We pen this Supply Chain Matters posting in the late afternoon of October 4th, which is deemed Manufacturing Day 2013 in the United States. It is a designated event occurring on the first Friday of October each year and features day consisting of a number grassroots events, open houses and tours creating awareness and celebrating modern manufacturing.
This is fantastic and congratulations to all who either sponsored, planned or participated in the celebrations and events.
Today’s events are sponsored by a number of industry groups including among others:
Fabricators & Manufacturers Association International
Industrial Strength Marketing (ISM)
Manufacturing Institute and the Science Channel
National Association of Manufacturers (NAM) and the Manufacturing Institute (MI)
National Institute of Standards and Technology (NIST)
U.S. Department of Commerce’s Manufacturing Extension Partnership (MEP)
According to an event announcement, this year’s celebration includes over 800 events taking place today and throughout October. Some of these events aim to show that manufacturing no longer involves dirty, back-breaking work but rather a vibrant set of activities that leverage a high-tech driven economy. Much more important, factories will open their doors to busloads of middle, high and technical vocational school students to provide tours and spark interest for a career in the field of manufacturing. That is a rather critical and important objective because numerous industry research and other studies point to a need to overcome a critical shortage of the skilled manufacturing people required to sustain a renaissance of manufacturing across the U.S.
We recently called attention to research conclusions from the Massachusetts Institute of Technology (MIT) Task Force on Production and Innovation research team that addressed Making in America. This author is in the final stages of reading the book that was published in conjunction with this research effort, and the results are thought provoking. Supply Chain Matters will feature a detailed commentary on this book sometime next week.
Even in Silicon Valley California, an area that was once the mecca for high tech and consumer electronics manufacturing, there were events celebrating Manufacturing Day 2013. Mike Cassidy reporter for the San Jose Mercury News penned a blog commentary in conjunction with today’s celebration: “Manufacturing conjures up images of places like 1950’s Detroit and Pittsburgh and 2013 Shenzhen China. But unknown to many who live here, production work accounts for 17 percent of the jobs in the valley and the manufacturing plants here produce some of the world’s most complex and rapidly evolving products and components.” About two-dozen plants in the Bay Area opened their doors to students today. Cassidy cites last year’s Brookings Institution finding that Silicon Valley had the second highest concentration of manufacturing jobs among the country’s major metro areas. Wichita Kansas was cited first in the Brookings study.
Unfortunately, one company not directly participating in this regional celebration was probably Apple, and our readers are fully aware of where Apple’s high volume manufacturing capabilities reside. Then again the cluster of innovative suppliers and small skilled manufacturers that assist Apple designers and engineers in converting designs into fabricated products most likely were participating. Perhaps in the spirit of Manufacturing Day 2013, the company that designs the coolest and most innovative smartphones and tablets might want to re-double its efforts to bring further manufacturing capability back to the U.S…
Supply Chain Matters applauds all of the efforts surrounding Manufacturing Day and extends our Tip of the Hat recognition for all of the associated industry sponsors, manufacturers and students who participated.
Here’s another idea. What about a Supply Chain Day, a celebration of careers among all facets of today’s modern supply chains?
Professional organizations such as the Council of Supply Chain Management Professionals (CSCMP) or The Institute of Supply Management (ISM), global logistics and transportation leaders, third-party logistics and surface transportation carriers. Are you up to the challenge?
For our part, we will do our part to spread the word wide and far.
Market competitive design and production of electric powered motor vehicles has been a challenge for the global automotive industry. Challenges have included the high material cost of batteries as well as the energy consumption of the vehicles themselves.
Supply Chain Matters recently read news reports that BMW AG has launched production of the carmaker’s new Project i electric automobiles, its first ultra-light family of city focused vehicles constructed of carbon fiber and reinforced plastic materials. The BMW i-car family of products will be a combination of all-electric or plug-in hybrid vehicles constructed of these more sophisticated materials.
The material concepts are so innovative that BMW wisely invested in a $530 million new Project i production facility in Leipzig Germany that according to a report published in the Wall Street Journal, (paid subscription or free metered view) represents an effort to reinvent mass car production in a far smaller factory and supply chain footprint.
