The Changing Times of Chinese Manufacturing

Tags: manufacturing, supply chain, china, automation

Over the last few weeks, issues related to Chinese manufacturing have been all over the news. On one end, we have the continued pressure of the U.S. government for China to revalue its currency, and on the other end, we have the increasing discontent of Chinese workers, demonstrated by suicides at the Foxconn plant, and strikes at well-known brands such as Honda and Brother.

While the currency discussion continues with no end in sight, the RMB is unlikely to reduce in value in the near future.  In addition, with the various strikes and labor disputes, the management of these companies is responding by raising wages and improving working conditions. With a 24% wage hike at the Honda plant being implemented, the costs will need to be allocated. Even with the parent company absorbing some, part of the cost will be passed on to end customers. Theoretically, Chinese manufactured products are going to get more expensive.

However, this is only true if there is no change to the manufacturing process within the factories. Recent research from IDC Manufacturing Insights shows that Chinese manufactures are increasingly interested in automation; for both manufacturing processes and the adoption of information technology to support information flow across the various support processes within the factory. However, implementing automation will require a detailed understanding of the underlying business processes.

I remember a discussion with a Chinese manufacturer a few years ago when I asked about automation and process efficiency. At that time, he said that he could not justify the investment in technology and would simply put additional people to work on a task when the need arises. With the recent changes in workforce behavior and currency issues, the mind-sets of Chinese manufacturers will have to change with times.

The Ash Cloud in Europe - What is the Impact on Asian Manufacturers?

Tags: manufacturing, manufacturers, asia/pacific, supply chain, video-conference

We are now entering the sixth day of the Icelandic ash cloud impacting air travel in Europe. The plight of travelers has been well documented, but the discussion on the impact on manufacturing and retail businesses has not been highlighted.

As more and more companies adopt lean supply chains, with just-in-time production methods, any disruption to that chain can have disastrous consequences, whether it results to quality issues in the factory or disruption to the logistics network. It is the disruption to the logistics network that we are now experiencing.

Shipping manufactured products by air is normally seen as the most expensive option, and is traditionally used only for high value, low weight / volume products, or perishable goods. The impact on these sectors is now starting to be felt by companies in the region. In the automotive sector, Nissans’ production of three models in Japan will stop on Wednesday (21/4/2010) because it was unable to import air pressure sensors from Ireland. Production of the three models, which are targeted at the North American market, will be reduced at its Oppama plant in Yokosuka outside of Tokyo.

Manufacturers also rely on air freight to deal with problems in the supply chain such as shortages in parts and quality issues. Normally, these parts would be shipped by sea, but when there is a problem and a fast response is required, air freight is used. With the unavailability of this option at the present moment, many companies will be feeling the impact in their supply chain where the opportunity to have a fall-back option is removed.

The export focused factories countries of China and Korea are now also being impacted as factories in China's Guangdong province have seen air shipments of clothes and jewellery delayed. In South Korea, Samsung and LG said they were unable to airfreight more than 20% of their daily electronics exports. On the import side, lovers of fine food in Hong Kong are now being impacted as hotels and restaurants in the country are facing shortages in French cheese, Belgian chocolates and Dutch fresh-cut flowers.

The Icelandic ash cloud is also providing opportunities for some – customers are looking for alternative sources, particularly for food and fresh produce. Australia and New Zealand food manufacturers are now seeing orders increase from SE Asia, the Middle East and the U.S. For technology vendors, providers of video conferencing technology are seeing a boom in demand, as executives stuck in different parts of the world seek to cope with travel disruptions.

In the long term, impact of the ash cloud will drive manufacturing companies to rethink their supply chain disaster plans. This may lead to a change in inventory holding policies, suppliers' selection and support, and/or a shift to more regional production centers. But, one thing is certain: manufacturers will be looking at this latest challenge and taking steps to deal with this type of challenge in the future.

Improving Productivity: The Challenge for Asia Pacific

Tags: manufacturing, manufacturers, asia/pacific, supply chain, videoconference, plm, engineering

I have been traveling around the region over the last few weeks, spending time in Japan, Australia and Singapore. A common thread of discussion that keeps coming up is how to improve productivity. In Singapore's case, there is the need to see the next wave of growth coming from putting focus on improving the productivity of the workforce, rather than importing workers. In Australia and Japan, the focus is on the need to deal with the ageing workforce.

