Under pressure, manufacturers cook

Dec. 5, 2007
Managing Editor Ken Schnepf reports the results of two studies that say manufacturers are optimistic about the future, but they're losing confidence in the U.S. economy.

Internationally, manufacturers are optimistic about the future, however, they’re losing confidence in the U.S. economy, according to two recent surveys. Respondents are confident about value chain improvements, but concerned about cost pressures, say the results of the fifth annual Multinational Manufacturing Pulse, a survey by the TBM LeanSigma Institute (www.tbmcg.com) in Durham, N.C. Meanwhile, high energy costs, lack of demand, regulatory pressures and lower profitability lead their concerns, according to PriceWaterhouseCoopers’ Manufacturing Barometer (www.pwc.com/manufacturing), released quarterly.

"While cost pressures are always on the minds of manufacturers, this year’s survey reveals a heightened concern," says Anand Sharma, CEO of TBM Consulting Group. "To compete in the global economy, leaders in these countries are under increased pressure to find innovative ways to manage the cost of doing business. By concentrating on value chain improvements, companies can sustain profitability and become nimble at responding to changes and opportunities in the marketplace."

Conducted in the third quarter of 2007, the survey polled 3,082 executives from mid-sized to large firms in six major manufacturing countries in the western hemisphere – the United States, U.K., Germany, Spain, Mexico and Brazil. The Manufacturing Barometer survey also was conducted in the third quarter of 2007, with results based on interviews with 60 senior executives of large, multinational U.S. industrial manufacturing companies.

"Ongoing concerns about high energy costs are now being coupled with similar concerns about lower demand and decreasing profitability," says Barry Misthal, partner and industrial manufacturing sector leader, PricewaterhouseCoopers. "Mix in uncertainty about legislative and regulatory pressures and it's not hard to see why manufacturers are less optimistic about the U.S. economy. However, healthier international prospects are offsetting these lowered expectations on the domestic front."

The majority (91%) of manufacturers surveyed by TBM report productivity gains during the past year and identify continuous process improvement (Lean) as the leading source of improved productivity (United States, 52.5%; U.K., 50%; Germany, 47.4%; Spain, 75%; Brazil, 36.8%; and Mexico, 36.3%).

Additionally, when asked to specify the productivity/quality improvement programs being used, nearly three-quarters (72%) of manufacturers identify kaizen as their primary method, up 29% from last year. Respondents also rank Lean (63%) and ISO certification (84%) among the top three methods.

Manufacturers identify the plant floor as one of the top three areas where innovation is most active, according to the Multinational Manufacturing Pulse survey results. When asked where innovation is most active in their value chain, 39% of the manufacturers say new product development, 25% identify the plant floor and 11% name new technology.

Recognizing that innovation occurs on the factory floor reflects a benefit of Lean that manufacturers hope to extend throughout their value chains, according to TBM. In a Lean culture, where everyone continuously strives to improve, employees must be innovative, not only in their day-to-day activities, but also in getting closer to their customers to understand and meet their needs, develop new products and services faster, and deliver solutions. Respondents recognize that innovation exists in their organizations. They also recognize that they need more of it, in more areas of their companies, to tackle the challenges ahead.

"The value of human capital to an organization should not be underestimated or overlooked, there should be continuous awareness of the state of the workforce and its level of engagement, empowerment and integration," says Mike Serena, managing director, TBM LeanSigma Institute. "Today there is a toolbox full of techniques in the lean factory to activate and compel workers. By encouraging all workers to think, eliminate waste and find ways to contribute and add value, companies will be able to create a compliant, fully engaged workforce."

However, the majority of manufacturers are scaling back plans for major investments during the next 12 months, according to the Manufacturing Barometer survey results. Only 42% are planning new initiatives during the next year, a decrease from 57% citing plans for major investments last quarter. However, the average percent of revenue put aside for major new investments remains high at 8.7%. Those who are investing are looking to spend more on information technology (IT) – a trend that continues into the third quarter, with 57% planning to expand their IT capabilities.

E-mail Managing Editor Ken Schnepf at [email protected].

Sponsored Recommendations

Arc Flash Prevention: What You Need to Know

March 28, 2024
Download to learn: how an arc flash forms and common causes, safety recommendations to help prevent arc flash exposure (including the use of lockout tagout and energy isolating...

Reduce engineering time by 50%

March 28, 2024
Learn how smart value chain applications are made possible by moving from manually-intensive CAD-based drafting packages to modern CAE software.

Filter Monitoring with Rittal's Blue e Air Conditioner

March 28, 2024
Steve Sullivan, Training Supervisor for Rittal North America, provides an overview of the filter monitoring capabilities of the Blue e line of industrial air conditioners.

Limitations of MERV Ratings for Dust Collector Filters

Feb. 23, 2024
It can be complicated and confusing to select the safest and most efficient dust collector filters for your facility. For the HVAC industry, MERV ratings are king. But MERV ratings...