The carbon-fiber plastic skins are supplied by a joint venture with SGL Group in the United States. The car’s body consists of 30 percent fewer parts that a traditional body made of steel, but requires far more sophisticated production processes. That includes stacking sheets of material followed by molding and heating to form door frames and fenders. Because the car construction materials are so light, less expensive robots and conveyors can be deployed for supporting line output. Instead of a high concentration of air-powered ratchet guns, there are glue guns. A specialized painting line generates no wastewater and costs one-fifth the cost of a traditional steel body paint line. Overall production requires 70 percent less water and 50 percent less energy than a regular car factory, positively contributing to supply chain sustainability goals. The factory’s overall noise footprint is far quieter for workers because of the overall reduction in manufacturing complexity.
Innovative products require innovative processes and in the case of BMW, a far different and more holistic approach to automobile fabrication and assembly while delivering on social and environmental sustainability goals. Continued challenges in reducing the material costs of batteries are still evident but these new innovations in materials and fabrication could prove noteworthy.
According to reports, BMW has priced the all-electric i3 city car at $41,350, about the same range as its mid-sized vehicles. How consumers respond is, of course, the next chapter, but rather than a factory retrofit, BMW’s efforts in dramatically changing how electric powered vehicles are designed and produced bear watching in the months to come.
Last week, Supply Chain Matters had the opportunity to attend the 2013 MIT Production in the Innovation Economy (PIE) Conference held on the campus of MIT. The purpose of this conference was to premiere the results from an MIT research study that began in 2010 on what is required to bring continued innovation in U.S. manufacturing.
We were tremendously impressed with the speakers, findings, and collection of attendees at this conference. Andrew Liveris, Chairmen and CEO of Dow Chemical Company, author and current U.S. Presidential advisor on manufacturing competitiveness provided the opening keynote along with Patrick D. Gallagher, Assistant Secretary of the U.S. Commerce Department.
The findings of the new PIE research study are included in a newly published book, Making in America, From Innovation to Market, published by MIT Press. In a nutshell, a group of 20 MIT faculty conducted 264 interviews with manufacturers among five research themes related to what makes innovation and manufacturing successful. These themes included successful innovation traits of start-ups, the critical contribution of human skills, what happened to U.S. manufacturing along with the successful traits of manufacturers in China and Germany and the influence of financial markets on manufacturing. An important focus was also placed on success of U.S. mid-sized manufacturers and the need for supplier innovation clusters directed at strategic industries, which has long been a concern of this author.
Many of the speakers addressed themes that will resonate well with the manufacturing and supply chain community while others add important insights to negating some current myths. Overall, the presenters stimulated a lot of strategic thought regarding the current state of manufacturing in the United States and what is required to take advantage of the current momentum.
We are in the process of reading the detailed results of this landmark PIE study and over the coming days will be provided additional commentary and insights garnered. Suffice to initially indicate that this research uncovered very important needs, insights and recommended direction. It invigorated our thoughts and we believe it should be mandatory reading for many of the U.S. based manufacturing and supply chain management community.
This week, certain aerospace supply chains have additional cause for celebration with major milestones of inaugural flights for new innovative aircraft being achieved. First flight is a big deal in aerospace since it demonstrates to potential customers that newly developed aircraft have reached final stages of development, and for extended supply chain teams, that the volume manufacturing phase of these aircraft is closer to reality.
On Monday, Bombardier’s new C-Series aircraft completed its maiden voyage achieving a major milestone in its attempts to penetrate the single aisle aircraft markets and compete with the likes of Airbus and Boeing. Videos of this maiden flight can be viewed at this Bombardier web site link.
