What are the major trends transforming manufacturing in the U.S? Conventional wisdom, as reflected in much of the U.S. news media, seems to view manufacturing as an unchanging or change-averse business sector notable for its grease-stained, blue collar workforce and outdated heavy equipment. This stigmatizing (and utterly mistaken) perception often positions U.S. manufacturing as stuck in some bygone era, akin to an old machine left out in the rain. Nothing could be further from the truth.
In fact, U.S. manufacturing is being transformed and disrupted by precisely the same forces transforming the rest of the business landscape: the evolution of digital technology, globalized logistics and partnerships, and an accelerating need for organizational agility.
5.7 million manufacturing jobs were shed between 2000 and 2010, yet overall manufacturing productivity boomed at the same time
Far from being lost in some bygone era, U.S. manufacturing is actually ahead of the “change” curve in so many business areas. In this post, we explore six of these trends transforming U.S. manufacturing:
Manufacturing Trend #1: More automation, less labor
This trend has profoundly impacted the entire global economy, but it’s especially pronounced in U.S. manufacturing. Productivity in manufacturing has steadily increased because of the growing use of machines and, especially, computers/digital technology. Generally, the U.S. industries that have prospered in the past decade have been those where the most automation has been deployed and where the level of technology is highest. Manufacturing output per hour between 2007 and 2016 increased by 15%, while the number of workers dropped dramatically. The Brookings Institute says that 5.7 million manufacturing jobs were shed between 2000 and 2010, yet overall manufacturing productivity boomed at the same time. These trends have transformed not just back office/administrative functions, but operational/production areas too.
How is ERP playing an important role here? ERP automates and optimizes business functions and activities that were previously done manually (with higher costs and more errors). For example, you can lose business fast if you promise a customer a fast turnaround time but then fail to deliver on schedule. Having an Advanced Planning and Scheduling (APS) system, such as the one abas ERP offers, can keep you and your customers happy.
As a previous abas USA post explains, APS systems “run simulations that provide real-time expected completion dates based off of current workload, system-populated item master data (e.g., run times, set-up times, batch sizes, and routing preferences) and capacity data (e.g., number of shifts, number of hours per shift, work center schedule, work center throughput, work center staff allocation, worker performance).” That’s an efficient, cost-saving way to do what your promised your customers by using automation.
By outsourcing or leasing, U.S. manufacturers have been better able to focus their resources on differentiators and core competencies, allowing them to strengthen their competitive advantages.
Manufacturing Trend #2: More outsourcing and leasing
All manufacturers need to do more with less. They’re constantly seeking ways to increase operational efficiency by concentrating resources on primary production and marketing functions, their core business. As part of this ongoing “efficiency push,” many U.S. manufacturers have outsourced non-core functions and services they previously did in-house, such as parts manufacture, maintenance, payroll services, and benefits management. The results have been cost savings, increased competitiveness, more efficiency, and an enhanced capacity to focus on their core business. By outsourcing or leasing, U.S. manufacturers have been better able to focus their resources on differentiators and core competencies, allowing them to strengthen their competitive advantages.
Let’s look at an example. As product life cycles get shorter, building proprietary assembly lines becomes less practical, more costly, and time consuming. Contract manufacturers have stepped in to enable some companies to operate without owning any brick-and-mortar factories. In addition, many U.S. manufacturers have increased the efficiency of their assets by leasing, rather than owning, various equipment and facilities.
Cloud ERP has been part of this efficiency drive. Manufacturers are outsourcing their IT to the cloud, which has benefited them greatly. U.S. manufacturers can now conduct IT with fewer in-house resources and less on-site infrastructure.
As a previous abas USA post explains, “With on-premise ERP solutions, businesses need to invest heavily in hardware and an IT team capable of maintaining and updating it. Cloud ERP makes your life easier by moving systems and resources off site, where experts make sure your infrastructure is sized properly, backed up, upgraded, and maintained.” A cloud ERP solution reduces a manufacturer’s need for labor, cuts costs, frees up physical space, and allows you to focus on operational/production excellence (which is your core business, after all).
Manufacturing Trend #3: More services
The increased level of technology integrated into so many machines and products, especially as IoT evolves, enables so many benefits (as described above), yet also requires more complicated support. Getting the support you need to keep your business running at optimal efficiency is thus becoming more essential. It doesn’t matter whether that support looks like training, maintenance, operations, and/or services — you need it to be fast and reliable and customized to your needs.
Being agile means everything for U.S. manufacturers, and your service providers must be expert partners helping you stay up to date as you move forward
A growing number of companies, like IBM for example, actually sell more services related to their products than they do the products themselves. This “service trend” is growing right along with the large-scale use of computers in manufacturing, which is, of course, no accident. Think of service as an enabler of greater efficiency for your people, processes, and technology. Like any other asset, you’ll need great support to maintain and upgrade what you do.
More service may represent a cost, but it also represents an ongoing opportunity to get the most from your people, tools, and systems. Being agile means everything for U.S. manufacturers, and your service providers must be expert partners helping you stay up to date as you move forward.
ERP is a key place where this service trend is playing out, with manufacturers partnering with ERP vendors for more than just software. The best ERP vendors help businesses analyze and improve, making the most of their ERP systems as well as helping them automate, digitize, mobilize and modernize their facilities, reporting and processes.
