Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide a series of predictions for the coming year. We have maintained this tradition since the founding of the blog in 2008.
Readers can view the entire listing by clicking on this web link: 2013 Predictions for Global Supply Chains.
In our Part One posting, we explored our first two predictions for 2013, the overall economic and business challenges, and our prediction of inbound commodity prices. In this commentary, we move to our Predictions #3 and #4.
Prediction #3: The renaissance of U.S. based manufacturing will continue in 2013, but further momentum is dependent on addressing key challenges in legislative and industry barriers and the new transformation of manufacturing.
In our Supply Chain Matters weekly and Newsletter quarterly commentaries, we have acknowledged conditions that have spurred the ongoing increased attractiveness for firms to invest in U.S. based manufacturing. The latest and most high profile announcement came from number one ranked global supply chain Apple, which announced in December, a $100 million effort to transfer a line of its Mac computer production to the U.S.. Apple’s announcement, although motivated by image considerations, is another watershed announcement.
A boom in North American natural gas production, coupled with economic factors related to exploding double-digit growth rates for direct labor in China and other low-cost manufacturing areas, along with perceived instability of currencies such as the Euro and the Japanese yen, have fueled the current U.S. based manufacturing renaissance. During 2012, global manufacturers such as EADS-Airbus, Honda, Lenovo, Toyota and others reinforced the momentum. The Financial Times notes that manufacturers have announced more than $90 billion of investments in the U.S. as a result of the attractiveness of energy costs. This trend was especially prevalent in asset-intensive manufacturing, and included petrochemical, fertilizer, steel and heavy equipment industry. Since the start of 2010, U.S. industrial production has increased 12 percent in the U.S., while falling 2 percent in China.
In 2013 however, U.S. legislators, private industry and trade union partnerships must address remaining identified structural issues to insure this renaissance continues. The U.S. Presidential Commission on Manufacturing Competitiveness, various private industry groups and academia have called for efforts to apply existing regulations more intelligently, streamline bureaucracy in obtaining approvals to build facilities while addressing a multi-year program to improve overall transportation infrastructure. Similarly, there are identified needs to address a shortage of a more skilled manufacturing focused workforce that is adequately prepared to assume today’s more technological advanced manufacturing processes. Manufacturers continue to lament that they cannot fill existing needs for skilled manufacturing people in the U.S.. These efforts require more active and more committed partnerships in 2013 that provide more opportunities for concentrated curriculum and training.
Similarly, a new era of manufacturing transformation is underway. Increased private/public partnership programs addressing the next wave of required productivity, harnessing more custom, additive manufacturing and more advanced automation techniques will be fundamental in 2013 to continue U.S. based manufacturing momentum. Even in the high tech sector, where many have written off any viable U.S. manufacturing presence, Apple’s challenge represents an opportunity to re-establish some forms of a core presence for certain innovative products.
A globally competitive manufacturing presence implies continuous innovation in process and products as well as the existence of an associated vibrant domestic supply chain. For many industry supply chains, that will continue to unfold across the U.S. in 2013.
Prediction #4: For manufacturers and retailers, supply chain talent retention, management and development will remain a significant problem across global supply chains, with special emphasis in China and Asia.
Throughout 2012, industry forums, executive roundtables, general media and industry analyst research all identified supply chain talent retention, management and development as a significant challenge that needed more attention and concerted efforts in the coming year. The talent skill gaps are clearly impacting global supply chains. In spite of high unemployment levels across the globe, finding the right people with honed skills has become a recognized problem, which leads to a supply problem. The challenge is articulated for needs in managing the broader supply chain as well operations at the shop floor. If the global economy were to grow more dramatically, the problem would be even more acute.
At executive leadership levels of supply chain, the gaps are identified in the need for broader leadership skills in the areas of supply chain strategy, change management, regulatory compliance and implications and tradeoffs of decision-making. The current rapid clock speed of business coupled with the numerous challenges that supply chain teams must address each day, or each week, now require skills that extend beyond singular functional knowledge or depth. These talent skill needs are especially identified as lacking in developing markets or high volume manufacturing regions such as China and Southeast Asia. Those professionals, who have acquired necessary skills, find themselves in high demand and jump to other organizations, causing additional frustrations with the organization that made the investment in training.
As was noted in Prediction #1, the talent shortage extends to the manufacturing floor where needed positions in the U.S. remain unfilled because of a declared lack of qualified people. Manufacturers, especially small and mid-market firms, have turned to higher levels of automation and process sophistication to meet higher customer expectations and needs for increased productivity. The impact has been on the need for more math and process-focused skills among operators. Some equate skills to those of entry level mechanical engineers.
The problem has many facets, and in 2013, much work remains. Primary and High School students lack awareness of supply chain as a career path. Some colleges and universities with concentrated educational programs in areas of supply chain management remain grounded in academic fiefdoms of either operations or business management, not building broader curriculums. Industry has perhaps unrealistic expectations that the numbers of experienced skilled talent required can be acquired without the need for on –the-job mentoring. Training programs are expensive, and when employees decide to jump to another firm, employers feel the effects of a lost investment. Senior leadership shows signs of understanding that more must be done in providing professionals attractive career progression plans supported by on the job training experiences across different geographic regions and varied supply chain roles. State governments have been showering many forms of economic incentives, amounting to millions of dollars, on manufacturers in order to attract these firms to their regions. These incentives now need to address worker re-training and skills development.
With global economic uncertainty continuing, 2013 may be the ideal year for supply chain organizations, academia and industry groups to step up the game in concerted and coordinated efforts in the identification of critical required skills in the coming years, as well as active programs to identify and train people in these skills. For our part, Supply Chain Matters will provide updates and expand visibility to successful programs throughout 2013.
This concludes Part Two of our 2013 Predictions for Global Supply Chains. As always, readers are encouraged to comment on these predictions as well as add additional thoughts as to what to expect in 2013.
© 2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.