, Pa., is one example of a producer that can no longer find domestic suppliers of small electric motors. The company’s electric fans are sold at Walmart, which has discovered the effort to buy more U.S.-made products has proved particularly difficult when it comes to electrical devices.
Let’s hope the FTC can at least clarify the rules.
What do you think is a reasonable definition of “Made in USA?”
A version of this article was previously published on EBN Online.
by Fronetics | Feb 17, 2016 | Blog, Content Marketing, Manufacturing & Distribution, Marketing, Social Media, Supply Chain
The US manufacturing index is at its lowest level since 2009. This is sobering news for the industry and for the economy. Within the industry, it is clear that the road ahead is not flat, straight, or even smooth. For companies to not just survive, but to also succeed, action needs to be taken.
In August 2015 Bruce McDuffee, Principal at Knowledge Marketing for Industry, released the second edition of the Manufacturer’s Growth Manifesto. If you haven’t read this, you need to do so – today. In the Manifesto, McDuffee spells out how manufacturers can achieve growth rates of 10%, 20%, and even 30%.
The key to attaining a double digit growth rate is changing your marketing strategy and adapting to buyers’ new habits. Specifically:
- Stop pitching products and start helping people.
- Start educating your audience utilizing your particular experts and expertise for FREE.
- Stop advertising product features and benefits of a product.
- Start promoting your useful, helpful papers, webinars, seminars, videos, etc. (not product information) to foster meaningful engagement.
- Admit to yourself and your team that your products are perceived as a commodity and it will take more than product revisions, releases and enhancements to gain the attention of your target audience.
McDuffee concedes that for those who have not previously embraced and engaged in this approach to marketing, “You may be thinking, WTF?”
It may seem counterintuitive, but the results are real. Your company will be able to achieve those double digit growth rates and realize these benefits:
- Reciprocity, credibility and trust in the minds of the people in your target audience.
- Top-of-Mind Awareness (T.O.M.A.) in the minds of your prospective customers so they remember your firm first when the day comes around and they need to buy.
- Higher prices, more sales, more market share, and higher growth rates.
Success, however, depends on believing in this approach and incorporating it into your overall business strategy.
Research conducted by the Content Marketing Institute (CMI) found that while 82% of manufacturers use content marketing, only 26% say that their efforts are successful. A lack of buy-in/vision from higher ups is one of the key challenges identified by CMI. Another challenge that was reported was creating and executing a strategy; only 20% of respondents reported that they had a documented strategy. Notable though, is that 58% of the most effective companies reported that they have a documented strategy.
This approach is not relevant only to manufacturing. Companies across industries and verticals should take notice. Cerasis, a top North American third party logistics company offering logistics solutions with a strong focus on LTL freight management, shifted their marketing strategy and realized positive results. Within 25 months Cerasis realized a 14% increase in revenue. This increase was directly attributable to inbound marketing. In addition to this stream of revenue, the company’s sales team was able to generate revenue totaling $20 million during this period – more than double the previous two years combined.
Those numbers are not small potatoes. If you haven’t checked out the Manufacturer’s Growth Manifesto, make the time.
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This was originally published on Electronics Purchasing Strategies.
by Fronetics | Jul 14, 2015 | Blog, Logistics, Manufacturing & Distribution, Strategy, Supply Chain
To see lean perfected – study the NASCAR pit. In a matter of seconds, the pit crew has changed tires, wiped down the windshield, filled up fuel, and given the driver a drink of water. Everything is in the right place at the right time. If only every distribution center would run that smoothly. What’s clear is that mastering inventory levels is central to the equation of eliminating waste, but inventory management is becoming a vexing problem for some organizations – compounded by multi-channel distribution, inadequate demand forecasting, and a lack of communication among appropriate parties.
Taking a closer look at the experiences of forerunner companies in their quests to master lean inventory management might just help your company avoid these top three snags.
Failure to Adapt Business Processes
In an effort to reduce merchandise sitting around on warehouse racks, some organizations take lean too far. The problem, in this case, is one of business process rather than software. While management sees the financial impact of cutting inventory, they tend to pay less attention to how it will affect operations. The heads of distribution quite frequently are not even invited to take part in the decision and find out only when fewer cases and pallets show up at receiving. Adapting business processes to involve the managers of procurement, finance, operations, and sales and marketing, is key to maximizing efficiency. In other words, open up the silo by building it in to your formal and informal processes.
Failure to Collaborate
Even with sophisticated demand forecasting models on hand, input from all parties is needed for an accurate assessment of inventory levels. And although demand forecasting can help an organization plan around high-level “what if” scenarios, it may not always be able to break it down on a granular level or take into account the increasing number of variables associated with multi-channel distribution. Collaboration is crucial.
Failure to Align Objectives
Sometimes the answer to the issue of inventory levels is counterintuitive. Even with lean as the driving force, the notion of optimization cannot be left out. In some instances, it makes sense to increase rather than minimize inventory if it will contribute to lowering your overall supply chain costs. Your business and inventory strategies need to align.
Despite the fact that in recent years the lean revolution has hit manufacturing, many organizations, especially retailers and wholesalers, have yet to apply lean principals. And among those who do dabble in lean, the focus tends to be on suppliers upstream rather than adding value to the end customer. As more and more businesses seek to tighten the management of their inventory in order to increase efficiencies, opportunities to address end customer value will emerge. Paul A. Myerson, professor in supply chain management, identifies store- and distribution operations as prime candidates since that’s where the most waste can be cut. He writes:
Distribution is all about optimizing the trade-offs between handling costs and warehousing costs, and maximizing the warehouse’s total cube—utilizing its full volume, while maintaining low materials handling costs and minimizing travel time.
Mastery of lean management principals will come for companies that are both successful in identifying new efficiency opportunities within their existing supply chain and navigating around the pitfalls of businesses that have instituted similar inventory management techniques.
Fronetics Strategic Advisors is a leading management consulting firm. Our firm works with companies to identify and execute strategies for growth and value creation.
Whether it is a wholesale food distributor seeking guidance on how to define and execute corporate strategy; a telematics firm needing high quality content on a consistent basis; a real estate firm looking for a marketing partner; or a supply chain firm in need of interim management, our clients rely on Fronetics to help them navigate through critical junctures, meet their toughest challenges, and take advantage of opportunities. We deliver high-impact results.
We advise and work with companies on their most critical issues and opportunities: strategy, marketing, organization, talent acquisition, performance management, and M&A support.
We have deep expertise and a proven track record in a broad range of industries including: supply chain, real estate, software, and logistics.
