We have already discussed these strategies for Growing as a Domestic Manufacturer in earlier posts:

• Prepare for Re-shoring Production
• Invest in Your Workforce
• Design for the Developing World

The fourth business strategy: 

Master Supply Chain Visibility

Domestic manufacturers need to update their supply chain management technologies in order to remain competitive. Too many domestic manufacturers currently rely on spreadsheets and manual processes to manage their supply chains. This is inefficient, expensive and error prone.

 To better manage supply chain operations and gain visibility into production, domestic manufacturers should invest in supply chain software. Supply chain software can automate supply chain planning, manage supplier relationships, and provide supply chain execution automation. By automating the process, manufacturers are able to gain productivity, more accurately plan production and reduce cycle times.

 Kildeer Mountain Manufacturing (KMM) has gained efficiency by combining radio frequency identification (RFID) technology with supply chain execution software to track incoming inventory and production. The real-time information provided by the software allowed KMM to cut their cycle times in half. The drop in cycle time increased output and allowed KMM to remain competitive.

 The final part in this series will be exploring:  Improve Environmental Responsibility

"We have surveyed the manufacturing landscape and identified five strategies that companies are using to remain competitive. Here we profile each strategy and present case studies illustrating how real companies are putting those strategies to use ."

Strategy 1:  Prepare for Re-shoring Production

More manufacturers are bringing production back to North America. We think the three main drivers of this trend are:

●        Increases in the cost of ocean freight transportation, which has increased by as much as 150% since the 2008 lows;

●        Longer product delivery cycles that make domestic manufacturers less responsive to consumer demand; and,

●        Poor production quality standards that have resulted in the delivery of defective goods.

In addition to these drawbacks, the rising cost of Chinese labor is prompting domestic manufacturers to reconsider their off-shoring habits. Last year, Chinese inflation rose to 5.1% – its highest level ever. Sure, Chinese manufacturing remains far less expensive, but a trend toward higher costs is clear.

These factors, including consumers’ growing environmental and patriotic concerns, are motivating US manufacturers to move their production facilities back to North America. An October survey of nearly 1,400 US manufacturers found that 19% brought production into or closer to North America in the last three months. Domestic labor costs may be more expensive, but manufacturers are finding ample motivation to re-shore. At the same time, these manufacturers are identifying innovative ways to reduce costs.

For example, Vaniman Manufacturing, a maker of dental parts, was initially drawn to China by the allure of labor costs 50% lower than domestic labor. However, Vaniman’s labor savings were quickly eaten up by shipping and storage costs. This prompted Vaniman to leave China and locate their production in San Diego. After the move, Vaniman realized cost savings from reduced transport and storage needs. Ultimately, Vaniman’s costs are still 5% higher than the cost of doing business in China, but the manufacturer feels the premium is well worth it.

Manufacturing needs to continue this growth track and remain competitive.  To do this, they will need to adopt new business strategies.  Last week week we looked at Strategy 1 - Prepare for Re-shoring Production.  Strategy 2, Invest in Your Workforce:

Invest In Your Workforce

Sourcing labor domestically is a challenge as costs are still higher in the US than overseas. To overcome this barrier, domestic manufacturers should invest in workforce training to gain a skills advantage. Instead of focusing on competing on the basis of labor cost, domestic manufacturers should target productivity and skills. A skilled labor force will help push productivity much more than a relatively less productive labor force.

One company to see their workforce investment pay off is Aerofil Technology Incorporated (ATI). ATI recently invested in a lean training program that dramatically increased worker productivity. Workers were required to attend a full year of lean manufacturing training to improve worker efficiency. In training, workers were taught how to identify and eliminate waste. The work of ATI's well-educated employees helped the company realize a 100% increase in productivity and double digit turns in inventory.

Domestic manufacturers should also offer workforce training to recent college graduates. Providing workforce training to this generation will help grow a skilled talent pool for the future. Caterpillar, the heavy equipment manufacturer, increases their labor pool by offering 2-3 years of training in human resources, engineering, logistics and more. After completing training, graduates are given professional placement in their division.

Watch for Strategy 3 - Design for the Developing World