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Competing in the Global Economy: Lessons for Midwest Manufacturers
by Karl L. Buschmann |
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The 2004 Global Manufacturing Series presented actionable and practical strategies for small and medium-sized manufacturers (SMMs) confronted with a competitive global economy. Case presenters emphasized that new ideas, fresh vision, and a willingness to let go of the past are the primary requirements for success. The central role of collaboration, marketing, and a global supply chain in revamped business models were highlighted in the case studies.
In recent years, the American manufacturing sector has been hard hit by the economy’s downturn, overcapacity, global competition, and a variety of self-inflicted missteps. (1, 2, 3) Coming from the perspective that SMMs need to take a sober look at their own operations and get back to the basics of looking for new sources of competitive advantage and figuring out how to sustain it, the International Trade Club of Chicago (www.itcc.org) and the Tooling and Manufacturing Association (TMA) (www.tmanet.com) presented the 2004 Global Manufacturing Series (www.itcc-tma.org) during the January – March period.
The five-part series focused on actionable and practical strategies in order to stimulate new thinking and creativity and to redeploy resources in ways that make sense in today’s competitive global economy. As the manufacturing sector and individual companies are focused on maximizing profitability and competitiveness in a timeframe and scope that is under their control, the series did not seek to address external factors beyond their control, including geopolitical issues such as foreign competition, macroeconomic considerations such as trade practices and barriers, and national policy debates such as the mounting cost of healthcare. As Series Chairman Michael L. Hetzel commented, “There is an artificial erosion of manufacturing activities in the United States due to the failure of adapting to new conditions such as globalization.”
The series addressed the pain and problems that TMA president Bruce Braker discussed with me in 2003 when he argued that, while China was certainly a factor in his and many other industries’ malaise, there is a long list of factors that have had a more direct bearing on their fortunes: (4)
1. Not keeping up with the times, such as rethinking strategies, paring costs through automation and streamlining processes to speed production and delivery
2. Denial regarding globalization as a mega trend
3. Inadequate use of lean manufacturing techniques
4. Outdated conceptions of sales and marketing
5. Undiversified customer base
6. Workforce ill-equipped for higher value added jobs
7. Absence of deep pockets and staying power of large firms
The series presented lessons – case studies, successful strategies, and models of excellence – that demonstrated how SMMs in the Chicago area are adapting to survive. This is where new ideas, fresh vision, and a willingness to let go of the past are the primary requirements for success. (5)
What are examples of effective business strategies and best practices in these challenging times?
Pro Mold & Die spoke on its strategy of standardization, automation, and outsourcing. David Long argued that SMMs cannot wait for help: they just have to ‘do it’ themselves. By embracing concurrent engineering and manufacturing and information technology, standardization and automation made the company more productive and consistent. Selective outsourcing, both offshore and domestically, allowed the company to sell its strengths and buy its weaknesses. Progressive leadership techniques, such as early intervention and open communication, gave management time to demonstrate results and overcome employee resistance. The lesson? “May you live in interesting times” is not a curse if change is embraced.
Winzeler Gear spoke on the art of manufacturing and the power of strategic partnerships. John Winzeler approaches the process of making gears as a collaborative art form through strategic partnerships with both clients and suppliers. By finding a niche in the marketplace and creating a vision for change, Winzeler Gear fostered a brand image of ‘creative vision, creative company, creative solutions,’ leveraging a commitment to automation and manufacturing/operational excellence and a mindset of adding value by extending a client’s design and manufacturing capabilities. The lesson? Make a statement of being creative, high tech, and forward looking and be happy by combining your work and your passion.
Dial Tool Industries spoke on its ‘one stop shop’ services through the power of collaboration, sensible outsourcing, targeted exporting and labor-reducing automation strategies. Steve Pagliuzza embraced the customer and changed the company to accommodate its needs. Steps included making a commitment to be competitive in the global market, helping employees understand that China would help the company secure their jobs, and embracing creativity as a tool to change the way the company did business. The lesson? Be competitive in the global market by rethinking the business plan, being creative and open to change, and viewing China as an opportunity, not a threat.
What collaborative strategies are necessary for successful partnering?
Buhrke Industries spoke on collaboration as a strategy vital for survival and success. Arguing that times change and one must either foster new thinking for survival or go out of business, Mike Chester explained how Chicagoland stampers took control of their destinies and diversified risk by acknowledging the collective benefits of collaboration in sensor technology utilization, disaster planning, and technical training for individual companies, customers, the industry, and even the country. Collaboration can represent a viable new means of growing a company’s business through the systematic and progressive build-up of relationships with others in the industry and the marketplace. The lesson? “It’s a new day in manufacturing and only the strong will survive…to thrive” and “What’s good for the industry is good for us.”
B-TEK Scales spoke on the advantages of collaborating in a joint venture. Arguing that the opportunities prevailed over the risks for The Bilanciai Group of Italy and Brechbuhler Scales of the USA, Charles Bernardini outlined how a synergistic management team capitalized on the strengths of each company for tapping the market opportunity that neither one could go after by itself. The lessons? Create a process and objectives, including a business plan before signing a final binding agreement, to guide the construction of a joint venture so that both parties will complement each other and win.
IRMCO (International Refining & Manufacturing Co.) spoke on the benefits of collaboration by aligning needs. Citing the need for compatibility between collaborative partners, Brad Jeffery explained how IRMCO leveraged 30 affiliates on four continents to achieve a global presence. Collaboration can present an opportunity for gaining new product development insight, greater competitor and market intelligence, and higher barriers to entry provided that core strategies, culture, and philosophy are in alignment and the strengths and comparative advantages of each partner are leveraged. The lesson? Collaboration produces unexpected benefits when needs are aligned.
