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Thursday, June 21, 2012

Five Capabilities That Mid-Sized Manufacturers Need To Build

A mid-sized manufacturer needs to do the following five things right, so it can continue to successfully compete and maintain its growth rate.
Mid-size companies, with revenues between $10 million and $1 billion, are expected to outpace larger companies in growth over the next 12 months, according to recent research by the Ohio State University Fisher College of Business and GE Capital.

These companies account for a third of the nation’s GDP, more than 41 million jobs, and are considered a leading indicator of America’s future competitiveness. Mid-sized companies added 2.2 million jobs between 2007 and 2010 (a period of economic crisis), while big businesses shed 3.7 million jobs during the same period. Although mid-market companies may not dominate the headlines, they are the engine of the American economy. This article identifies the advantages that mid-sized manufacturers have (which drive their growth) and the key investments they need to make in continuing to maintain this growth.
Mid-sized manufacturing companies have three very big advantages over larger companies. They are:
■Focus: Unlike large companies, a mid-sized manufacturing company offers a narrow range of products and services, allowing them to maintain a sharp focus. As a result, their business and market strategies are more crisp, resulting in a better potential to out-execute the large manufacturers.


■Speed: The ability to move faster than larger companies to take advantage of a new market opportunity is one of the biggest advantages of mid-sized manufacturing companies. The likely presence of an entrepreneurial founder (or a family member) running the day-to-day operations, coupled with smaller size, allows mid-sized companies to move quickly when they identify a new opportunity in an existing or related market segment.


■Closeness to customers: Customer relationships and satisfaction are important for any business’s success, but mid-sized manufacturers (especially those that are family owned) take it to the next level by connecting with the customers they deal with, emphasizing the community and accentuating the personal touch. Their sharper focus and smaller size enable them to stay closer to their customers.


As we discussed above, the primary source of a mid-sized manufacturer’s competitive advantage is its ability to stay close to its customers, be nimble and offer superior service, while still making respectable margins. But as such companies grow, they begin to get squeezed from both sides – they can no longer be as flexible and personalized as their smaller competitors, but at the same time, they do not have the operational sophistication to compete with the big boys. This affects their ability to grow at the pace they want. How can they counter it?
A mid-sized manufacturer needs to do the following five things right, so it can continue to successfully compete and maintain its growth rate:
■Hire the right managerial skill set: As an organization grows, it needs managerial talent who know how to scale the company to the next inflection point. Lack of such skills within the company has tripped many companies who were very successful when they were small, but are now struggling. Mid-sized manufacturers also need managers who know how to grow their business internationally. Easy growth in revenues and profits from an expanding domestic economy is gone – so mid-sized companies have to build their presence in the fast-growing emerging economies. As a result, they need to hire managerial talent that has done this before and knows how to navigate these new waters.


■Gain access to cash and working capital: Most mid-sized companies need access to sufficient working capital to fuel their growth. While financial discipline ensures they have sufficient cash-on-hand, it is often not enough to fund their growth. Challenges to improving working capital performance remain, partly as a result of mid-market firms deriving a large volume of business (57%) from bigger companies. This imbalance, according to an American Express study, affects their ability to negotiate better deals and payment terms, requiring them to tap into financing arrangements outside the company. As a result, mid-sized businesses need to continuously evaluate and build relationships with banks and capital markets to fund their cash and working capital needs.


■Deploy technology that provides insights into business performance: Mid-sized companies have limited resources. Therefore, they cannot afford to make many mistakes. They need visibility into what is working well, so it can be quickly capitalized. They also need visibility into what is not working well, so it can be rapidly addressed. For example, if their managers have analytics technology that provides clear visibility into planned vs. actual revenue, costs, and spend for new products introduced in the last 12 months, they could easily identify poor performers and quickly shift the spending away from them until their issues were addressed. Without the benefit of such information, it may take either longer to make such decisions, and they may continue betting on poor performers. Continued success also comes from getting everyone in the company on the same page, using the same set of assumptions, and seeing the same version of the truth. For example, if engineering, sales, finance, and marketing organizations use the same analysis on marketing pipeline trends, quarterly sales performance and profitability by various segments, they are more likely to share the same conclusions and be aligned on priorities to maximize growth and fix problem areas.