The key question is: how? Obviously technology is going to play a crucial part. Examples being cited include the use of mobile technologies to improve responsiveness. The use of PDAs in restaurants to speed up service byremotely transmitting the diners' orders to the kitchen, and to the cashier. For manufacturing, we will see a far greater emphasis on moving towards automation of the production line. Other tasks we will see getting automated include product tracking, either through barcode or RFID tags, the use of sensors in production machines to give feedback as to what is happening, reducing the number of operators required. We are also seeing this come to the fore in the product development space where companies are seeking to ensure that engineers spend their time engineering instead of doing administration. The use of videoconferencing is another technology that will find its place as managers seek to reduce the need to travel, in turn improving their productivity by being able to connect face-to-face with customers, partners and suppliers with minimal difficulty.

The key focus will be to ensure that people are used productively; the automation of the production lines, as well as the use of mobile technologies and sensors will be at the forefront as retailers and manufacturers seek to improvep roductivity within their operations. 

Counterfeit Products: A concern for Asian Manufacturers

Tags: manufacturing, supply chain

Consumers around the world are feeling the effects of the global slowdown which has resulted to unemployment, job uncertainties, and credit reductions. Consequently, the market for counterfeit products has been growing as more consumers are purchasing them to satisfy their status needs.

Findings from a recent consumer survey conducted by Villanova School of Business in five countries including Brazil, China, India, Russia, and the US in the area of fake products revealed some startling results. 2000 consumers were interviewed in the survey and the results showed that:

• One-third of the interviewees reported a high level of complicity with counterfeit products
• Two-thirds of the interviewees reported some level of complicity with counterfeit products: They willingly obtained, shared or used a counterfeit product
• Although the emerging markets are where counterfeit products are most likely to be purchased, consumers in developed countries are also willing to purchase them

As anti-counterfeiting campaigns in the US would be very different from campaigns in India or China, the study recommended that companies should respond by developing anti-counterfeiting strategies that target specific countries. Although the study made this recommendation, it also pointed out that it will be very costly and complex to develop strategies that are specifically tailored for individual countries.

For manufacturers, this growing problem can be addressed in two specific ways: The first is to take preventative measures and the second, to understand the scale of the problem.

A tighter control of distributors and dealerships is an example of a preventative measure; manufacturers have to put in place processes and systems to monitor sales so as to reduce the chance of fake goods being sold as a replacement for original parts.

To understand the scale of the problem, manufacturers would have to keep track of its intellectual property; maintain a close watch on their competitors to ascertain if they infringing on their intellectual property rights; and, work with supply chain partners to ensure there they are not working "extra shifts" to  produce parts that will later on be sold in the black market.

As Asian markets mature, we will see more and more focus being placed on the removal of counterfeit products as manufacturers seek out opportunities to increase revenues.

Concerns in the Cloud: Issues for Manufacturers

Tags: cloud computing, manufacturing, supply chain, it priorities

The CIOs of many manufacturing companies are in a dilemma; they are being tasked to reduce costs, optimize existing infrastructure investments, and provide new applications to support the business. Whilst it is easy to say these things, the delivery of new strategic applications to the business, with a smaller team, is much more difficult. One possible solution to the CIO's dilemma is the use of cloud computing.

However, our research shows that whilst cloud options are being considered, manufacturers have a number of concerns that vendors will need to address.

According to the IDC Manufacturing Insights Asia/Pacific Business and IT Priorites survey, April 2009:

The biggest concern is security: close to 60% of the survey respondents cited confidentiality of company information as their prime concern. The need to protect financial information is a given, and this typically has not been an area where we see interest in cloud computing initiatives. But even if we look beyond the ERP systems, there is a growing need for the protection of intellectual property as well as security of supply chain information. So as new applications connecting the supply chain and supporting product lifecycle management are being considered, security is the top concern.

The second rated issue with just over 50% of all companies citing as a concern is that the cloud delivery model is not able to replicate and support business processes that are specific to the company. As companies seek to differentiate themselves, their applications become increasingly personalized, and the question I often find myself discussing these days is: Can the cloud deliver – and how? This also relates to data integration concerns, where over 40% of respondents expressed their concerns over data integration from applications in the cloud to applications within the four walls.

The third-highest ranked area of concern was the view that moving to a cloud model will not be cost effective in the long term. The shift from a capex to an opex model has long been discussed, and where the shift to an opex model will benefit in the short term by getting new applications deployed and/or scaled quickly, the long-term cost implications are a concern that vendors will need to address if they want companies to embrace this new way of operating.

Cloud does offer a lot of opportunity for manufacturing companies to embrace new applications and scale very quickly; however, vendors must ensure that the needs of security, personalization and ROI are addressed before cloud becomes widely adopted in the manufacturing segment.

Driving for Efficiency in Product Life-Cycle Management

Tags: innovation, manufacturing, plm, engineering, simulation

The results of the Manufacturing Insights' latest survey show an interesting trend that manufacturing companies within the region are focusing their improvement efforts on driving efficiency in the product life-cycle area. That is companies are looking to apply waste reduction efforts, such as lean manufacturing ideas, to their product development processes.

Engineers the world over are expensive, and this has not gone unnoticed by the management within companies, especially with R&D and engineering staff numbers being reduced as companies try to save costs.

This, in turn, is leading to a focus on the efficiency of the product development process. Companies want to ensure that the engineers they employ are productive. They are effectively 'engineering' during the work day rather than focusing on administration or other non-value adding activities.

How do companies gain control and visibility over the development process? This is where the suite of product life-cycle management (PLM) tools comes into play. We have the tools that simplify and remove the administrative burden – things like product information management (PIM) systems, the increase in the use of collaboration tools from desktop videoconferencing through to shared markup. We can also see the increased use of computer-aided engineering (CAE) tools to support the efficiency of the engineering process through product, manufacturing and in-service simulations. Finally, we have the project management tools to monitor the progress of development projects as well as analyze the data to gain insights into the status and health of the development process. Such insights are useful as it gives us a better idea of the development costs and risks such as skills bottlenecks.

The next two to three years will see some major restructuring of the product development process as companies focus on waste reduction and increasingly turn to technology to facilitate lean product development.

Leveraging your customers for innovation

Tags: manufacturing, engineering, innovation

Walkers Crisps in the UK recently held a competition to ask for suggestions for new flavors of crisps. The flavors were then shortlisted, and people asked to vote on which ones they liked the most. The person with the winning suggestion, 'builders breakfast' flavor crisps, received a cash award of £ 50,000 (US$82,324) and 1% of the total sales!

The idea of getting closer to your customers and involving them in your product development process is nothing new. Capturing the ‘voice of the customer’ is still critical to applying many of the tools to identify features and functions, but how do we capture that voice of the customer? The use of focus groups and customer panels is still useful, but increasingly, we are seeing companies turn to the Internet to get feedback and ideas for new products. The Walkers competition is an excellent example, and to give some idea as to how successful it was: they received 1.2 million entries for the competition. Yes, 1.2 million people suggested flavors of crisps, 1.2 million customers telling them what they would like to buy...
 
What does this mean for your business? Well, if you are looking to connect with the end customers and involve them in your product development process where they can share ideas, the use of social networking sites where groups can be set up and customers' comments analyzed is one avenue. However, if you really want to drive interest, then there needs to be some form of reward. Some recent academic research from the Lausanne Polytechnic in Switzerland showed that to get many people to contribute online with ideas, there needs to be some form of payment or reward – like the Walkers example.
 
The other problem, a good problem but still a problem nonetheless, is what to do with all the ideas. If your marketing and product development team received over a million new ideas for evaluation, there would be some very upset individuals. The use of analytic tools to analyze all the data given, pick up trends and keywords becomes a real necessity. It is important that companies put these tools in place when looking to the mass market for ideas.
 
Drawing on the ideas of customers is not knew, but the power of the Web is going to become increasingly popular as a creative source of input to marketing and product development, where the 'actual voice of the customer' is heard.

Videoconferencing makes an impression

Tags: manufacturing, engineering, innovation, video-conference

The opportunities for companies to use this are vast. Certainly at the C level there is the opportunity to save on travel cost and inconvenience, maximizing the senior managements time, but as I suggested in a recent perspective document, the use of the technology within the engineering function, where geographically dispersed design teams, can come together, face-to-face, and resolves issues or brainstorm new ideas – this is where I believe there is still a great deal of opportunity for companies to streamline and improve the collaboration process. Going face-to-face is considerably more productive than the now standard ‘conference call,’ and will certainly assist in the development and generation of new and innovative ideas – something critical for success today.

Product Life-cycle Management - the next big investment area for Asian manufacturers?

Tags: plm, manufacturers

Knowing the demand

Tags: manufacturing demand supply-chain