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Less than two in five (39.9 percent) U.S. manufacturing executives are very confident they can increase revenue enough to maintain or improve their position in the global marketplace over the next three years with their current resources, according to a new study released by Capgemini.
The study showed that manufacturing performance may also be compromised by the fact that very few, less than 20 percent, of the 273 respondents consider their companies to be world class in the revenue generating areas of product innovation, operational excellence and customer retention. As a result, manufacturers are considering a host of initiatives for growth, with the most popular being:
1. Implementing continuous improvement practices outside of production (56.5 percent of respondents are considering this strategy)
2. Increasing training (49 percent are considering)
3. Making larger investments in capital assets (38.3 percent)
4. Outsourcing some current functions (32.4 percent)
5. Hiring more people (32 percent)
6. Seeking mergers and/or acquisitions (28.5 percent)
As our study clearly shows two thirds or 67 percent, of the most often cited strategies for improving performance and growth relate to people management, according to Gary Baldwin, Vice President and North American Manufacturing Industry Leader for Capgemini. Manufacturers are considering multiple and complex strategies, but for many companies, the real solution can be much more straightforward. In fact, using a single strategy partnering with external companies with deep industry knowledge and world class resources can enable manufacturers to address the diverse set of challenges they've identified in people management. Indeed, an experienced and trusted third party provider can help manufacturers meet the people management challenges unique to their industries, but will also provide the types of resources they need to meet their revenue targets and achieve sustained business growth into the next decade.
The Capgemini study, Leading Through Growth, was conducted in May 2007 by IndustryWeek Custom Research and included respondents restricted to the job titles of CEO, COO, President, CIO, CFO and CMO. Among the other top-line findings from this inaugural report:
1. Very small percentages of the surveyed executives believe their companies are world class in product innovation (18 percent), operational excellence (14 percent) and customer retention (21 percent).
2. In each of these critical growth areas, the respondents say they could strengthen their positions by knowing more about their customers.
3. Less than half (39.9 percent) of manufacturing executives are very confident they can increase revenues enough to maintain or improve their current market position over the next three years with their current resources.
4. A higher percentage, but still less than half (47.6 percent), of the executives are very confident they can adequately address the challenges their companies face in the coming year including such issues as rising costs, increased competition, escalating customer demands and shortage of skilled workers.
5. Two thirds (67.8 percent) of U.S. manufacturing executives say the biggest challenges to customer attraction and retention are increased demands imposed by customers and global competition.
Executives overwhelmingly say they would reinvest cost savings in the business to improve their ability to deliver in changing market conditions. Specifically, they would:
1. Buy new machinery (53.4 percent)
2. Improve processes (45.8 percent)
3. Create new products (30 percent)
4. Improve product innovation (24.5 percent)
5. Build new plants (20.9 percent)
Baldwin said among the myriad challenges that manufacturers face, the most critical issue for virtually all manufacturers is managing customer relationships. Most U.S. executives believe more knowledge of their customers' needs would make them more successful, but U.S. manufacturers admit they don't know their customers well enough. This lack of customer intimacy hampers product innovation, lifecycle management, and time to market.
To improve their customer relations and overall operations to world-class levels, manufacturers can no longer afford to do it alone, Baldwin said. Instead, manufacturers should aggressively pursue outside parties with which they can work collaboratively to achieve long-term, world-class business growth and profitability.
"By collaborating with trusted partners with deep industry experience and the willingness and capability to have a stake in the relationship, manufacturers throughout the United States can reclaim their heritage as world-class manufacturing leaders," he said.
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