Supply Chain Matters first introduced our readership to the C-Series program in October of 2010 under the headline: C-Series Joins in the Global Supply Chain Outsourcing Perils of Aerospace. At the time, we noted that Bombardier was taking a huge strategic gamble on the supply chain deployment and market launch of the new and innovative aircraft which was originally scheduled for market introduction this year. The C-Series supply chain is global in scope. Major components such as fuselage wings and tail are sourced in China, Ireland, Italy, and other countries. In a posting earlier this year, we speculated whether Bombardier as a disruptor could compete with the two other aerospace giants. With this week’s completion of maiden voyage, the aircraft is reported to be nine months behind original schedule, which is not all that bad considering the development track records of major rivals.
On Monday, the new C-Series 120 passenger jet took off from an airfield near the Bombardier factory north of Montreal with thousands representing Bombardier employees, suppliers and customers looking on. The aircraft completed a two and a half hour flight. According to a report penned by Jon Ostrower published in the Wall Street Journal, the aircraft version that flew on Monday lists of $63 million, with a larger version priced at $72 million, before discounts. Comparable models from rival Airbus and Boeing list in the range of $70-$90 million and the WSJ reports both rivals are aggressively discounting to keep Bombardier from gaining market traction. To date, there are 177 orders for the C-Series, including an order for 60 aircraft from Lufthansa’s Swiss International Airlines.
First customer ship for the C-Series is expected to be completed shortly after completion of certification by global regulators, which could take up to a year, barring any major unexpected issues.
On Tuesday, Boeing completed a five hour maiden voyage of the Dreamliner 787-9 aircraft, a slightly larger version of the currently operational 787. Video of the 787-9 maiden flight can be viewed at this Boeing web site link.
What makes this significant is that the “Dash Nine” was designed and built with different supply chain design parameters than the current version. Instead of outsourcing major aspects of design and manufacturing to external suppliers, this newest version relied more on Boeing resources. In its reporting of the event, Jon Ostrower of the Wall Street Journal quoted sources as indicating that Boeing engineers designed 40 percent of the parts associated with the original Dreamliner, and that Boeing reversed course on the “Dash Nine” by designing as much as 60% to 70% of this model. Similarly, more of major component manufacturing was brought under Boeing control. Also noted by the WSJ is that this newer version accounts for 41 percent of current backlog orders for the Dreamliner family, and factoring additional orders for the 787-10 model slated for 2018 delivery, three-quarters of current customer backlog comes from these newer models. This is somewhat of an indication that prospective customers were drawn to the different features and composition for both the 787-9 and 787-10 models.
Supply Chain Matters extends both a Thumbs-up and well done recognition to both Bombardier Aerospace and Boeing Commercial Aircraft product development and supply chain teams for reaching these important milestones in their respective programs. They join Airbus and its extended teams on celebrating the recent maiden voyage of the new A350 aircraft.
Boeing and the industry are applying a lot of internal learning from previous efforts at global design and supply chain outsourcing and that is an important takeaway as a whole and for other industry supply chain leaders.
In mid-May, Supply Chain Matters called reader attention to a study issued by Alix Partners that cited a narrowing gap in the sourcing of production in China vs. the United States. Last month the Boston Consulting Group reiterated its prior message that the increased competitiveness in United States based manufacturing will capture $70 billion to $115 billion in annual exports from other nations by the end of the decade. In an August 20th published BCG Perspectives report (no-cost sign-up required), BCG declares that the current momentum in U.S. manufacturing is just the beginning, and that by 2020, higher U.S. exports combined with production work that will likely be “re-shored”, could create 2.5 to 5 million additional factory and service jobs. The strategy firm declares that its analysis suggests that the U.S. is steadily becoming one of the lowest-cost countries for manufacturing in the developed world, as much as 8 to 18 percent lower than countries such as France, Germany, Italy, Japan and the United Kingdom. The full impact of the shifting cost advantage is expected to take several years to be felt and BCG advises that manufacturers and retailers should recognize that structural cost changes underway represent a potential paradigm shift in global manufacturing sourcing. At the same time, BCG advises supply chain teams to maintain diversified manufacturing operations around the globe.
Some well-known retailers and manufacturers are now demonstrating more noticeable awareness to these trends, for obvious business reasons.