■Look bigger than they are: One of the greatest challenges for a mid-size company is to find a way to profitably scale their operations. They now need to look big in the eyes of their large customers – where the average lifetime contract value is highly prized and will provide fuel for their rapid growth. But in order to successfully acquire such customers, they must appear seasoned in all aspects of their customer interactions – from marketing campaigns, to sales force’s interactions with customers, to after-sales support and service. Examples include:


◦Being able to segment the prospect base and deliver highly customized marketing campaigns to them at a caliber one expects from large companies.


◦Enabling sales people to have ready access via their mobile phones to information such as pricing or configuration or shipment dates, providing for rich customer interactions.


◦Providing specialized support to VIP customers by routing calls quickly to the best support people and rapidly escalating unresolved issues.


CRM technology implements such capabilities, so the organization will appear seasoned and operationally sound to the bigger prospects.
■Improve operational capabilities and deploy changes rapidly: In order to scale successfully, mid-sized manufacturers also need to develop operational sophistication to predictably deliver the right product to the right customer at the right time in the right quantity at the right cost. It requires extremely tight integration between the front-office (sales, marketing, and service) and back-office operations (engineering, planning, procurement, manufacturing, distribution and finance) to coordinate all aspects of the supply chain to meet customer commitments. It requires eliminating any information silos within the organization and across the supply chain, so nothing can fall through the cracks. But that is not enough. Agility, one of the sources of competitive advantage of mid-sized companies, cannot be sacrificed in favor of well-defined and integrated processes. Mid-sized organizations need to ensure their technology is flexible, so they can quickly deploy process changes to support rapid deployment of new initiatives or rapidly respond to shifting market dynamics.


Mid-sized companies are the growth engine of US economy. A mid-sized company that develops these five capabilities can continue to successfully compete in the market against companies of all sizes and grow its business.


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By: Mindy Fiorentino, SAP Mindy Fiorentino is Vice President of Portfolio Marketing in the Global Ecosystem Channels Solution Marketing Group at SAP








Friday, June 15, 2012

US Manufacaturing Renaissance: Which Industries?

Though margin has driven outsourcing to China for decades, the advantage is eroding according to the Boston Consulting Group. “Seven ‘tipping point’ sectors are poised to return to the U.S. for manufacturing: transportation goods, computers and electronics, fabricated metal products, machinery, plastics and rubber, appliances and electrical equipment, and furniture. Combined with increased U.S. exports, these groups could boost annual output in the economy by $100 billion, [and] create 2 to 3 million jobs…“(The U.S. Manufacturing Renaissance: Which Industries?).




Hopeful Sign: Small Manufacturers Buy Big Machines

NEW YORK (AP) — Small businesses that make machines and components for other manufacturers are experiencing an upswing that could be a sign of things to come for the broader economy.


The industries fueling the demand vary. In some cases, business is coming from medical device makers, which are expected to see increasing growth as baby boomers age and need more medical care. An uptick in orders is coming from oil and gas producers supplying energy to growing economies in countries such as China and India. And then some are getting a pop in sales from aerospace manufacturers that are busy building fuel-efficient aircraft and engines and need special parts to get the job done.


As different as these manufacturers may be, they have two things in common: Their industries are expected to see continued growth and they're investing in expensive machinery that can cost millions of dollars.


This small manufacturer machinery boom may seem at odds with an economy that is suffering from slow job growth following the worst recession many can remember. But the increase in demand for gear that businesses use to make a variety of machines, parts, tools and devices is a sign that companies are more confident and are willing to spend. They're also getting loans from banks to buy the equipment — evidence that lenders are feeling more secure.


Last year, industrial and materials manufacturers had a 37 percent increase in big equipment purchases, according to PayNet, a company that tracks lending to small businesses. That compares to an average of 17 percent for all the industries PayNet follows.


