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From the Desk of Jack Healy

Opportunities for Manufacturers…Again

By Jack Healy, Director, MassMEP

Carl Jung once said, "Man needs difficulties; they are necessary for health." If there is any truth to this statement, then you will find some of the healthiest people in the world in manufacturing! With the financial industry meltdown, the automotive industry in the tank, and the housing industry in crisis, the Massachusetts manufacturing industry will once again be given a big opportunity to improve its health.

The 2001 recession resulted in an enormous change in our manufacturing base thanks to a widespread movement to embrace productivity improvement methodologies such as lean manufacturing. Such operational improvements, combined with new, high value product introductions, pushed Massachusettss manufacturing output to grow faster than the overall economy — rising  from 10.9% of gross state product in 1997 to 13.3% of total state output in 2006.  While these numbers tell a very favorable story with respect to total output, an even more favorable story can be found in the "Value Added per Employee" numbers. 

Value Added per Employee is the best indicator we have that provides a picture of overall profitability. The results of the 2006 annual survey of manufacturers indicates that not only did our manufacturing community survive the 2001 recession, but it did so profitably. Average value added per  employee rose by almost half (46%), from $117,000 to $171,000 in just five years.

But what about today? Can such growth and profitability be achieved in response to the current downturn? How much more can we improve productivity?  How will manufacturers deal with new, industry-changing technologies (e.g. the electric car) that will soon be introduced on a large scale? Companies that are facing both economic and industry challenges without an action plan will soon find out that hope is not a solid basis for maintaining their organizations economic health.  

As reported in the press, many large manufacturing organizations are turning to "innovation" as a way to transition through the coming economic change.  This is fine for large manufacturers who have the resources to partner with universities or to acquire new technologies. However, 98% of manufacturers are small. Yet they still must figure out how to support all the innovation initiatives generated by  large manufacturers plus deal with todays economics. They will be facing sizeable challenges for improving their health. This is why the following article, by Dr. K. (Subbu) Subramanian of Saint- Gobain Co. should be of interest to every small manufacturer around.


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