On August 22nd, global retailer Wal-Mart sponsored a U.S. Manufacturing Summit. At the event, Bill Simon, President and CEO of this retailer’s U.S. based operations delivered what seems to be a passionate address to the attendees where the transcript was captured on the Wal-Mart web site. Simon declared his belief that this is a transformative period in history, that opportunity in America and growth of the middle class was predicated on a job at the local factory. His argument is that the current U.S. “hourglass” economy has caused a rift, with groups calling for reform of either too much wealth or too little unskilled wages. He argues that filling in the middle through a revitalization of U.S. manufacturing could help boast the U.S. economy. He reiterated a takeaway from this Wal-Mart sponsored summit that: “the next generation of production will need to be built closer to the points of consumption.”
Of course, Wal-Mart has skin-in-the-game on these arguments since its core customers represent a good portion of middle class consumers, and they have been showing a tendency of late to shop at other lower-cost outlets. None-the-less, Wal-Mart continues in its effort to commit $50 billion, no small sum, toward increased sourcing of products among goods manufactured in the U.S. The retailer has appointed a senior team to lead this effort and has stated its willingness to sign long-term supplier agreements when it makes sense to provide manufacturers more certainty in sourcing. Simon implored other retailers to do more in their sourcing commitments. Some other passionate statements were: “I tell my team all the time that that our $50 billion commitment is our starting point. If we put our minds to it, there’s no question to me that we can achieve and exceed it. I want us to think bigger.”
Supply Chain Matters readers will recall that our numerous ongoing commentaries regarding Apple and its supply chain, cite CEO’s Tim Cook’s commitment to bring forward a U.S. based manufacturing presence it its assembly of end-products, albeit an initial small presence. That announcement was been communicated in the declared commitment to produce a new line of Mac computers in 2013 at a U.S. based facility. In late May, Cook declared to a U.S. Senate Subcommittee that the new Mac assembly facility would be in Texas. According to his testimony” “The product will be assembled in Texas, and include components made in Illinois and Florida, and rely on equipment produced in Kentucky and Michigan.” While we and other sites speculated that the new U.S. presence would be overseen by contract manufacturer Foxconn, a mid-June posting on Mac Rumors.com quotes a Taiwanese equity analyst as indicating that Apple will actually be partnering with contract manufacturer Flextronics for the new upcoming Mac Pro. The 450,000 square foot Flextronics facility near Fort Worth is also reported to be the manufacturing site for Motorola’s new Moto X smartphone. Astute readers may also pick up on the fact that Texas is a no-income tax state, which provides an added incentive and economic justification to make it the home of Mac Pro production.
Yesterday, Parade Magazine featured an article, Made in the U.S.A., which cited other manufacturers upping their commitment to increased U.S. manufacturing including General Electric and a host of non-U.S. automotive brands. One interesting statistic: “according to Libby Newman, a vice-president at the American International Auto Dealers Association, about 55 percent of all light vehicles sold in the U.S. through July were foreign brands- but more than half were built in America.”
While readers might argue that some of the cited companies we note in this commentary have obvious motives behind their renewed interest in U.S. based manufacturing sourcing, the economics and the noticeable shifts in momentum towards a re-discovery of U.S. based manufacturing attractiveness is underway. Supply Chain Matters has further cited structural shifts in global transportation that reinforce a paradigm shift in supply chain related economics.
Each supply chain organization will have to analyze their own business factors but take heed to these messages since more noticeable momentum and commitment towards favoring U.S. manufacturing is underway.
Has your senior management teams been advised of these trends?
On July 30th, Supply Chain Matters attended the Infosys 2013 Global Analyst Summit meeting held in Boston. This is an annual event held each year with invited industry analysts representing multiple coverage areas. It was a great briefing event, held at a scenic facility overlooking Boston Harbor and filled with insightful information.
Bottom-line, we were surprisingly impressed at the consulting efforts that Infosys’s manufacturing and supply chain teams have made in the past twelve months.
