General Electric CEO Jeff Immelt is the Chairperson of President Obama’s Presidential Council on Jobs and Competitiveness, a commission that is addressing a set of policy recommendations for long term U.S. competiveness and job growth in manufacturing.  In a previous Supply Chain Matters commentary, we provided our impressions of the interim report of this commission.

Immelt recently hosted a select group of financial media journalists on a tour of three GE manufacturing facilities.  The GE team took the time to share with reporters some significant trends and observations regarding manufacturing, and the critical role played by industry supply chains.

Daniel Gross, economics editor at Yahoo Finance penned a fairly comprehensive blog commentary sharing his impressions of the GE tour. In his commentary, you will note some rather insightful points:

Modern manufacturing process is all about doing more with less: less time, metal and labor.  Work teams have repeatedly developed time and material saving innovations, which translates to higher and higher levels of manufacturing productivity.  Noted is that GE can accommodate a 20 or 30 percent increase in order volumes without the need for a corresponding increase in its employee base.

Readers may ask- where, if anywhere does job growth come from?  According to Immelt, it comes from the supporting supply chain.  Large manufacturers such as GE have placed ever more dependency on networks of suppliers.  GE’s Greenville South Carolina plant relies on 16 Tier One suppliers,  Immelt’s ratio is that for every employee at the factory, there are 8 jobs in the supply chain, because smaller suppliers lack the scale and resources to invest at the same level as global manufacturing OEM’s.

Another belief from Immelt is that the U.S. has to take market share in order to drive growth. Market share for U.S. based manufacturers is the product of endless product and process innovation, along with export markets. During the recent severe recession, GE elected not to cut back on research and development and came out of the recession with more products in the pipeline.

Some readers, and indeed journalists come to different conclusions, namely that the U.S. is in the midst of a jobless recovery.  John Gapper, and editorial writer at the Financial Times were also invited on the GE tour. In his column, (paid subscription or free metered view required) Gapper expresses the view that from what he observed, there is little cause for optimism in U.S. job growth. He cites statistics from the McKinsey Global Institute indicating zero growth in U.S. manufacturing jobs by 2020. He notes that the best hope is that manufacturing productivity rises so high that offshoring is no longer worth the effort.

For our part, Supply Chain Matters offers two of our own conclusions for readers and legislative policymakers to consider.

Long-term U.S. manufacturing competiveness must be predicated on a robust and competitive supply chain networks, particularly in key growth industries such as alternative energy and aerospace.  Mid-marker and smaller suppliers continue to struggle with financial lending and legislative policy practices that stem growth and investments in innovation.  Make no mistake that countries such as China have adopted policies and mechanisms to promote domestic manufacturing and supply chain growth, including favoring of domestic companies for strategic growth markets.

Second, with the current gridlock in the U.S. Congress, any form of a long-term strategic strategy seems to get totally lost in short-term parochialism and playing to the next election.  The U.S. needs a long-term strategic manufacturing and supply chain competiveness strategy and the time is now.

Too much time is being wasted on political gamesmanship and agendas. Mr. Immelt and GE should be applauded for raising more awareness but what is needed now is not tours, but concrete initiatives and action.

Bob Ferrari

This posting is a follow-up to our previous two commentaries, Aerospace Supply Chains Are Now Stressed, and Another Supply Chain Related Delay in Boeing’s 787 Program.

This week, during its fiscal earnings briefing, Boeing cut projected deliveries of its new 787 and 747-8 aircraft to 25-30 aircraft this year.  According to an article in the Wall Street Journal, Boeing chairman and CEO Jim McNerney indicated that the company’s recent decision to initiate a one month halt of 787 production final assembly lines gives its network of global suppliers a chance to catch-up.  His quote: “I view (the pause) as good news.  The facts are we have broad visibility across our supply chain now and when we need to make a pause to rebalance it… we do it early.”

Our Supply Chain Matters reaction- it’s about time!  After being three years late, and after a series of outsourced supply chain related setbacks, Boeing now assures that it has broad supply chain visibility.

During the month of July, Boeing has been conducting final certification and acceptance testing of the first 787, which will be delivered to All Nippon Airways. In our last commentary, Supply Chain Matters made reference to a posting on Flighblogger which noted Boeing’s careful use of wording regarding customer deliveries of the 787. That vague wording appears to continue, now being lumped together with the 747-8 program status which adds even more speculation as to stress points in Boeing’s supply chain.  Another open question points to any supply disruptions a result of the March earthquake that struck Japan.

To give readers a perspective of aerospace supply chains in general, consider the following.  In its latest earnings briefing, Boeing reported a total order backlog of $323 billion, $262 billion of which was attributed to commercial aircraft.  Boeing also announced that it was increasing the rate of 737 production to 42 per month in Q1-2014.  Rival EADS, manufacturer of Airbus aircraft, reported its total order backlog as €453.8 billion (($649 billion), most of which involves commercial.  That amounts to close to one trillion dollars in combined backlog, and does not count other smaller aircraft OEM’s.  Delivery schedules extend out at least seven years, and are growing in time windows.

Boeing’s supply chain has been under the looking glass for many months.  Airbus’s supply chain, after some initial snafus and setbacks with its massive A380 program, seems to be humming, but it also faces more challenges as order rates continue to climb.  EADS booked €58 billion ($83.3 million) of new orders in the first six months of this year alone, the majority being the newly announced A320neo. In response to the explosive popularity of the new A320neo, Boeing is scrambling to re-engine its popular 737.

Yes indeed, aerospace supply chains are being stressed.  If participants are not feeling it now, they will soon.

Bob Ferrari

©Copyright 2011 The Ferrari Consulting and Research Group LLC

Supply Chain Matters has readership representing a broad range of supply chain functional and operational disciplines including planning, procurement and product management.  For those readers who are involved in conducting or participating in your organization’s Sales and Operations Planning (S&OP), we would like to call attention to an upcoming conference you might want to consider attending.

The IE Group is conducting its S&OP Innovation Summit in Boston on September 15-16.  We had the opportunity to attend last year’s conference, and we found the conference to be jam packed with presentations addressing S&OP case studies from multiple industry settings, as well as ample opportunities for networking with other S&OP related professionals.  You are welcomed to read our summary impressions from last year’s Summit. This year, Supply Chain Matters is featured as one of the media sponsors of this year’s conference.

Thus far, the conference organizers have lined-up speakers representing Abercrombie & Fitch, ConAgra Foods, Dow Chemical, Elizabeth Arden, Mars, UPS, among others.  There is also a quality group of technology sponsors where you can have opportunities to “kick the tires” among software dedicated to supporting S&OP and related planning processes.  Supply Chain Matters will also be in attendance at this year’s conference and we look forward to networking among conference attendees and sponsors.  Look for our conference commentary shortly after the conference.

Further information and an invitation can be found at the following web site. Please note that an early registration discount is in effect until July 31. Last year’s conference was filled to capacity.