Two hundred years ago, agriculture employed 90 percent of Americans, but today employs just 3 percent. Agriculture did not, however, go away. It became industrialized, which increased productivity and enabled a general economic shift toward manufacturing. In the present information revolution, manufacturing employment has dropped from 40 percent of the total U.S. workforce in 1950 to less than 15 percent today. Services now lead the economy. Again, manufacturing is not going away. It is becoming "informationalized." And these trends span Western Europe and Japan as well.
How will these trends affect manufacturing firms, particularly in the automotive, aerospace, high tech, and process/energy industries? Critical assets such as relationships with suppliers, customers, and employees will edge out traditional owned assets as a core source of value for manufacturing firms. The rise in importance of such nonowned or connected assets will revolutionize manufacturing.
In this world of connected assets, innovation will greatly accelerate. A firm's main competitor will be the business life cycle itself. Rather than invest in a broad array of physical assets, manufacturing firms will outsource more production beyond the traditional factory to networks of suppliers. Manufacturing firms will also harness information technologies throughout the value chain to enable real-time collaboration and innovation among customers, suppliers, and employees. Such strategies will not just reduce costs, they will allow firms to reach broader markets more rapidly and effectively than traditional manufacturing allows.
Fifteen years ago, the general pattern of manufacturing in industrialized countries was 20 percent produced outside the company, 20 percent produced outside the country. Today, those figures are closer to 80 percent produced out of company, 80 percent out of country. Clearly, we are rapidly entering this world of connected assets.
Two critical uncertainties, however, persist as to where the economy is heading. These center on connectivity and concentration. For connectivity, continued expansion of networks among customers, suppliers, and employees is expected, but issues of trust, reliability, and leverage will need to be overcome within and between firms. To overcome such barriers, new incentive structures, third-party mediation, cross-investing, and contractual agreements are among the most promising strategies.
From these two uncertainties emerged four alternative scenarios for the future of manufacturing to 2008, depicted in figure 1. Taken together, these four scenarios captured more than 90 percent of possible future states, confirming the overall strength of this model. The most likely scenario is "Silicon Valley," a world of highly connected, highly dispersed firms. Next most likely is "Keiretsu," a world of highly connected, highly concentrated firms. Third is "Trench Warfare," wherein highly concentrated, highly unconnected firms predominate. And least likely is "Microbreweries," comprised of highly dispersed, highly unconnected firms. Note that the two most likely scenarios are in a connected world.
Our findings indicate that all four industries examined here are moving toward greater connectivity and greater dispersion by 2008. The automotive, aerospace, and process/energy industries are all today in an unconnected, concentrated world much like Trench Warfare, and are expected to be in a connected world by 2008, though with varying degrees of concentration. Only high tech, which largely drives the information economy, is today in a highly connected, highly dispersed Silicon-Valley-like world and is expected to be even more connected and more dispersed by 2008.
The best strategies for each industry to pursue address the growing importance of connected assets. These strategies focus on
•customers by including them in real-time customization and by sub stantially increasing marketing investment to strengthen global brand name
•suppliers by integrating them in manufacturing operations and new product development and by investing in new processes to reduce coordination costs
•new "informationalized" manufactured goods that bundle services
To Be Continued
For balance of this article, click on the below link:
Need help in bringing this training to your company, may I
suggest that you forward this Web page to your leader. If you do,
we'll send you our Power-Point presentation, "7-Rules for Surviving in an Entirely New Economy."
To open the
"Forward to" form:
To stay current on Lean Management Basics and
Best Practices, subscribe to our weekly MBBP Bulletin... and we'll send you
presentation, "Introduction to Kaizen Based Lean Manufacturing™." All at no cost of course.
personal information will never
be disclosed to any third party.
what one of our 13,000 plus subscribers
wrote about the MBBP Newsletter:
"Great manufacturing articles. Thanks for the insights. I often share portions of your articles
with my staff and they too enjoy them and fine aspects where they can
integrate points into their individual areas of responsibilities. Thanks
Kerry B. Stephenson. President. KALCO
to Basics" Training for anyone ... anywhere ... anytime
6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596