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The winds of change are creating new sources of competitive advan­tage as manufacturers transition out of the postindustrial era. Only a decade ago, manufacturing executives were preoccupied with elimi­nating direct labor through automation, integrating manufacturing sys­tems with other business functions and pursuing competitive advan­tage through economies of scale. Quality was eclipsed by time-based competition. The global landscape was also radically different. The Toyota system dominated world-class manufacturing, and Japanese manufacturers were the envy of the world. The fate of American manu­facturing seemed unclear; many European manufacturers faced high wages, overengineering, and protectionism; and South America was ravaged by inflation.

Times have changed. Globalization and rapid technological change are rewriting the rules of competition. Extensive research captured in a study referred to as Vision in Manufacturing by Deloitte & Touche shows that manufacturing is poised for a renaissance. In contrast to the recent past, technology is now affordable and abundant, while skilled technical workers are in short supply. The ubiquitous availability of information and Internet technology is enabling niche players, as well as those in emerging markets, to "leap" traditionally cost-prohibitive infrastructure barriers and assert themselves globally. Advances in in­formation technology and telecommunications are accelerating pro­ductivity and supply chain integration—distribution bottlenecks are as feared today as bottlenecks in production were just 10 years ago. The rising sophistication and expectations of customers around the world have given an unfamiliar primacy to coordinating marketing and sales with manufacturing. Also, the center of gravity of the global economy is irrefutably shifting to emerging markets. Even in the wake of eco­nomic turmoil in Asia, economists are still bullish that the developing world will command over 65 percent of global GDP by 2020.

What are the implications of these trends for manufacturers? It means that the game has changed. Since the start of the 20th century, the manu­facturing sector has passed through two key phases. The first phase— the "Mass Assembly Era" —was based on the production logic of econo­mies of scale. This gave way to the "Quality Era" in the 1980s, which fundamentally reoriented business toward continuous process improve­ment and the elimination of waste.


The Quality Era is now evolving into what we call the "Era of the Virtual Customer." Customers around the globe are deciding what, when, where, and how they will purchase goods and services. Customers have virtual access through cyberspace to more products and services than ever before and they are using "smart" systems to help them make more informed, personalized choices. Customers are also beginning to exert their bargaining leverage to influence price. Furthermore, with instant telecommunications and overnight delivery, typical constraints, such as time and distance, are rapidly diminishing. As a result, customers are demanding product and services in "zero time." As the new millennium approaches, expectations will not only continue to rise, they will be­come increasingly unpredictable. This means that planning horizons will rapidly decline and traditional approaches of forecasting, planning, and execution may not be enough to achieve success.

Our research shows that new manufacturing technologies and best practices have reached critical mass and are converging globally. To sat­isfy customers, manufacturers will need more than new organizational structures, increases in outsourcing, and alliances. They will require a fundamental shift in executive mindsets and organizational cultures. To create extraordinary value for customers, manufacturers must eliminate traditional boundaries between customers and integrate more closely with them. This means partnering with customers and emphasizing the coor­dination of research and development (R&D), marketing, and manufac­turing. Our studies conclude that successful manufacturers will integrate the customer into the fabric of their organization.

Our manufacturing study finds that rather than being surprised by changes in the market, leading manufacturers anticipate change and possess the flexibility to quickly adjust their strategies. As they expand into new markets and confront new competitors, the leaders recognize that they must be able to turn on a dime and react to changes in a highly uncertain environment. Even more so, top performers are proactively changing the rules of competition to their advantage, and to their ri­vals' disadvantage. New wealth from manufacturing is being created more by adaptability, value-added services, and speed of execution than by sheer quantity of capital or technology.

This new state of manufacturing means that incumbency does not guarantee long-term success. Fierce global competition and increasing demand for customized products and services, coupled with shortened product life cycles in most manufacturing industries, suggest that many of today's leaders will not necessarily be tomorrow's. Unless the lead­ers can reinvent themselves to seize opportunities and keep pace with rapid change, they risk falling behind. They cannot afford to focus on merely outperforming rivals. To win in the era of the virtual customer, executives must continuously refocus their strategies toward custom­ers and prepare their enterprise to respond quickly to change.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11

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