"We're positioning ourselves now to have the capacity to respond quickly," says Pat Pastoors, general manager of Dynamic Sealing Technologies, which last month spent $450,000 on new equipment after spending $800,000 last year. In 2011, Dynamic Sealing paid $3.2 million to expand its Andover, Minn., factory. The company makes manufacturing equipment for companies including food packagers and oil and gas producers. Pastoors says the company sees good potential growth in the industries it serves. The company's revenue rose 20 percent last year after doubling in 2010.


THE FIRST STEP


Skeptics should talk to the bankers who grant loans to companies that make gear and parts for othermanufacturers, like Anthony Cracchiolo, president of U.S. Bank's equipment finance unit. U.S Bank's lending through its Manufacturing Vendor Services division, part of the equipment finance unit, is up 15 percent this year from the same period of 2011. And last year's lending level was up 26 percent from 2010. Equipment sales had fallen 70 percent during the recession. More recently, the bank, which is based in Minneapolis and has branches in 25 states, has seen an increase in demand for big machines like lasers, molding equipment and plastic injection machines.
By the end of this year, U.S. Bank expects this type of lending to be at 90 percent of pre-recession levels. It expects the recovery among these manufacturers to reach other parts of the economy.
"This is the first step, the people that build the machines," Cracchiolo says.
Sales for privately held industrial machinery manufacturers, including companies of all sizes, are up nearly 23 percent in the last 12 months, according to Sageworks, a financial research firm.

Wells Fargo & Co. also is seeing an increase in lending to companies that manufacture products for other companies, says Hugh Long, head of business banking. The bank would not provide a breakdown of how much lending to companies that make machinery and components has gone up, but "that particular subset of themanufacturing business is quite active," Long says.
Morris Technologies spent $1 million on an electronic beam melting machine in January. The company, based in Cincinnati, uses a sophisticated technology called additive metal fabrication to create complex parts for planes, turbines, medical equipment and other machinery. It's a manufacturing method that uses computer models and molten metals to build components one layer at a time rather than carving them out of a block of metal.


CEO Greg Morris says the interest he's seeing in the technology from his customers justifies the purchase of an expensive machine even though the economy is looking a little more uncertain these days.
"I think the handwriting on the wall is that this technology is going to be huge," he says.

Generous tax breaks that small businesses got during the recession were also an incentive for thesemanufacturers to buy big equipment. Morris said the laws that allowed him to speed up depreciation of new equipment were a factor in his decision to buy. However, those breaks have been scaled back dramatically this year. For example, what was a $500,000 deduction last year is now down to $125,000. It's not certain that Congress will increase them before Dec. 31.


TAKING BUSINESS FROM CHINA
Many of these small manufacturers spend months on design and development to customize parts for their customers. The complexities involved have given U.S. manufacturers an edge. That's helped some smallcompanies in the U.S. take business away from manufacturers in China.
"For specialty manufacturing products, the end users are concluding it's better to have production close by, here in the U.S.," says William Phelan, the president of PayNet. "If there's a problem, they can get the parts shipped overnight, and transportation costs are less."

Wells Fargo also sees the trend in its lending to small manufacturers. "We're seeing this reverse offshoring — some call it onshoring," Long says.
Some of these companies are getting more business from the government. Peter Boucher, whose company, 3v Precision Machining, makes components for industries including aerospace and medical devices, is also making parts for the new F-35 fighter plane. He began buying machines during the recession and will buy one this year. He has spent $1.6 million on four machines since 2007.
Boucher says his business from aircraft makers has risen sharply because airlines that weren't buying planes during the recession now want to replace them. When Boeing. Co. released its first-quarter earnings in April, it said it had orders for more than 4,000 commercial planes.
"It's a good food chain to be involved in," says Boucher, whose company is located in Tacoma, Wash.
The heavy toll that the recession took on the manufacturing business has also encouraged many companies tobuy machinery. Manufacturers that went out of business left behind a glut of machines.
John Maurer has bought four machines in the last year and has been getting bargains — some cost just 40 percent of the price of a new one and were only a year old. He expects to buy two this year for his family's Springfield, Ohio-based company, Esterline & Sons Manufacturing, whose customers include aerospace and medical device companies and power plants


Thu, 06/14/2012 - 9:11am

Thursday, June 14, 2012

Analysis: After decades of outsourcing, manufacturing jobs coming home to US

Beginning in the 1970s America’s high-paying manufacturing jobs in the steel, textile, electronics and automotive industries relocated first south to Latin America and then east to Asia.

