I had the opportunity to present at IndustryWeek’s Manufacturing & Technology (M&T) Conference in Pittsburgh in early April and came away impressed. This was the first time I had attended this annual event, and I’m kicking myself for not getting there before this year. I sat in on several presentations and came away more fully informed on many issues affecting manufacturing and supply chain. In addition, there were a multitude of manufacturer booths that opened my eyes on newly introduced products that will likely play a role in future supply chain work, both from supplier and customer points of view.
I thought two presentations were particularly timely (and one of them’s not even mine!).
U.S. Trade and Tariffs: An Insider's Guide to the Current Trade Environment
I have written a lot recently on tariffs, and thought I was pretty well-versed on the history of how they’ve been used and the impacts they have had (and are having) on the world’s economy. I can only say after attending this presentation by Jeffrey Watson, CEO of Sourcing Systems International, I was thoroughly schooled.
Here are some points that Mr. Watson made in his talk:
The basic question regarding tariffs is whether having a negative trade balance is beneficial or detrimental. Arguments can be made in support of both sides.
On the positive side, most economists actually believe that overall,having a negative trade balance benefits the U.S. economy, contending that they drive our standing as the world’s reserve currency—a big deal—and that for most the most part, our trading partners invest their trade surpluses back in the U.S. economy, creating job growth. And that as long as they remain relatively low as a percentage of our country’s GNP—4% today—they are not a major threat to our country’s economic health.
On the negative side, some economists believe that trade deposits result in lost jobs and lower wages. And it is true that data shows that trade deposits correlate directly to job losses. And that wages the jobs that remain have not kept up with inflation, reducing worker standards of living.
Watson cites statistics that show unemployment is at an all-time low, while wage gains are still lagging. He also points out that while job losses are real, the vast majority of them are due to technology and improved productivity; i.e., the U.S. manufactures more than twice the amount of goods it did in 1984 but with 33% fewer workers. And that while some sectors of the U.S. economy have lost jobs—for instance, basic manufacturing—others, such as those related to technology, have seen steep increases in employment.
He also provided background on Section 232 of the National Security Clause portion of the 1962 Trade Expansion Act, which designates and outlines the president’s authority to impose tariffs. This clause was inserted because of fear at that time that there might not not be enough jet fuel should war break out with the Soviet Union; i.e., the intent of this Section was to actually initially give the president broad powers to cut tariffs.
Build to Demand: The Lean End Game
Sorry, I couldn’t help myself in highlighting a presentation I gave because it relates to the IndustryWeek supply chain initiative that I’m involved in.
Here are some of the main points I shared:
Supply management should have a goal of delivering lean supply chain performance to buying organizations within the framework that they are not a customer, but rather a link in the overall supply chain involved in producing a product or service to a final use customer.
Business has always been based on the concept of balancing supply and demand, and the most successful companies are those that can hit their customer fill rate goals with a minimum of waste; i.e., Build-to-Demand. Because of this, businesses should then focus on order fulfillment and the time it takes from getting an order to the time a customer pays for it.
The practice of lean needs to evolve to support this business reality. Specifically, lean projects should be prioritized on how improvements with impact a product’s “true” lead time, i.e. translating and including the various forms of waste as a time element. It also requires that the definition of the lean end game be adjusted such that it, too, is tied to order fulfillment.
Lean today is expressed as a “never ending journey”. The goal of business is to develop competitive advantages. Consequently all projects and initiatives, including lean, should be viewed in those terms. To reflect this reality, lean goals should be based on delivering an organization a measurable and quantifiable competitive advantage. And when this happens, a company should be seen as having attained a lean state.
Since competitive advantages are generally temporary, this definition of lean does not imply an absolute goal but one that is maintained until the competition improves to match a company’s current capability. After that, a company is no longer considered lean and to regain their lean-ness needs additional waste elimination to create a new competitive order fulfillment advantage.
This was the first year of a supply chain track at the M & T Conference, and it got off to a great start. If you are interested in topics like those referenced above, I’d highly recommend attending next year’s conference in Orlando. I’d like to thanks the folks at Dassault Industries for sponsoring our track.
Paul Ericksen is IndustryWeek’s supply chain advisor. He has 38 years of experience in industry, primarily in supply management at two large original equipment manufacturers.