Manufacturing Trend #4: Globalized Manufacturing
Improved technology and streamlined global logistics/supply chains have untethered U.S. manufacturing from the limitations of geography. If you can find customers or suppliers down the block in Indianapolis, there’s no reason you can’t find customers or suppliers in India or anywhere else around the globe. Moving information and products from one place to another has never been easier, faster, or cheaper than it is today.
If you have competitive advantage, it’s now easy for customers to find you and work with you.
The emergence of international logistics networks means that U.S. manufacturers can now efficiently deliver or source raw materials and finished products to and from anywhere around the world. This trend has vastly increased the reach and economic opportunities of U.S. manufacturers (and international competitors too). If you have competitive advantage, it’s now easy for customers to find you and work with you.
Among other things, globalized logistics has meant that U.S. manufacturers in labor-intensive industries such as apparel can now have most of their production facilities abroad. Factories are frequently located in other countries for reasons related to tax, labor costs, or politics, rather than proximity to raw materials or markets, as was once the case. In an age of digital technology and global logistics, geography is no longer a limitation for U.S. manufacturing.
How is cloud ERP helping? U.S. manufacturers that have a global reach – whether they produce, procure or sell abroad – require a more advanced ERP system that can easily manage multi-site functionality, which abas ERP enables. Cloud ERP is a huge advantage for global companies because it makes the syncing of data so much easier. As a previous abas USA post explains it, “Cloud ERP solutions provide real-time data availability over a widely dispersed network. No matter how many locations you have, users can all access the same system running in the cloud from their web browser or mobile device. And with Cloud ERP, multi-location deployment is easier too. You can deploy your application in multiple regions around the world with just a few clicks.”
Manufacturing Trend #5: More Strategic Partnerships, Globally
Manufacturing is complicated, from sourcing parts, to production, distribution and much more. In order to be optimally efficient on a global scale, U.S. manufacturers have increasingly looked to partner and ally internationally. In some cases, global partners produce components for the U.S. manufacturer’s production process. In others cases, an international partner may make the product while the U.S. partner manages distribution, design, and other important functions. Some global partners might even offer distribution. The possible business relationships enabled globally by technology and logistics are massive.
U.S. manufacturing firms are leveraging global strategic partnerships in order to do what they do better
Relationships between manufacturers and their suppliers can also take the form of alliances, which may require strong integration of information systems and regular production consultations. Many large U.S. manufacturers now hold “strategic stakes” in smaller companies, some of them abroad, that are developing new products or markets, enabling U.S. manufacturers to essentially farm out their R&D efforts. No matter the form and focus of these global strategic partnerships (they can be quite complex), U.S. manufacturing firms are leveraging these relationships in order to do what they do better while expanding their global reach and revenues.
How does abas ERP help? It’s a means to integrate key business processes into one system for better management and more efficient operations no matter where you do business, or with whom. A U.S. manufacturer with global reach and relationships simply can’t work without a good ERP system to manage and coordinate operations efficiently at multiple global locations. Needless to say, each geographic location will have different requirements and local needs for compliance, and many other strategic concerns. abas ERP can support all this complexity while allowing a tighter connection not just within a U.S. manufacturer with global locations but also between U.S. manufacturers and their strategic partners within global supply networks. Having the agility and capacity for global integration of data, internally and with your strategic partners/allies, is essential for any global outreach.
Manufacturing Trend #6: Reshoring U.S. Manufacturing Jobs
Jobs that once flowed out of the U.S. are now flowing back in. Rising wages in the developing world and some of the compliance-related complications of global supply chains have caused some U.S. manufacturers to consider bringing back jobs that had previously been outsourced. One eye-opening data point will illustrate this reshoring trend: In 2016, US manufacturing jobs created by reshoring and foreign direct investment surpassed the number of jobs that were offshored, according to the Reshoring Initiative. More jobs are coming in than going out.Between 2004 and 2016, China’s manufacturing cost advantage over the US fell from 14% to about 1%
Many of the reshored jobs are coming back from China, where wages and compliance complexities are increasing rapidly, making that Asian giant less competitive on labor costs, according to Trade and Industry Development. Between 2004 and 2016, China’s manufacturing cost advantage over the US fell from 14% to about 1%, according to the Boston Consulting Group.
Of course, the manufacturing jobs that left the U.S. in the 1990s are not the same manufacturing jobs being reshored today. As we’ve seen throughout this post, U.S. manufacturers are far more digital today, more custom, more modern, and more connected to the global economy than ever.
U.S. manufacturers inhabit a business landscape of change and uncertainty. Because of that, today’s U.S. manufacturer needs a modern ERP system to provide them with the business agility they need to succeed. A modern ERP system works and integrates efficiently with IoT, robotics, mobile apps, business process management, global logistics, and international strategic partners. All of that gets enabled by abas ERP.
What’s clearest from the 6 manufacturing trends we’ve covered is that U.S. manufacturers can’t succeed without a digital platform that supports agility. Whether it’s globalization or technology, U.S. manufacturers need to be ready to take advantage of the emerging trends of today and tomorrow. Thriving in manufacturing today takes being proactive rather than reactive, standing on the front foot, not the back foot. Cloud ERP enables just that kind of necessary agility.
