KPMG’s 2011 Global Manufacturing Outlook linked 56 percent of the global manufacturers they surveyed with plans to sell new products in new and existing markets over the next two years. That number is up from the 37 percent who said the same thing in the previous survey. Wow! Top-line growth is once again the name of the game for the 220 manufacturers (international conglomerates with a minimum of a $1 billion in revenue) that participated in the survey.
In spite of markets doing peculiar, sometimes-unpredictable and perpetually-worrisome things, 80 percent of survey participants expressed some level of optimism about growth. Growth, they believe, will be fueled by new products.
The anticipated growth will be inhibited if their entire supply chain is not engaged and along for the new ride. Growth, through product development, requires that supply chain objectives align with longer-term planning. Products produced by the supply chain, to the needs of customer, is a key determinant of growth for every company in the chain.
This notion is supported by the findings in a recently completed study entitled, Why Planning and Agility Are So Important to U.S. Supply Chain Competitiveness. The study, conducted by the GenEdge Alliance, the MEP affiliate located in Virginia, was undertaken with 19 OEMs representing 9 different NAICs codes. The initial findings of the study were then validated by 49 small and medium-sized manufacturing companies (1st , 2nd, and 3rd tier suppliers) representing 16 NAICs codes.
According to the study, “in order to achieve profitable share growth (not just increased sales), companies must achieve consistent product development pipelines for new markets and new customers. It is nearly inconceivable to imagine this happening without planned collaboration between customers.” Additionally, the study noted that, “product development relates closely to planning because of the need to frame sourcing decisions adequately for long-term manufacturing capability and material sourcing requirements related to innovation (new products or existing products in new markets)”.
One key to the future ability of supply chains to rapidly develop new and improved products will be the collaborative use of advanced modeling and simulation software to speed the process of product development at all stages, from concept to design to production. Close to half of the respondents in the KPMG study said they will invest in technology to improve their supply chains. That’s a good start for those looking from the top of the chain down to the lower tiers.
On the flip-side, small and medium-sized companies need to accelerate the pace at which they learn about new product and new growth market opportunities so they can make better informed decisions about being suppliers in their current chains or looking for new customers, with new products, themselves. And herein is a great challenge for organizations like MEP…
MEP has formed a consortium consisting of five MEP centers that are developing a suite of supply chain collaboration tools to help small and medium sized manufacturers reduce product development cycle time. The reason why supply chains have struggled is that small to medium sized manufacturers have not been able to collaborate effectively with the larger OEM’s. The goal of the consortium is to help reduce the cycle time from the OEM all the way down to the last supplier in the supply chain. SCMEP is part of the supply chain consortium and is developing a supply chain optimization program that will provide executives with a mechanism to better understand the cause and effect decisions within the supply chain.
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The risks of product development across supply chains is probably best portrayed by the Boeing 787 start up. This project, which is building and delivering the world’s most advanced commercial jet, is a great case study regarding understanding and managing risk in a shared product development start up. Boeing sought assistance from it’s supply chain to move from traditional aluminum structures for the airframe and wings to composites. 32 billion dollars later (just Boeing), and 3 1/2 years behind schedule, Boeing is now moving forward with a design that promises 20% lower fuel consumption, a more pleasant, higher pressure ride, and best in class passenger comfort and through window visibility. Life cycle costs to maintain the airframe are predicted to be significantly less than aluminum airframes as well.
Trouble in getting going included fastener supply, lack of documentation from foreign suppliers, software issues, certifications of major components, and the viability of a major fuselage section supplier, ultimately resulting in a Boeing buy out of the supplier.
Issues in the start up of a new technology can occur in any business. The NIST MEP consortium is attempting to develop processes, systems and solutions to help US based supply chains avoid the Boeing scenario from being repeated in their product development initiatives.
Among the many valuable points made above is the term “collaboration,” which has had multiple applications – from the mutually beneficial participatory relationship to the thinly veiled approach for cost reduction. Manufacturing history is littered with examples of the latter, which burdens true “collaborators” unfairly. Developing new products and extending existing product lifecycles will, increasingly, require a shorter time-to-market. True, open collaboration throughout the supply chain will, increasingly, be the foundation on which shortened development cycles, new product innovations and expanded markets are based.
This post is yet another example of the increasing pace of change and how we need to respond. It is no longer sufficient to maintain the status quo. Technology and globalization cause the game (defined by consumer expectations) to change more and more frequently. Adapability is an oft-used word but one packed with deep meaning. In three recent conversations with senior leaders of OEM’s, their biggest concerns related to whether or not their supply chains can adapt to the significant increased product redesigns and launches that are planned in the next few years. For American manufacturing to effectively compete in the game of exceeding customer expectations, the supply chains will need to strengthen their ability to adapt and innovative together.