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as an unchanging or change-averse business sector notable for its grease-stained, blue collar workforce and outdated heavy equipment.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
In this two-part series, we’ll take a deeper dive into a half dozen key trends transforming manufacturing, and explain how abas ERP is helping U.S. manufacturers thrive as they dynamically adapt to these trends. Far from being lost in some bygone era, U.S. manufacturing is actually ahead of the “change” curve in so many business areas. In part one, we explore three of these trends transforming U.S. manufacturing (read part 2 here):
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.
As the three trends listed above make clear, U.S. manufacturers aren’t standing still. In fact, they’re creating the future every single day in the many innovative ways they’re doing business, improving the efficiency of their people, processes, and operations. In part 2, we explore three additional trends shaping the future of U.S. manufacturing.
Want to know more about how abas ERP can help you get ahead of the trends transforming manufacturing? Schedule a time to talk to one of our demo experts by reaching out to [email protected] or find out more by downloading our white paper on "Selecting an ERP System in 7 Easy Steps" to learn more.