Value-Chain Report -- Next Generation Manufacturing

Although a great deal of attention related to supply-chain operations tends to be centered on eProcurement, B2B marketplaces, real time visibility, and similar issues, manufacturing's potential contribution to supply-chain effectiveness is often overlooked. Yet, for manufacturing firms and their trading partners, manufacturing operations can create an enormous opportunity for competitive advantage. According to Forrester Research, many companies it has surveyed "increasingly manufacture products all over the world. Although firms benefit from this trend, most far-flung manufacturing operations can't respond to demand swings -- nor do they have the communications infrastructure to coordinate production." The result is reduced responsiveness, greater inventory investment, and lower customer service. However, manufacturing's role in the connected supply chain is gaining attention. Leading firms are recognizing that increasing flexibility and responsiveness in their extended manufacturing network, including internal and external production facilities, allows them to leverage gains already made or in progress in other areas, such as planning, sourcing, and logistics. Evolution of Manufacturing During the last few decades, we have witnessed several major shifts in the emphasis and focus of manufacturing activities. From the early part of the 20th century through the mid-1970s -- the era of mass production -- manufacturing's focus was centered on cost reduction, efficiency, and scale. During the late 1970s and throughout the 1980s, this focus had shifted to the principles of TQM, which emphasized quality and continuous improvement through product design and process control. U.S. manufacturers were facing increased competitive pressures from offshore producers, particularly the Japanese car and consumer-electronics companies, who had begun to focus on quality much earlier. Improved quality, when added to production efficiency, provided a competitive edge. As the quality landscape leveled, manufacturing's focus again shifted in the late 1980s and 1990s toward streamlined production. It emphasized JIT, kanban, lean manufacturing, and similar processes. Again learning from Toyota, Canon, Sony, and other international competitors, global manufacturers adopted methods and systems that supported the principles of elimination of waste. Lean capabilities, when added to quality and cost effectiveness, raised the competitive bar again. Current Manufacturing Approaches Still Fall Short In spite of all the gains made during the evolution from mass production to lean-manufacturing principles, current manufacturing capabilities have significant shortcomings that need to be addressed if significant further progress is to be achieved. Lack of flexibility and inadequate information systems are frequently cited as significant barriers to achieving manufacturing responsiveness and true flexibility. In a July 2000 survey Manufacturing Deconstructed, Forrester Research noted that 74% of the global manufacturers participating in their survey "noted that inconsistent production systems and equipment make it impractical to transfer production from one plant to another." In the same report, 62% of the global manufacturers interviewed cited poor visibility or poor communications within the supply chain as their biggest problems related to flexibility and responsiveness. Global manufacturing companies and their extended supply-chain networks are facing increasingly intense competitive pressures. Traditional manufacturing operations are being challenged to transform to a more responsive and dynamic execution model. Next Generation Manufacturing As it already has for many other supply-chain processes, the Internet is creating an environment that will enable the next generation of manufacturing capabilities. Cap Gemini Ernst & Young (CGEY) believes that next generation manufacturing, which it terms Adaptive Manufacturing, will focus on: