December, 1998 Market Analysis: U.S. Manufacturing Leaders Invest In Employees A new study from PricewaterhouseCoopers (St. Louis, Mo.; www.pwcglobal.com), a professional services organization, says a select group of U.S. manufacturers over the past five years has grown productivity 40% and shown that business success tomorrow will require more than investments in new technology. To keep pace, companies also must comprehensively train employees and forge new relationships with customers and suppliers. "It's easy for American manufacturers to think investments solely in technology will remove enough slack from the supply chain to give them a winning competitive edge," said Barrett Boehm, a PricewaterhouseCoopers partner who oversees the research. "Unfortunately, it isn't that simple. Yes, they must stay technologically current, but more is required. To thrive amid the overcapacity and pricing pressures that characterize today's marketplace, the 72% who plan to step up capital spending over the next two years must also allocate money for extending their employees' knowledge base and forging stronger linkages with customers and suppliers. That's what the super-competitors are doing, and they're pulling away from the rest of the field." PricewaterhouseCoopers' Census of Manufacturers reveals three keys to business success: Invest in people and share knowledge — 15% of manufacturers each year provide more than 40 hours of training per employee. Most others offer fewer than 20 hours per year. Moreover, the leaders give employees more authority to make decisions, break down barriers that separate various job functions and disperse institutional knowledge. Tear down company walls — Super-competitors are finding new ways to build bridges with suppliers and customers that help them reduce inventory and meet customer needs faster. They're cutting costs, not value. In particular, 11% continuously replenish customer stocks, 7% foster extensive interaction between customers and production employees and 20% require suppliers to deliver materials on a just-in-time basis. Employ technology selectively — Super-competitors use technology to realize the gains of investments in people, customers and suppliers. For instance, they are more likely to have established electronic data links to customers and to utilize the latest production planning and scheduling software. For them, the Internet is becoming a pervasive technology tool to create such linkages. In effect, they are building an electronic supply chain that leverages the gains achieved from investments in people. The study shows that companies that employ these strategies achieve superior results across a range of performance measures: Productivity is growing fast. • 10% of US manufacturers have increased productivity by 40% over the past five years. Over the same period, most of their peers recorded gains of less than 20%. • 6% last year shipped at least $1 million worth of product per employee, compared with a median for all U.S. plants of $150,000 per employee. • 16% say wastage during production or reworking of flawed products costs less than 1% of sales each year. For most, scrap and rework costs comprise more than 2% of sales. Quality is nearing perfection. • 14% say 99% or more of their products come off the assembly line with zero obvious defects; compared with an average of 89.7%. • 25% say warranty costs amount to less than 0.5% of annual sales, compared with an average for all manufacturers of 2.5% of annual sales. Operations are humming with efficiency. • 22% routinely crank out a product every five hours or less, compared with an average of 180 hours, and 25% get customer orders out the door in fewer than 5 days, against an industry average 31 days. • 5% deliver products to customers on time 100% of the time compared with 91% on-time delivery rate for all U.S. manufacturers. "These super-competitors are achieving results unthinkable a few years ago," Boehm said. "For others the message is clear, if you want to remain competitive next year, you'd be well advised to follow their example." The Manufacturing Report © Copyright 1997, 1998 by Lionheart Publishing, Inc. All rights reserved. E-mail Editorial Dept: tmr-editorial@lionhrtpub.com Lionheart Publishing, Inc. 2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA Phone: 770-431-0867 | Fax: 770-432-6969 E-mail: lpi@lionhrtpub.com Web Design by Premier Web Designs E-mail: lionwebmaster@preweb.com