In what some dubbed “a global race to the bottom,” labor rights have dwindled all along the way and the American middle class, long sustained by those manufacturing jobs, finds itself gutted. Now the fate of what is left of the American middle class is at the center of a presidential election and forcing a reexamination of the impact of the global decline of labor rights.

But after years of pain for America’s manufacturing sector and its workers, some economists and analysts are wondering if the tide may be turning. Call it “re-shoring” or “rebalancing” or just “revenge,” but the dynamics of global labor, transportation and productivity costs that eviscerated American manufacturing over the past decade have begun to shift again.

Over the past few years, some key American manufacturers have either brought jobs back to the US from Asia and Latin America, or have made important decisions not to relocate them in the first place.

For several years now, the anecdotal data has been tantalizing:

Caterpillar is building a $120 million plant to make giant earthmovers in Victoria, Texas, including some models that were previously built in Japan and shipped back to North American customers. The Japan plant is now free to devote more capacity to the booming Asian market.

Master Lock, in Milwaukee, landed a visit from President Barack Obama in February after its decision to bring 300 jobs back from China.

General Electric reversed a decision to build a new “green” refrigerator plant in Asia and decided instead to invest $93 million in refurbishing a plant in Bloomington, Indiana, saving 700 jobs. The company followed up in 2010 by investing $80 million in a water heater plant in Louisville, Kentucky, preventing another 400 jobs from heading east.

Not to be outdone, GE competitor Whirlpool decided to break ground on a new $200 million plant in Cleveland, Tennessee rather than send the 1,500 jobs overseas. The facility is part of a four-year, $1 billion American investment campaign.

Dow Chemical, the cash register company NCR, Sauder Woodworking and the machine tool firm GF AgieCharmilles have all brought overseas production back to the US market in the past three years.

More from GlobalPost: Team America needs a new game plan

Most economists — even those inclined to sympathize with the Obama administration’s economic policies — scoffed in 2010 when, in his State of the Union address, the president vowed to double US exports in five years — creating 2 million jobs in the process. It’s not that this wasn’t possible in the eyes of economists. It just wasn’t likely, they thought, that the global conditions and political climate in the United States would allow it.


The “zero effect” — the distorting phenomenon of measuring growth starting at an unnaturally low point — kept a damper on enthusiasm even as export figures soared in 2010-2011.


Many experts assumed that the favorable trends supporting that growth had little to do with long-term shifts. Instead, most felt the numbers reflected a coincidental confluence of events: sky-high oil prices that drove the costs of shipping upwards, a mega-recession that undermined American labor’s negotiating leverage, Federal Reserve “quantitative easing” that kept the dollar cheap and pumped up US exports, and freak events like the euro zone meltdown and the Japanese earthquake/tsunami that took major players off the economic chessboard.


But the data has started to cause reassessments. Monthly net exports have grown from $140 billion to $180 billion since the start of 2010. Indeed, energy exports (mostly refined gasoline, jet fuel and natural gas) have suddenly grown into the single most valuable product sent abroad by American manufacturers, the first time in 60 years the US has been a net exporter of any of these items.


A new revolution

So what’s behind this strange counterintuitive trend? For some economists, this represents the start of the “third industrial revolution,” the dawn of the new high-tech, value-added era of manufacturing that follows the first two global revolutions: England in the mid-1800s, and the one sparked by Henry Ford’s mass production innovations in the 1920s in Detroit.


“The factory of the past was based on cranking out zillions of identical products,” writes The Economist in a special report on the new trend published in April. “Now a product can be made on a computer and ‘printed’ on a 3D printer, which creates a solid object by building up successive layers of material. … the cost of producing much smaller batches of a wider variety, with each product tailored precisely to each customer’s whims, is falling.”


