Regulatory and competitive constraints also take a toll. Industrial production is responsible for 15 to 20 percent of worldwide greenhouse gas emissions. As measures to control carbon and other pollutants are mandated, manufacturers will have to find ways to minimize traditional energy use, develop renewable energy sources and grids, protect local water supplies, and meet stricter and stricter regulatory reporting requirements. They will do this while struggling against new rivals emerging from low-cost countries and while dealing with their own senior management, who often treat manufacturing as a “cost cash cow” — a candidate for reaping another 5 or 10 percent in cost savings.
Because of the complexity of these interrelated threats, it is possible that whole industries will continue to disappear from developed regions such as the United States and Europe.
But there is also the counterexample of leading manufacturing companies, farsighted enough to view their factories, supply chains, logistics and procurement programs, inventory cycles, and labor management as strategic assets. These include Tetra Pak (the packaging giant), Novartis, Lego, Procter & Gamble, Boeing, Toyota, and a significant number of others, large and small. Perhaps the most striking characteristic of such companies is their persistence as attentive innovators of operations. They treat manufacturing experimentation as a source of knowledge for improvement, and their solutions interact in a virtuous circle that reinforces its own impact. For example, to overcome shortages of silver, the solar cell industry has been working to advance its products in a way that relies on more abundantly available materials. These breakthroughs require entirely new designs in process technology. But if they can succeed, then they will not just reduce energy costs but make plant siting more flexible — factories will be freed from having to be near dwindling raw materials — and that in turn could enable supply chain innovations that make it far more possible to manage labor force shifts.
How then can national leaders foster a revitalized manufacturing base? By encouraging the development of more companies with the vision to invest wisely. To be sure, it will never be easy. Even enlightened manufacturing companies must work extremely hard to keep their edge. But with any luck, in the next few years, we’ll see remarkable tools and ideas emerging that break the boundaries of conventional practices. Old, fossilized plant footprints can become nimble networks; confrontational labor relationships can evolve into constellations of joint interest; outmoded supply chains can be transformed into clearly defined, mutually beneficial partnerships; and stolid aging factories can be retrofitted into showcases of lean manufacturing. Only those companies that appreciate manufacturing, invest in technology, and innovate in this field are likely to prosper. The challenge for governments is to figure out how to support them — for they are carrying the future.
Author Profiles:
Kaj Grichnik (grichnik_kaj@bah.com) is a vice president with Booz Allen Hamilton based in Munich. As a leader of research and practice in manufacturing, he has visited more than 350 factories and plants in the past 10 years. He focuses on the pharmaceutical, food, aerospace, and automotive industries.
Conrad Winkler (winkler_conrad@bah.com) is a vice president with Booz Allen based in Chicago. He advises companies across industries on supply chain management improvement and manufacturing strategies, with a focus on the automotive and aerospace sectors.
This article is adapted from Grichnik and Winkler’s forthcoming book, Make or Break: The Future of Manufacturing (McGraw-Hill, 2008).
