Manufacturers lay out blueprint for industrial success

Making the Right Things in the Right Places, which is launched by Cambridge University today, also warns that many firms are relying too heavily on short-term outsourcing and offshoring to countries such as India and China.

Without a more systematically designed global “footprint” or network, it says, even leading businesses will miss out on savings, fail to gain market share and could disappear within the space of a generation.

The new guide is the result of over a decade's work by researchers and practitioners in the University's Institute for Manufacturing, who co-developed a manufacturing network strategy with several leading multinational firms. It provides a set of best-practice guidelines, offering a systematic approach to the development of production networks suitable for 21st century markets. The constantly changing nature of the global environment means that it is essential these issues are continually addressed and adapted to meet evolving circumstances, it maintains.

“The few that get this right could be leaders for a generation,” the guide adds. “Those that get it wrong will likely fade from view, or be swallowed up in ongoing industry consolidation.”

The main aims of the guide are to show companies why and how manufacturing networks should change. It urges them to focus on what individual factories make and where production takes place, and lays out a blueprint for the development of networks that are attuned to technological developments and economic change. The importance of individual plants working together as a coherent network is also stressed.

“Many of today's leaders in the manufacturing sector have not managed to develop what we would call a truly effective global footprint,” Phil Hanson, one of the practitioners behind the guide, said.

“In many cases they have evolved over time, inheriting factories via mergers and acquisitions. The resulting legacy is a haphazard collection of plants which typically lacks global coherence and is more suited to serving yesterday's customers than tomorrow's.

“The potential savings that would spring from rectifying that are breathtaking – indeed, some estimates have shown that it could cut landed costs by a third.”

In particular, the guide stresses that lean manufacturing and “offshoring” practices, to gain access to low-cost labour, are no longer sufficient for businesses aiming to achieve global competitiveness.

“A collection of lean factories is no longer enough to deliver internationally competitive products and services,” Paul Christodoulou, another of the report's authors said. “The real benefits in the long-term will come not from quick cost reductions, but from a systematic approach that requires learning to ride the crest of the wave in these rapidly-growing markets and establishing an early presence there.”

Developing an effective set of “global behaviours”, the guide says, needs to begin with a re-evaluation of what manufacturers make and where they make it. Networks are encouraged to become “agile” – capable of shifting production to respond to unplanned market or economic changes.

The guide also stresses the need to define the role of individual factories clearly, rather than asking plants to be ‘jacks of all trades'. It argues that specialised plants built into a strategically-informed network will perform more effectively. Consideration is also given to the raising of capital, legal implications, human resources and other issues that may affect the development of flexible, global firms.

“Transferring products to new sites, plant closures and plant migrations are likely to become regular features of a manufacturing business,” it adds. “Managers will need to become familiar with the emerging best practice in this sort of migration.”

Professor Mike Gregory, Head of the Institute for Manufacturing, said: “Most companies have acknowledged the need to reconfigure global manufacturing but until now there has been no single, coherent approach to doing so.

“We are on the brink of wholesale changes in the way in which global manufacturers operate and while that period of transition is potentially hazardous, the potential benefits are breathtaking. For the first time, this guide offers a definition of best practice that builds on existing academic thinking and practical experience to guide them through that uncharted territory.”