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CREATING A VISION FOR MANUFACTURING TO 2008

The following themes describe the business environment of 2008: con­nectivity will continue to expand, although uncertainties surrounding trust, reliability, and leverage will persist; sharing information will be the critical success factor for business in general; managing connected assets will be the critical capability for the manufacturing firm in par­ticular; and, lastly, the customer will gain market power over the next 10 years.

Connectivity will continue to expand. Over the next 10 years, glo­bal connectivity will continue to grow, enabled by open international trade policies, sustained economic growth in the U.S. and Europe, and increased decentralization of manufacturing operations. Moreover, Web-based applications, suggesting broad connectivity across firms, will be key in supply chain management.

Barriers to connectivity within and among firms center on issues of trust, reliability of information, leverage, and general cultural issues versus such issues as the accuracy of data from the Internet and whether or not Web-based systems would replace proprietary enterprise resource planning (ERP) systems.

Increased information sharing will be the critical success factor in the connected economy of 2008. The cultural changes needed to pro­mote information sharing within and among organizations ranks first as the critical success factor for the emergence of a connected economy. Next on the list is the related need for shared technical standards. Clearly, connectivity will be key, but cultural as well as technological shifts will be needed to achieve this.

The ability to manage connected assets will be the critical capabil­ity for the manufacturing firm in 2008. The critical capability for the manufacturing firm in 2008 will be the ability to manage connected assets such as relations with customers, suppliers, employees, and stra­tegic partners. Additionally, the ability to develop new products quickly and manage human capital are seen as necessary competencies.

The issue of human capital focuses attention on the importance of training, retention, knowledge management, and international labor laws. Key to the success of the manufacturing firm of 2008 will be possessing intellectual capital that understands how to leverage knowl­edge or technology into business opportunity by being connected to a network of talent and infrastructure. The need to protect intellectual property, particularly in the high tech industry, will be competitively important.

Although the sharing of information within and among organiza­tions is a critical success factor leading to a connected economy, as noted above, the risks associated with sharing information within and among firms exists due to issues of trust, reliability, and leverage. To counter such risks, new incentive structures, third-party mediation, cross-investing, and contractual agreements are among the best strate­gies.

The customer will gain market power by 2008. Finally, the cus­tomer ranked first as the key player on the value chain by industry for 2008. Manufacturers, once focused largely on internal productivity, leaving it to the market to allocate their final products, now sweat to keep up with customer demands. Gone are the days when a customer might get any color car he wanted, as long as that color, to paraphrase Henry Ford, was black. Today, for example, Caterpillar engineers go out to building sites around the world to study customers using their products. They do this to see how those products might be improved.

In short, if information is power—and product information has tra­ditionally been lacking for customers of automotive, aerospace, and process goods in particular—the customer is expected to gain ground as the information revolution unfolds. Increasing transparency in the value chain, resulting from outsourcing and overall disintermediation of manufacturing, will also allow customers to exercise more power than traditional manufacturing has allowed. Mass customization, work­ing with customers to provide them with specialized products though still at low cost, is a key strategy for addressing the rising power of the customer.

One surprising finding is that first-tier suppliers are expected to yield only moderate influence on the value chain by 2008, despite cur­rent consolidation in this area. First-tier suppliers are currently con­solidating in order to achieve the global presence and technological competencies that the OEMs require of them. Greater connectivity and dispersion by 2008 will allow for more competition and thus more diffused power among first-tier suppliers.

CREATING SCENARIOS FOR THE FUTURE OF MANUFACTURING

Despite the strong consensus that connectivity—globally and techno­logically, with customers, suppliers, and employees—will continue to grow over the next 10 years, critical uncertainties could undermine this. Political instability, cultural barriers in emerging markets, and lack of technological standards as a critical enabler of connectivity, would stall connectivity. Moreover, manufacturing firms will need to over­come traditionally adversarial relations with employees and suppliers to share information within and across firms. How, again, will they overcome issues of trust, reliability, and leverage, particularly regard­ing sensitive information?

Using connectivity and concentration as intersecting axes of a ma­trix, four alternative scenarios for manufacturing to 2008 emerged, as shown in figure 2. Taken together, these four scenarios capture more than 90 percent of possible future states, confirming the strength of this model.

Silicon Valley, a world of highly dispersed but connected agents working together in an adaptive business environment, is the most likely scenario for 2008, with a probability of 40 percent that it will occur. The next most likely scenario is Keiretsu, at 27 percent. This is a world of highly connected and highly concentrated manufacturing. This sce­nario is followed by Trench Warfare, with a probability of 14 percent, wherein highly concentrated but unconnected firms predominate. Fi­nally, Microbreweries, a world of highly dispersed, unconnected firms targeting local markets is considered the least likely scenario, yet still earned an 11 percent probability.

 

Overall, there is more certainty about connectivity than about con­centration. The upper two connected scenarios—Silicon Valley and Keiretsu—earned a probability of 67 percent. This indicates the strong likelihood of a connected economy by 2008. Less certain are the issues of concentration, as indicated by the summed total of 41 percent as­signed to the two concentrated scenarios—Keiretsu and Trench War­fare—and 51 percent assigned to the two dispersed scenarios—Silicon Valley and Microbreweries.

To Be Continued

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

Lean Manufacturing Articles and click on Series 12


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