How do global supply chain and purchasing strategies influence business models?
DuPont Engineering Polymers spoke on the requirements for fitting into a global supply chain. Observing that supply chains are dynamic and in constant evolution, Cliff Dykes noted that collaboration is important among each segment of the supply chain. For a company to insert itself into a global supply chain, it must understand what it brings to the table and the tradeoffs. It must add value with distinctive products, lower costs, higher quality, or greater market access. The lesson? Adapting your business model to the needs of the supply chain will require work, but it may open a whole new world of opportunity.
North American Tool Corporation spoke on the impact of exporting on its ‘Back to Basics’ business model. Citing new global conditions and realities, Bernie Bowersock outlined how the company transformed itself to cut time-to-market and to make a business out of many small orders. Key success factors were leveraging government programs (www.buyusa.gov, U. S. Export Assistance Centers, and the Gold Key Matching Service) to understand offshore markets, trade associations to promote peer level supply chain collaboration, and industrial distributors to access 41 countries. The lesson? To understand what supply chain partners need and value, travel in order to see what the conditions are firsthand, participate in trade shows, and tap into federal government export assistance programs.
Winzeler Gear spoke on the power of partnerships in forging strong supply chains and business models. Arguing that relationships and commitment are the bedrock of strategic partnerships, John Winzeler noted that ‘what starts as a unique vision is touched by the imagination of many…each partner contributing (its) own experience and passion…a surprising harmony evolves from this unique collaboration and from their combined efforts…they bring the vision to life. This is the power of partnership.” The lesson? Design the future and do not compete on the basis of past preconceptions. Start at the top of the supply chain and work down with new concepts, such as alliances, because they can be an even stronger competitive tool than lean manufacturing.
What are the mechanics of developing and executing a global strategy?
PDT (Product Development Technologies, Inc.) spoke on how to create a global presence and reduce product development cycles through high tech tools and people. Asserting that ‘globalization may be a threat for some, but it is an opportunity for all,’ Ray Wiltgen made the case for leveraging innovation by adopting existing products for new applications using multidisciplinary offshore engineering teams. Key success factor were stationing employees near key clients, opening company offices where low-cost labor was available, and leveraging inexpensive telecommunications for global collaboration. The lesson? “Utilize resources that make sense for your customers, your employees, and your business.”
Dial Tool Industries spoke on the considerations of having a global presence in order to be both cost competitive and accessible to its customers. Arguing that the key to success is the same in both Mexico and China, Doreen Huro Michelini stressed the need to understand the laws, to be respectful of cultures, and to be aware that the laws are ever changing. The lesson? Customers and markets are migrating across borders and around the world, and SMMs need to adapt to global conditions whether they ever intended or planned to be a multinational corporation.
International Components Corporation (ICC) spoke on building a global presence with a seven point strategy. Emphasizing that ICC had a global focus since its founding, Stuart Oakes made the case for a diversified business platform, expanding reach by customer base, geographic regions served, end markets, and product lines. Keys success factors were pursuing a marketing strategy focused on niche markets, establishing production facilities as a beachhead for market entry, and staying flexible with creative and collaborative decision-making. The lesson? Challenge yourself constantly to answer what needs to be done to capture an opportunity and to maintain the competitive advantage.
The Take Away: Summary Points
One, Ray Wiltgen’s point is worth repeating: ‘Globalization may be a threat for some, but it is an opportunity for all.’
Two, new ideas and fresh vision for competing in the global economy begin with marketing. SMMs, particularly TMA members, have the tools at their disposal now. (6, 7, 8)
Three, plan now to be a success in 2004 and get your bragging rights as a success story at the 2005 Global Manufacturing Series. Contact ITCC Manufacturing Series coordinator Michael Hetzel at mlhetzel@earthlink.net or ITCC President Sidney Salvadori at president@itcc.org.
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Karl L. Buschmann, an international management professional, helps companies understand China and is an authority on “Marketing with a Global Flair.™” Buschmann plays a leadership role in China Sourcing Services (CSS) (www.ChinaMfgSourcing.net) and China Business Sources (www.ChinaBiz-88.com), is a frequent lecturer on China and a member of the International Trade Club of Chicago and The Chicago Council on Foreign Relations. His column ‘Karl on China’ at www.TheMayReport.com focuses on the changes underway in China and the implications for the American business community. Buschmann can be contacted at kbuschma@gsb.uchicago.edu or kbuschmann@ChinaMfgSourcing.net
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(1) “Global Economy Strains Loyalty in Company Town,” Tribune Special Report: Outsourcing – Pain and Profit, Chicago Tribune, 4 April 2004.
(2) “From Indiana to India: Why 1 Firm Leapt,” Tribune Special Report: Outsourcing – Pain and Profit, Chicago Tribune, 5 April 2004.
(3) “Where Are The Jobs?” Special Report, BusinessWeek, 22 March 2004.
(4) “Are There Any One-Arm Economists Over There in China?,” ‘Karl on China,’ www.TheMayReport.com, 11 November 2003.
(5) “China Déjà vu: Staying Competitive in the Global Economy,” ‘Karl on China,’ www.TheMayReport.com, 10 December 2003.
(6) “Target Marketing Ideas for TMA Members,” Bruce Braker Communication, Tooling & Manufacturing Association, 16 May 2003.
(7) “Differentiation as a Path to Higher Profit,” Tooling & Manufacturing Association, An Information Service from TMA for Its Members, March/April 2003, Volume 27, No. 2.
(8) “Goin’ Global: How U.S. Fabricators Can Angle in Worldwide Waters,” The FABRICATOR, March 2004. |
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