Manufacturing Moves, in Black and White

Author and spiritualist Deepak Chopra has said that the next step in man’s evolution will be survival of the wisest.

We already know about individual wisdom—Gandalf the Grey taught us about that. But what about businesses? How can they become wise? The short answer is this: It starts at the top.

For a business, it’s imperative for the leadership structure to have clarity and focus, understand what direction to take the company, generate the best possible business opportunities, and align its staff and processes to meet company goals. In other words, operate wisely.

Such leadership is necessary because business today is like playing chess, not checkers.

A recent report from KPMG called the “2015 Global Manufacturing Outlook” states that a “major transformation” is coming to the manufacturing sector, but few manufacturers are transforming their business models, operating structure, or supply chains.

The study, conducted by Forbes, is based on a survey of 386 senior manufacturing sector “grand masters” from around the world.

While sales growth (55 percent) and cost reduction (41 percent) were the top two goals of these executives, they also are preparing for increased competition. In fact, almost 40 percent stated that the biggest upcoming challenge they will face comes from more intense competition and the pressure on prices that this competition brings.

Minor moves will not usher manufacturing businesses into this new future, either. No simple trading of pawns will be effective.

“Few manufacturers are truly transforming,” said KPMG Global Sector Chair of Industrial Manufacturing Jeff Dobbs. “Instead, most are tweaking and adjusting their business models and operating structures in preparation for the battle they know must come.”

The survey revealed many common themes across sectors that included aerospace and defense, automotive, and medical manufacturers. Here are the top 4 revelations from the survey, as indicated by these top-level executives.

1. It is early in the transformation cycle. Growing, controlling costs, and managing supply chains—all items at the top of most agendas—are stuck in last-generation modalities. A new business model is needed, and there is time to create one.
2. Innovation is just warming up. Today’s innovators are revolutionizing how we make things using new manufacturing processes, and failure to join this group could mean failure for a business.
3. Agility is key. New business models and new challenges also will lead to new ways to fail. This age’s supply chains need to change too. Look for those that are as agile as you are (demand-based suppliers).
4. R&D is more important now than maybe ever. R&D costs money but it spurs growth, attracts high-end talent, and creates opportunities to partner with other forwardthinking, high-tech companies.

The opening gambit of this game was made many years ago in the form of offshoring and continues today with currency fluctuations, which affect the prices of raw materials, labor, and equipment. The next move may come in this country after the October election, but for now it’s up to the players to review the forces arrayed against them and prepare to deliver a checkmate.

There are only two sides to the upcoming battle, and like in chess, the sides are pretty black and white.