13, July 2018
Building Strong Relationships to Face Challenges, Make the Most of Opportunities
By: Steve Campbell
The coming decade offers a host of challenges and opportunities for both large and small manufacturers alike, and forging the right partnerships — whether public, private, or both — is key to navigating the coming changes. Your local NIST Manufacturing Extension Partnership (MEP) Center can be a key partner in helping you build the right relationships. I was reminded of this recently while reviewing last year’s report by the McKinsey Global Institute, the business and economics research arm of McKinsey & Company, the worldwide management consulting firm, entitled “Making it in America: Revitalizing US manufacturing.” The report explained why the erosion of U.S. manufacturing isn’t a foregone conclusion, and how changes over the next decade could open up new opportunities to reverse the recent industry setbacks.
McKinsey forecasts that U.S. manufacturing could boost annual manufacturing value added by up to $530 billion (20 percent) over current trends by 2025 — that is, if the manufacturing sector is prepared to capitalize on the coming changes, such as advances in manufacturing technology. “Given the importance of manufacturing to the broader economy, capturing these opportunities should be a national priority,” the report stated.
While these changes will affect every part of the U.S. manufacturing industry, smaller manufacturers will face somewhat different opportunities and challenges over the next decade from larger companies. Let’s look at some reasons why.
Consumer Demand Is Creating Regional Markets
Demand is soaring and economies are improving both in the U.S. and abroad. As the report points out, the U.S. is still one of the most lucrative markets in the world. The diverse, technologically savvy consumers here expect quality, low prices, and variety from their products. This demand is driving increases in certain consumer sectors such as food processing , and is evident as one manufacturer reported that the SKU count of its North American business unit rose by 66 percent in just three years.
However, this increase in U.S. consumer demand may not be felt by all U.S. manufacturers, especially smaller ones that are regionally focused. Because income growth has increased unevenly across different U.S. regions, growth and demand may spike in certain areas while stagnating (or even declining) in others.
Looking beyond U.S. borders, emerging global markets such as Africa, Brazil, China, and India present an enormous potential for growth. However, consumers in these markets — and even within the same country — exhibit high regional, ethnic, linguistic, and income diversity, which means that competing in these markets is a very complex undertaking.
The ExporTech program, jointly offered by the NIST MEP and the U.S. Commercial Service of the U.S. Department of Commerce, was created to help small and medium-sized manufacturers (SMMs) navigate these nuances and increase their exports to these emerging global markets. The program helps manufacturers build relationships by providing introductions to new clients, and by deepening relationships with existing clients.
Advanced Manufacturing Will Become the New Normal
As “Industry 4.0” takes over, advanced manufacturing will become the rule, and not the exception. As defined in the McKinsey report, “Industry 4.0” refers to the convergence of multiple technological changes: the increasing volume of available data, machine learning developments, new forms of human–machine interaction (such as touch interfaces), and the ability to translate digital instructions into a physical product. This convergence is increasingly becoming the standard, and even smaller manufacturers will need to implement these technologies to increase productivity and become more competitive.
Smart manufacturing is one of the most immediate Industry 4.0 trends that affects manufacturers and refers to integrating information technologies with operating technologies. This definition encompasses many manufacturing applications, such as computer-assisted design software or monitoring machines remotely via computers or tablets. Robots fall under the broad umbrella of smart manufacturing, and while they can be a significant upfront commitment cost- and training-wise, over time they represent an excellent opportunity to either achieve automated, cost-efficient, large-volume operations, or pursue highly customizable production capabilities.
If you want to implement advanced manufacturing techniques and technologies in your facility, but aren’t sure where to start, there are resources tailored to SMMs. For example, MEP Centers have staff members at all 14 Manufacturing USA Institutes, which work to transfer promising, early-stage technological advancements to operational manufacturers to provide resources for growing their business and establishing their place in the emerging Industry 4.0 landscape. The relationships being built at these centers are key to bridging the gap between early, pre-competitive research and the factory floor.
Large Firms Need Strong Relationships with Smaller Manufacturers
If they want to compete both stateside and abroad, large corporations will need to focus not just on cost cutting during the procurement process, but also on building value — and this won’t always happen with large manufacturers. “Large firms can benefit from identifying which of their suppliers provide critical, high-value components; these may not be the largest suppliers,” notes the McKinsey report. “Instead of just monitoring them, large firms could solicit their ideas, invest in their capabilities, and build trust to create a preferred relationship. Beyond their current suppliers, large companies also need to be engaged in strengthening the entire base of smaller manufacturers.”
As an example, the report notes that in the auto industry, inefficiencies in OEM–supplier interactions can add up to 5 percent of development, tooling, and product costs. The auto industry is far from the only one affected by such inefficiencies, which will likely only grow as manufacturers decrease turnaround times and increase product portfolios.
And while OEMs begin to reach out to the smaller members of their supply chains, SMMs need to focus on modernization and expanding their access to advanced manufacturing technology. Connecting with a partner such as the MEP National NetworkTM can provide smaller manufacturers the financial, technical, and business expertise they need to compete at a higher level and work successfully with much larger manufacturers and corporations.
In order to address the upcoming challenges and take advantage of potential opportunities, a company’s success truly depends on forging the right partnerships, and MEP is here to help.