Manufacturing Data Collection

I recently visited one of HighJump’s manufacturing customers in Iowa. Their shop floor makes up several product lines, is very complex and spans over 900,000 square feet. They run our manufacturing execution system software (MES) to manage the shop floor and direct over 600 employees. While their throughput is down due to the macro-economic conditions, it was refreshing to see complex manufacturing alive in the United States.

Every time I read an article about manufacturing, the drum seems to get louder about manufacturing getting outsourced and its inevitable departure from the United States. A recent Business Week article postulates that we might have entered into a permanent ‘invented here, industrialized elsewhere’ environment.  While I do not necessarily disagree for industries that have already completely left the cost to bring them back will be too high; I think there are other factors to help mitigate the transfer of industries that still have manufacturing in the United States:

Regulations and Protectionist Policies

Increasing regulations and risk of protectionism will drive up the costs of manufacturing elsewhere. Contrary to the promises of the G-20 about commitments to free trade, we recently slapped a 25-35% duty on tires from China. As the economic recovery starts, if countries resort to more protectionist policies this will need to be factored into an outsourced manufacturing decision. In addition we see additional regulations around imports; 10+2 being the most notable regulation scheduled to go live early next year. While there could be long-term savings from automation, the data collection effort can be significant and difficult depending on the technology infrastructure of companies in the supply chain so the corresponding upfront cost is not insignificant.

Demand Variability

Many companies moved manufacturing to Asia because of the significant cost benefits. One of the common trade-offs was the long lead times to ship the product to the United States. For companies that have a hard time predicting future demand (I am guessing there are a few out there) this creates a situation of either losing out on sales or loading up more inventory at different points in the supply chain. The more working capital tied up in inventory; the less money there is for the rest of the business. I think you will see more companies move toward a ‘near-shore’ strategy where they move non-strategic manufacturing to lower cost countries that are closer to the target market. In the case of the United States, Mexico fits the bill. Our customer has done exactly that by opening up a manufacturing plant in Mexico for the lower-end product lines while keeping the strategic product lines in the Midwest.

Government Incentive

One factor that has been absent up to this point but that I would greatly applaud would be for the US government to perform a review of our manufacturing capabilities and determine which are of strategic importance from a national security and ability to innovate standpoint. Then provide the right incentives to keep/enhance our core competencies in these areas, it sure beats the short-term incentive to pay people to pick up a shovel to build a road.

Hopefully our customer is not the only company that can make the proper assessment of what is strategic and what is not when it comes to manufacturing capabilities.

There has long been debate about off-shoring or near-shoring manufacturing capabilities and whether this is good for the United States. While I will not delve into the heart of that lengthy debate, “Made in the US” has long been an important buying criteria for large segments of the American population and has become even more important in the economic downturn as a renewed emphasis has been made on buying American, albeit with protectionist risks.

However, a recent study by the American Small Manufacturers Coalition (ASMC) states “over a quarter of American manufacturers – representing over 90,000 firms – are at risk because they are not at or near world-class in any of the six strategies.” So what exactly are Americans buying if a product is “Made in the US”? The ASMC study details six strategies that are required for global competiveness:

• Customer-Focused Innovation (CFI)
• Engaged People/Human Talent Acquisition, Development and Retention (EPT)
• Superior Processes/Improvement Focus (SPI)
• Supply-Chain Management & Collaboration (SCM)
• Green/Sustainability (GS)
• Global Engagement (GE)

This is particularly concerning as companies in China, Eastern Europe and elsewhere continue to build out more robust manufacturing capabilities. Of specific concern are our deficiencies in Supply Chain Management and Collaboration. A key component of world-class supply chain infrastructure is an investment in modern technologies such as manufacturing execution system software or manufacturing data collection. If our manufacturing companies, due to macro economic factors or industry specific dynamics are under-investing, it is unlikely they will be able to compete in an increasingly global marketplace. While this is concerning, we need to heed the warning bell that the ASMC raises and use this as a catalyst for action, rather than let it become a leading indicator to a decline in the “Made in US” moniker.

You can read the full report here.

Image via Flickr user shawdm.

HighJump Software today announced it has achieved integration validation with Oracle’s PeopleSoft Enterprise Supply Chain Management (SCM) 9.0 for both HighJump Warehouse Advantage and HighJump Data Collection Advantage. HighJump Software has maintained a strong relationship with PeopleSoft and Oracle for more than 10 years by providing integrated manufacturing data collection, inventory and warehouse management solutions for Oracle’s PeopleSoft Enterprise SCM products. This relationship has resulted in more than 80 joint customers.