Industries
Manufacturing
The impact of the opening up of the global economy on manufacturing has been drastic. The ability of foreign manufacturers to compete on cost adversely impacts the competitiveness of the manufacturing industry in the US. Entities that will survive are the ones that trim the fat via business process improvement adopting lean manufacturing principles, understanding the changes in demand, and trending away from vertical integration towards specific value-added concentrations.
Economic Conditions in Manufacturing Improving
As manufacturers are working down the excess inventories that had built up during the economic contraction, the next step is expanding overall production. And since mid 2009, consumer spending has continued to increase, which will also be augmented by a gradual pickup in jobs and earnings, the recovery in household wealth and some improvement in credit availability. This combined with stronger export demand point to the entire U.S. manufacturing sector increasing production and gaining a stronger economic foothold.
Access to Capital Markets and Debt Financing
In lieu of the abating economic crisis, access to capital for growth and development will be a key factor in the ability of a business to stay competitive. The tightening of and greater scrutiny in accounting for the credit and lending areas will increase the hurdles to acquiring debt financing. Companies will have to ensure that they maintain strong credit ratings in order to lever up their investments for growth through acquisition. Attention to the company's financial transactions even as they seek growth will be essential.
Finding Ways to Innovate
Rapidly changing technology forces companies to innovate and change or perish. As our economic system moves from producer to creator, we are driven to find new ways to spark, capture and implement innovations. Unfortunately innovation is inherently risky so its management requires a clear strategy, robust tools and techniques plus consistent oversight.
Cost of Materials and Energy
Scarcity, environmental issues and politics are driving up material and energy costs. Although we experience cycles in energy costs the trend is ever upward. Managing the costs requires understanding cost drivers and proactively investing waste elimination strategies and techniques. Increasing costs of raw materials makes it necessary to closely monitor inventory levels. Increasing energy costs make it essential to hedge risk by evaluating new alternatives and entering into purchase contracts to lock in prices.
Supply Chain Stabilities
Technological advances have led to shortened turn-around times in the movement of goods and people allowing businesses to tap into the cost-reducing power of global supply chains. Consumption increases in countries experiencing high growth and transportation advances allow demand to meet supply but not without operational risks. Highly complex problems related to transportation and logistics impact the power of the supply chain and thus impact success. Risks include disruptions in supply chains, inventory and schedules. Companies must have a thorough knowledge and control of their business processes and technology infrastructure in order to manage risks wisely. Optimization models are a proven management tool to evaluate and understand the sensitivity of risks.
Outsourcing
While outsourcing is a great strategy to keep costs down, it increases risks owing to uncontrolled dependencies. In addition, off-shore outsourcing has increased dependencies on the various stakeholders connected to global supply chains which depend on the operational efficiencies of other entities. A review of the operational process with attention to inventory management and systems compatibility between the outsourcer and the hired firm are keys to managing this risk. In the global marketplace optimization models can incorporate complex variables to improve sensitivity and reliability.
Lean Manufacturing
Studies have shown that the costs in most companies are between 50% and 70% non-value added. If you can eliminate the non-value added cost then you can immediately improve your bottom line. Plus it will bring greater value to your customers and win greater market share. Constant review of operational and financial management is critical to undertaking improvements that eliminate waste. Unfortunately not all non-value added cost is equal just as there are different definitions for value. Lean will drive companies to eliminate the costs that are not directly related to creating and producing products. Management must understand and support the other components of value that create the culture of success within the company.
How Can MorganFranklin Help?
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