Survey Results: The Keys to Next Generation Manufacturing Success
Massachusetts’ economic recovery depends on the ability of its manufacturers to maintain profitability in the face of fierce competition. Manufacturing remains the state’s largest industry in terms of gross state product, accounting for more than 13 percent of state GDP.
Next Generation Manufacturing (NGM) refers to a framework of strategies that will drive manufacturing growth in the 21st century. Developed by leading manufacturers, industry thought leaders and the MEP centers, Next Generation Manufacturing reflects the best practices and performance strategies of world class companies. To remain competitive, manufacturers in Massachusetts and across the country need to achieve world-class performance in at least some of these key areas. The study identifies six essential strategies:
Customer-focused innovation:Deliver new and better customer solutions at a faster pace than the competition.
Advanced talent management:Secure a competitive performance advantage by having superior systems in place to recruit, hire, develop, and retain talent.
Systemic continuous improvement:Record annual productivity and quality gains that exceed the competition through a companywide commitment to continuous improvement.
Extended enterprise management:Leverage a flexible network of supply chains and partnerships to provide competitive advantages of speed, cost, and quality.
Sustainable product and process development: Design and implement waste and energy-use reductions at a level that provides superior cost performance and recognizable customer value.
Global engagement: Secure business advantages through people, partnerships, and systems capable of engaging global markets, talent, and resources.
The survey administered to the initial 2,500 companies nationwide employed 63 questions to drill down and measure each firm’s progress, or lack of progress, in implementing strategies in these six essential areas.
Sobering Findings
A serious gap exists between the strategies that Massachusetts and US manufacturers believe are critical to their future success and their actual progress in implementing those strategies. Currently, only a fraction of Massachusetts manufacturers are at or near world-class in any of the six NGM strategies.
Small and midsize manufacturers are less likely than larger firms to be at or near world-class status in each of the NGM strategies. One-third of respondents nationwide with less than $10 million in revenue were not at or near world-class in any strategy, compared to just 14% of manufacturers with more than $100 million in revenue.
Measurement systems are inadequately deployed. Even in one of the most fundamental and easiest-to-measure areas – process improvement – 46% of respondents across the country and 56% of respondents in Massachusetts had no measurement system or only ad hoc measurement systems.
Effective partnerships with employees, suppliers, and regional support organizations are the exception rather than the norm. Nationwide, a majority of respondents (56%) engage less than half of their employees in improvement initiatives, falling far short of industry best practices that require company-wide participation. In Massachusetts the results were modestly better, but 40% of respondents still engage less than half of their employees.
In Massachusetts and across the nation approximately 40% of companies fail to reach or approach world-class status in the ability of their supply chains to respond to unexpected customer demand for existing products. In part this is due to the failure of companies to implement supply-chain measurement systems. More than 63% of Massachusetts firms said that they have no measurement system or only ad hoc measurement systems in place to review the return from supply chain management and collaboration.
Energy efficiency remains a weak link. Less than five percent of New England firms are at or near world-class status in terms of annual reduction of energy consumption per unit of product output.
Only 28% of respondents nationwide and 38% of firms in Massachusetts believe global engagement is highly important, despite a near-term future in which markets, talent, competitors, and partner opportunities are growing faster outside the US than within its borders.
New England’s Strength: Advanced Manufacturing
The survey data reveal a sobering picture of the challenges facing American manufacturers. But the report highlights an important distinction that characterizes New England manufacturers in general and Massachusetts manufacturing sector in particular. New England possesses a robust advanced manufacturing cluster that distinguishes itself from manufacturers nationwide in some very notable ways.
New England manufacturers devote more resources to new product development and R&D than their counterparts nationwide.
23.8% of New England manufacturers invest more than 10% of sales in new product development versus 14.6% of firms nationwide.
48.9% of New England manufacturers dedicate more than 5% of their workforce to new product development versus 34.6% of firms nationwide.
New England manufacturers launch significantly more new products annually than their counterparts nationally (23.5% of New England manufacturers launch more than 10% of their total SKUs annually versus 15.7% nationally.)
New England manufacturers derive a significantly larger percentage of annual sales from new products than their counterparts nationally (33.7% of New England manufacturers derive at least one-quarter of their annual sales from products introduced in the last three years versus 24.8% of manufacturers nationally.)
New England manufacturers derive significantly more value-added per employee than their counterparts nationwide, with 34.9% of New England respondents reporting that they receive more than $125,000 per employee versus 28.0% nationwide achieving that level of value-added.
