Navigating headwinds for success: the state of the manufacturing industry

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State of manufacturing industryIn the manufacturing industry, pros and cons are slugging it out for dominance. On the pro side, productivity in the U.S. is the highest in the world. Manufacturing technologies have triggered an industrial revolution, where machines and humans work together in real time at smart, flexible factories. On the con side, weak global demand and the strong dollar are packing a one-two punch. Daily challenges stem from core operations — finding skilled labor, protecting against cyberrisk, optimizing supply chains, addressing mass customization and innovating.

Filling the skills gap Over the next decade, the U.S. will need to fill 3.4 million manufacturing jobs, many requiring specific technical skills. But 2 million of those jobs will probably go unfilled because of the shortage of trained workers. There’s a bright side, though. Smart collaboration between government, academia and business can spur investment in maybe the most valuable resource of all — the U.S. worker. Manufacturers are teaming with local community colleges to build programs that resemble Germany’s apprentice model.

Transformation through advanced technologies Technology gives manufacturers the chance to innovate their business models. For example, manufacturing giant John Deere is moving from a product business model to a hybrid product-service model to help farmers get the most out of their land.

Thanks to technology, manufacturers can know their customers better than ever. Yet there may be a point when knowing your customers crosses the line into knowing their secrets. Cyberrisk complicates the question of who owns and controls the data of a manufacturer’s partners, suppliers and customers. The U.S. Department of Homeland Security reported in 2015 that nearly a third of the cyberattacks involving critical infrastructure were against manufacturers.

Once again, manufacturers have come up with an answer. They’re reducing their risk by pursuing joint ventures or shared service arrangements with strategic partners that have expertise in needed technologies.

Finding value in the value chain There are still a few kinks in supply chains, namely insufficient cost controls and risks. Reasons include a lack of transparency across the supply chain, conflicting performance objectives of segments in the business and difficulty in spotting cost savings opportunities in operations.

Yet manufacturers are also using their supply chains to pursue innovation, working with select supply partners on new ideas they can take to their customers. Most manufacturers are looking for cost advantages from a large pool of suppliers of low-value components while partnering with a few strategic suppliers.

Demand for mass customization Consumers want more choices in the products they buy. This forces manufacturers to produce more brands, adding complexity to their operations. Something as simple as peanut butter can require changing machine flows, sometimes many times a day, to create different varieties. The effort is worth it, though, because manufacturers need to respond to customer expectations to stay relevant. Japan and Korea established themselves as economy car manufacturers and pushed to improve quality, processes and technologies. Now they’re strong competitors.

Which side wins? In the final analysis, the pros outweigh the cons in manufacturing. U.S. manufacturers are still pushing the boundaries of productivity, technology and talent. And that will lead to ongoing innovation and success.