Manufacturers have discovered the value of bringing production closer to the point of sale, where their employees can engage more directly with customers and adapt quickly to changes in the market. And for all the changes in the global economy, the point of sale, by and large, will still tend to be in the world’s largest consumer economy.


For America, this could be the start of something good, according to the Boston Consulting Group. In 2011, BCG reported that, due to a number of changing economic realities — including rising salaries and economic expectations among Chinese workers, new labor, environmental and safety regulations abroad, the higher cost of energy required to ship products halfway around the world, and the US market and the uncertainties of political risk in these places — the cost benefits of producing in Asia no longer automatically outweigh the risks.


Indeed, the BCG report predicts a “renaissance for US manufacturing” citing the fact that labor costs in the United States and China are expected to converge around 2015.

“Executives who are planning a new factory in China to make exports for sale in the US should take a hard look at the total costs,” says BCG’s Harold L. Sirkin, an author of the report. “They’re increasingly likely to get a good wage deal and substantial incentives in the US so the cost advantage of China might not be large enough to bother and that’s before taking into account the added expense, time, and complexity of logistics.”


More from Global Post: Islamic banking on the rise amid the credit crunch


Skeptics continue to question whether this is sustainable. Not in the political realm, of course; it is anathema for any politician to suggest that America should content itself to life as a “post-industrial society,” in part because so few can explain how to employ 300 million people in such a place.

“Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs because the old assembly line has been replaced by numerically-controlled machine tools and robotics. Manufacturing is going high-tech,” writes Robert Reich, a University of California at Berkeley professor who served as Bill Clinton’s labor secretary. “Bringing back American manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees.”

 
BCG, which launched a cottage industry with its 2011 report on manufacturing, believes this line of argument misses the changes underway in the global economy. On April 20 its economists released a survey of the largest American manufacturing firms. The results: one third of all US manufacturing executives of companies with sales above $1 billion per year now say they are planning or considering “reshoring”; in effect, bringing home manufacturing plants that were sent to China and other low labor cost countries during the 1990s and first decade of this century.


The top factors for bringing these jobs home cited by these executives surveyed by BCG: Higher labor costs in Asia (57 percent), ease of doing business (29 percent), and proximity to customers (28 percent).


For the American worker, this will be rare good news. But the jobs that are returning will look nothing like those that left. Rote assembly lines, low value-added manufacturing like textiles, furniture and heavy smelting operations like the steel industry may never again be profitable in the way they were after World War II, when the US economy was the last bastion of capitalism not destroyed by war.


But history shows that workers adapt to change when the incentives are present. Displaced hunters became farmers; displaced farmers became artisans; displaced artisans learned the skills of the factory; and displaced factory workers can learn the techniques of the 21st century.

Source: http://www.globalpost.com/dispatch/news/regions/americas/united-states/120504/american-manufacturing-jobs-returning-outsourcing-reshoring

U.S. Commerce Department Invests in America’s Small- and Medium-Sized Manufacturers | Department of Commerce

U.S. Commerce Department Invests in America’s Small- and Medium-Sized Manufacturers | Department of Commerce

Wednesday, June 13, 2012

USA: Feds give $54M to cut manufacturing energy use

USA: Feds give $54M to cut manufacturing energy use



Funding innovation and manufacturing to create jobs is a big theme in this election year, and you can expect a flurry of announcements from the Department of Energy to drive that point home. In fact, the DOE announced Tuesday that it’s giving away $54 million to 13 projects to develop technologies that will help manufacturers reduce energy use and lower production costs of components that will lead to cheaper clean power equipment.

The money is going to academic research institutions and quite a few large companies such as General Motors and Delphi Automotive. Some projects aren’t sexy. GM’s project, for example, “will develop an integrated super-vacuum die casting process using a new magnesium alloy to achieve a 50% energy savings compared to the multi-piece, multi-step, stamping and joining process currently used to manufacture car doors,” the DOE press release said.
The funding announcement underscores President Obama’s twin goals: reminding his clean energy supporters that he still cares and positioning himself as a job creator, which he hopes will help him attract voters on the right as well.