These findings confirm the results of another recent study on manufacturing conducted by Deloitte Consulting LLP for the New England Council, which found that New England enjoys a strong cluster of advanced manufacturers whose productivity improvements have been transformational. That report, Reexamining Advanced Manufacturing in a Networked World: Prospects for a Resurgence in New England, noted that “advanced manufacturing has reversed the decline associated with traditional manufacturing in New England by developing a talent-rich network of advanced manufacturers with skilled workforces capable of creating complex product solutions.
“While New England manufacturers clearly out-perform their counterparts nationally in terms of developing new products and gaining a higher value-add from each employee, the Next Generation Manufacturing study clearly shows how far many manufacturers still have to go to reach world-class status,” said MassMEP Director Healy. “In many strategic areas our state’s firms are just as challenged as manufacturers nationwide and need to take major steps to improve their performance or else risk being left behind by the global competition. New England’s economic future will be determined by how the region’s manufacturers respond to this challenge.”
What Manufacturers are Saying about the Value of the Survey
The Next General Manufacturing Study was designed to serve two purposes. As the first national survey of world-class manufacturers, it provides valuable data about what America’s most successful manufacturers are doing to succeed in a competitive global environment. This overview is important for all those who care about the future of manufacturing in the U.S.
But the survey serves a second equally important function. It was designed to help individual firms participating in the study evaluate their own operations and establish performance benchmarks. It highlights how each firm measures up in comparison to its peers and assesses the progress, or lack of progress, a firm has made in implementing the key benchmarks of each strategy required to achieve next generation manufacturing success.
Manufacturers who participated in the survey were quick to acclaim its value. But it’s not too late for other manufacturers to seize the opportunity and utilize the assessment tool and survey findings. Project managers from the Massachusetts MEP can assist manufacturers in performing a similar assessment. Building on those findings, MEP project managers can help firms implement the Next Generation Manufacturing strategies that can transform the way firms operate.
For more information, on how to establish appropriate benchmarks, implement NGM strategies and measure the results, contact the Massachusetts MEP office at (781) 376-0028.
Here are some of the comments offered by New England manufacturers who participated in the survey:
"For manufacturers willing to develop the leadership and workforce related skills necessary to take the lead with innovative new products and services, this NGM report offered a clear and direct roadmap for the future of manufacturing. Executing these Next Generation Strategies will clearly position our manufacturing base here in Massachusetts to emerge strong and profitable when the recovery gains momentum." David Morgan General Manager, Perkins Products of Perkins School for the Blind.
“As a contract manufacturer of electronic equipment in homeland security, medical, defense, semiconductor, and other industries, this survey provided pertinent information that will help us benchmark some areas in our company that we may need to improve to stay competitive. It has also been helpful for us to see the areas in our business where we are leaders in the industry. This allows us to market our company around our strengths, while we focus on improving our weaknesses. We have never filled out or been involved in a survey so extensive and detailed that really focused on benchmarking many different industries in the manufacturing arena. It has been a useful tool that we will use for reference and hope to be involved in any future follow-up Next Generation studies.” David Metzemaekers Director of Operations, Scott Electronics, Inc., Salem, NH
“The NGMS not only provides a great benchmark for manufacturing across the nation but it also allows a company to compare itself against other local manufacturers. It can be used as a tool to put together an improvement plan that spans all functions of a company and helps it better compete in today’s global environment.” Mark Godfrey Chairman, Felton Brush, Inc., Londonderry, NH
“The NGMS is probably the most exhaustive and detailed study of the US manufacturing base ever conducted. In today’s climate of globalization and the threat of lost manufacturing jobs, it’s important to know where the US stands as a player in the international market. The study was also illustrative for Graphicast, as it highlighted where we stand compared to the over 1,000 companies that responded to the study. This information gives us a clear path to follow to achieve world class status in technology and service.” Val Zanchuk President, Graphicast, Jaffrey, NH
“This ground-breaking report provides an amazingly detailed assessment of what Maine manufacturers must do to achieve world-class manufacturing standards. Participating in the survey helped my firm identify key priorities and illustrate where our implementation fell short of our goals.” Bruce Pulkkinen President, Windham Millworks, Windham, ME
“The NGM survey was a must-do for manufacturers. Just filling out the survey was a learning experience. It challenged management to think outside the box and look at manufacturing from different perspectives. As general manager of a small manufacturer in western Maine that distributes products throughout the United States and 38 foreign countries, I appreciated the wealth of information that this survey generated for our company. It’s helping us identify changes that we look forward to implementing.” LoLisa Windover General Manager, Winderosa Gasket, Dixfield, ME
For a copy of the full report, Next Generation Manufacturing Study: Overview and Findings, please visit the Mass MEP Web site at www.massmep.org.
Sobering Findings