Infosys itself has undergone some turbulent changes in terms of lagging growth, culminating with bringing back its founder N.R. Narayana Murthy as executive chairmen. During the opening session, Co-founder, Board Member, Managing Director and CEO S. D. Shibulal reviewed the accomplishments of the Infosys 3.0 re-alignment that has been executed over the past 18 months. He acknowledged that last year provided some challenges for the firm with growth below industry average. Since that time the firm has re-aligned both its industry and geographic organizational focus and has assembled 14 offerings around products and platforms. Last year, a significant percent of the firm’s new deals around business outcomes came as a result of the new platforms strategy with the Process and Platforms business unit reaching $725 million in Total Customer Value last quarter alone. The re-alignment and re-focus has begun to demonstrate other improved performance. Shibulal re-iterated that Infosys maintains a 98 percent customer retention rate among nearly 600 core clients. The CEO also highlighted some key client accomplishments across multiple industries and it was rather clear that he was personally involved in overseeing some of these engagements. Also made clear was the firm’s renewed focus on assisting clients in major business process transformation that extends beyond just information technology, with broader measures of engagement performance. Infosys is in the process of transforming to both a services and platform consultancy.
The remaining morning briefing sessions featured a combination of Infosys senior executives and select customers discussing areas termed Insights-Driven and Agile Enterprise, along with Cloud and IT Outsourcing implementation efforts. What we found most interesting was how these clients described their business objectives, which included:
Building a smarter organization
Digitizing the enterprise for growth
Fail fast and win faster- iterated by more than one client presentation
Harnessing the power of real-time decisions
Managing disparate global operations effectively
Enabling guest experiences
Re-architecting the entire data environment
These are terms that connote broad cross-functional and enterprise initiatives. The other common theme we picked-up on was a sense of urgency for industry change in either maintaining or up-ending industry leadership in business capabilities, or seizing business opportunities in new markets.
Our afternoon time centered on a series of dedicated briefings from various Infosys executives within the Manufacturing Industry practice business unit, chaired by Sanjay Jalona, Infosys Senior Vice President for Hi-Tech and Manufacturing, along with his associated manufacturing industry leaders. This business unit stated that it works with more than 100 global 2000 clients and that 40 percent of engagements are led from a business process consulting framework. While we are restricted from the mention of client names, we can relate that the names are impressive. Once more, the described engagements are far reaching, many with multiple-year timetables for innovation.
More importantly, Infosys has shifted to a shared-risk outcomes-based client engagement model where end results are predicated on specific client specified business outcomes. Infosys has now discovered that its core capabilities lie in combined services that span engineering, business process outsourcing and IT transformation. The firm’s broad global presence across multiple countries is further leveraged to assist manufacturers and retailers in implementing capabilities on a global scale, including needs in higher-growth emerging markets.
Five areas of investment capability and client transformation focus were described that include: Information, Digital, Infrastructure, Business and Supply Chain. Beyond IT and business consulting, the manufacturing practices have also focused on the delivery of specific services including product engineering and industry specific customer services. The firm is also developing impressive capabilities in the area of leveraging predictive analytics applied to supply chain and online fulfillment needs.
Our briefing emphasized the increasing importance that manufacturers currently place on transforming to more services focused business areas particularly in discrete manufacturing and aerospace settings. In some specific engagements, Infosys has assumed the ongoing management of a client’s legacy products that frees-up client resources to work on more innovative product offerings. Client names were again impressive, many of which Supply Chain Matters has featured in specific supply chain, B2B, and online fulfillment capabilities.
As outlined above, we were obviously impressed, and we were not the only analyst firm with that impression. The firm has clearly shifted toward delivering strategic capabilities for its clients, a theme that was candidly not the top-of-mind impression for India based firms.
One of the current shortfalls of Infosys is its ability to effectively market its broader array of capabilities for global based manufacturers and retailers and that conclusion was openly echoed by other attending analysts as well. We were informed that this will be addressed.
The takeaway for our readers is that we were impressed by the renewed focus of Infosys, particularly its Manufacturing practice area.
Disclosure: Infosys is a former sponsor and client of the Supply Chain Matters blog