It’s a perennial cause for politicians to show they want and can boost domestic manufacturing of a variety of goods. But accomplishing that goal is difficult, and the bottomline is manufacturers will set up factories at places where they could produce more cheaply and easily ship their products to customers. Enticing them with incentives – such as grants, loans and tax breaks – certainly helps, and so will relaxing rules. Adding regulations that require, say, government agencies to buy only American-made goods also will prompt some manufacturers to set up shop domestically. But manufacturing is a largely a global business these days, and there are many countries that are happy to provide more lucrative incentive packages and relaxed environmental and other rules in exchange for manufacturing jobs and tax revenues.


Here is a look at some of the more interesting projects from the DOE announcement today:
1. PolyPlus: The battery maker is getting nearly $9 million to complete its work on encapsulating the lithium anode and enter mass production of three types of lithium-based batteries for electric vehicles: lithium-water, lithium-air and lithium-sulfur batteries. These batteries should be able to pack a lot more energy into a given space than conventional lithium-air batteries today, the company said. Polyplus previously received a DOE grant to develop one of the three, the lithium air battery, which has been a subject to academic debates over whether it would be suitable for electric cars. PolyPlus plans to work with Corning and Johnson Controls on the project.


More gigaom.com



Thursday, June 7, 2012

CRM Giants Snapping Up Social Technology Startups

By sschablow

It’s hard not to notice the recent flurry of the big CRM outfits acquiring social technology startups. It’s even more conspicuous when an acquisition price tag is in the hundreds of millions of dollars. For Salesforce.com and Oracle there appears to be a deliberate effort to one-up each other’s social management technology. Perhaps


Forrester research convinced them with a recent report calling this “the age of the customer.” Forrester claims “the only sustainable competitive advantage is knowledge of and engagement with customers.” I agree with the premise, although I have not read the full $499 report. Salesforce.com made a high profile move into social technology a year ago with the purchase of Radian6, a leading social media monitoring platform.


Last month Oracle acquired Vitrue, a leading cloud-based social marketing and engagement platform. The combination is expected to help organizations develop more meaningful customer engagements, improve ROI, provide enhanced customer service with real-time response and high touch relationships. Thomas Kurian, executive vice president, Oracle Development said, “Vitrue’s leading social marketing and engagement platform coupled with Oracle’s leading sales, service, and commerce products offers a complete social experience solution to our customers.”


A week after Oracle’s announcement, Salesforce.com countered with the acquisition of Buddy Media. The Buddy Media platform allows customers to publish content, place and optimize social advertising and measure the effectiveness of social media marketing programs. Their purpose is to help customers determine which content is driving the most engagement, test different strategies and understand which campaigns are delivering the greatest return on investment.


“By bringing together market leaders Radian6 and Buddy Media, we are doubling down on the Salesforce.com Marketing Cloud to provide CMOs with the ability to manage the entire social marketing lifecycle,” said Marcel LeBrun, SVP of Salesforce Radian6.


Not to be outdone, a day later Oracle announced it will acquire Collective Intellect, a social intelligence company. Collective Intellect’s is a cloud-based solution that claims to help organizations transform social conversations into actionable intelligence leading to better marketing campaigns, improved customer service, more targeted leads, and enhanced products and services with real-time customer feedback.


These M&As make sense on paper and if their combined potential can be realized, will provide the kind social customer relationship management services that we’ve only dreamed about. But the process of managing such disparate data is not going to be easy. Acquiring the technology is only the first step. To get to real, useful Social CRM you need to be able to monitor conversations, capture and analyze the data, extract insights from the data, translate the insights into actions, and then have the means to publish a response or message. The process can’t be fully automated, but it at least needs to be integrated into a single SAAS to make the process manageable.


That’s a tall order and one I’ve been discussing for years now with (other) start-ups that are in various stages of alpha or beta testing. Whether they will stand alone or be gobbled up in the social technology feeding frenzy (or even make it out of beta testing) is anybody’s guess. For now Oracle and Salesforce.com are both closing in on the Social CRM holy grail. It promises to be quite an adventure.

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