Manufacturers must adapt or face extinction

Cambridge, UK - Many leading manufacturers face extinction by failing to bring their production networks up to speed with 21st century demands and are also relying too heavily on short-term outsourcing and offshoring to countries such as India and China, according to a Cambridge University report

In a new guide, titled Making the Right Things in the Right Places, researchers at the University’s Institute for Manufacturing warn that "without a more systematically designed global network, even leading businesses will miss out on savings, fail to gain market share and could disappear within the space of a generation."

The publication is based on work by researchers and practitioners , who co-developed a manufacturing network strategy with several leading multinationals. It offers a set of best-practice guidelines, offering a systematic approach to the development of production networks suitable for the constantly changing nature of the global environment.

The guide urges companies to focus on what individual factories make and where production takes place and offers a blueprint for developing networks that are attuned to technology and economic trends, with emphasis on the importance of individual plants working together as a coherent network.

“Many of today’s leaders in the manufacturing sector have not managed to develop what we would call a truly effective global footprint,” said Phil Hanson, one of the practitioners behind the guide. “In many cases they have evolved over time, inheriting factories via mergers and acquisitions. The resulting legacy is a haphazard collection of plants which typically lacks global coherence and is more suited to serving yesterday’s customers than tomorrow’s.

The guide also goes on to stress that lean manufacturing and offshoring to gain access to low-cost labour, are no longer sufficient for businesses aiming to achieve global competitiveness.

"A collection of lean factories is no longer enough to deliver internationally competitive products and services," commented Paul Christodoulou, another of the report’s authors. "The real benefits in the long-term will come not from quick cost reductions, but from a systematic approach that requires learning to ride the crest of the wave in these rapidly-growing markets and establishing an early presence there."

Developing an effective set of “global behaviours”, the guide says, needs to begin with a re-evaluation of what manufacturers make and where they make it. Networks are encouraged to become “agile” – capable of shifting production to respond to unplanned market or economic changes.

The guide also stresses the need to define the role of individual factories clearly, rather than asking plants to be ‘jacks of all trades’. It argues that specialised plants built into a strategically-informed network will perform more effectively. Consideration is also given to the raising of capital, legal implications, human resources and other issues that may affect the development of flexible, global firms.

Transferring products to new sites, plant closures and plant migrations are likely to become regular features of a manufacturing business. Managers will need to become familiar with the emerging best practice in this sort of migration, according to the university experts.

Professor Mike Gregory, head of the Institute for Manufacturing, concluded: “We are on the brink of wholesale changes in the way in which global manufacturers operate and while that period of transition is potentially hazardous ... this guide offers a definition of best practice that builds on existing academic thinking and practical experience to guide them through that uncharted territory.”