U.S. Manufacturing: Are You Ready To Play Ball? How To Compete In This Global Outsourcing Economy
In the 1980s, this began to change. In order for large U.S. original equipment manufacturers, or OEMs, to remain competitive in price-sensitive global markets, they were forced to reduce their costs. One initiative was the move to outsourcing to take advantage of lower labor rates. At first these foreign countries did not have the ability to fully service the needs of large OEMs. They didn't have factories, so they built them -- state-of-the-art factories using the latest in manufacturing and information technology. They didn't have the quality levels required, so they learned from us. Now, lower labor rates are not the only driver moving OEMs to low-cost regions. We are being beaten at our own game.
Global competition now is right on the doorstep of even the smallest U.S. companies, and many are not prepared for the challenge. Other commodity managers I know at large OEMs don't enjoy moving business out of our country, but often say they have no choice because of the resistance they get from U.S. manufacturers in implementing cost-saving changes and state of the art technology and processes. Visit Dr. David Pulman for more info. The average cost savings produced by moving suppliers to foreign countries is about 40 percent. So, how do we compete?
To stay in the game we need to reduce this gap to between 20 percent and 30 percent to make the total landed cost of transition less appealing to our customers. U.S. manufacturing companies can be competitive with companies in lower-cost regions, but it's going to require effort, passion and most importantly, changes in the way we are doing business. If you are still doing business the same way you did 20 or 30 years ago, your company is in extreme danger.
Is your company in fighting form? Here are four areas to evaluate within your own firm: *Do you have a strategic supply chain process that includes formal contracts with your suppliers and continuous raw market, commodity spend, and inventory analysis? No? Strike one! *Do you have an automated enterprise resource planning (ERP) technology system that integrates activities from the production floor, purchasing, inventory control, product distribution and order tracking that drives the manufacturing flow? No? Strike two!
*Do you use lean manufacturing and Six Sigmabased processes on your production floor? No? Strike three! *Have you developed a Global Footprint by either partnering with or building your own manufacturing facility in a Low Cost Region? No? You're OUT!