Category Archives: Manufacturing

Interesting Facts and Figures from the UL Product MindSet

UL* (a safety science company) just released a new annual study on Navigating the Product MindSet — which resulted from quantitative interviews with 1,195 manufacturers and 1,235 consumers across a range of export and import markets in high-tech, building materials, food, and household chemicals — that had some interesting facts and findings that we should all be aware of. These include:

  • On average, manufacturing companies rely on more than 35 different global contract manufacturers to create a single product.
  • In the US, 50% of medical devices, 80% of medication ingredients, 75% of seafood, and 60% of fruits and vegetables come from other countries.
  • In the last year, global trade flows increased:
    • 12.9% in developed economies
    • 16.7% in developing economies
  • Per person, Chinese consumers are outspending US consumers 3 to 1 in High-Tech purchases
  • 81% of Chinese consumers would buy more green products if environmental claims could be substantiated
  • The majority of manufacturers believe they are ahead of the curve in:
    • safety (97%)
    • reliability (97%)
    • sustainability (94%)
    • innovation (89%)
  • The majority of manufacturers believe their quality and on-time delivery are the best-performing aspects of their supply chain with
    • 79% claiming consistent product quality
    • 71% claiming on-time product delivery
  • While 49% of manufacturers believe that product reliability & product safety are key factors in effective global competition, only 9% believe that designing sustainable products is a key factor (and only 8% believe operational sustainability is a key factor).
  • Only 31% of manufacturers consider environmental products to be profitable
  • 50% of manufacturers will increase sourcing from other countries

The Top 10 Export Markets are:

  1. USA
  2. China
  3. Germany
  4. Japan
  5. France
  6. UK
  7. Netherlands
  8. Italy
  9. South Korea
  10. Hong Kong

The Top 10 Import Markets are:

  • USA
  • China
  • Germany
  • Japan
  • UK
  • France
  • Italy
  • South Korea
  • Netherlands
  • Canada

So what does all this mean? Our next post will reflect on these findings.

* Underwriters Laboratories Inc.

To Green Your Supply Chain, Start with Packaging

Just about everything these days is still overpackaged. From the software DVD that comes in a box big enough to hold 20 to 50 of them to the laundry detergent that takes a box at least twice as large as necessary as it is not concentrated to even the bottle you’re drinking your water from, everything is overpackaged. The water bottle is a good case in point. You’re probably thinking this is probably the most compact packaging there is as, at least in this case, it’s usually 95% to 98% full, in addition to being light. However, in many cases, better technology can reduce the plastic required by half!

For example, as pointed out in this recent article on a “Chain Reaction” in Materials Management & Distribution, Nestle Waters Canada has been able to reduce the amount of plastic required to make a half-litre bottle from 20g to 9.1g! That just tells you how much overpackaging there is in the average densely packaged product with poorly designed packaging. And considering how wasteful packaging is to begin with (even if its recycled, as a lot of energy goes into producing packaging, and a lot more into recycling it), this is bad.

Furthermore, not only will you green your supply chain if you save packaging (as you will be using less raw materials and energy), but you’ll be saving a lot of money, as you will be able to fit more product on a truck, or ship the same amount of product with less fuel (as it will weigh less).

Is A U.S. Manufacturing Renaissance Coming?

A recent article over on bcg.perspectives on “the U.S. Manufacturing Renaissance” (registration required), summarized over on Supply Chain Brain (in an article that states “Manufacturing “Renaissance” to Begin Returning to U.S. Around 2015″), states that 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
  • furniture

The expectation of Boston Consulting Group (BCG) is that these industry groups could boost annual output in the U.S. economy by 100 Billion while creating 2 to 3 Million jobs and lowering the U.S. non-oil merchandise trade deficit by up to 35% when combined with increased U.S. exports, starting in the next five years.

Note that these industry groups account for about 2 Trillion in U.S. consumption each year, and roughly 70% of the 300 Billion in goods imported from China. If the BCG is right, China will not only lose a huge cost advantage of the US, but a huge manufacturing advantage as well.

Why would this happen?

  • Labor costs in China are rising rapidly (at 15% to 20% a year) with required skill levels, quality and the rising yuan; the gap between US and China labor costs will be less than 40% by 2015
  • U.S. productivity is increasing
  • Factory automation is increasing, and a robot costs the same whether you operate it in China and the US
  • shipping and import costs (due to all of the security and
    paper trail requirements) are rising
  • management costs are rising with travel costs, as on site visits are becoming more expensive

It’s pretty clear that China is on its way out as a manufacturing location of choice for many industries and American companies, with the exception of those that have invested in World Class Facilities (like Apple, etc.) that could not be cost-effectively replicated elsewhere. But will the Renaissance take place in the US, or will we see a return to Mexico? That is not quite as clear.

Finally, A Good Consumer Use for RFID!

I’m sure many of you will have arguments to the contrary, but this is the first use of RFID to enable the end consumer that I have to outright applaud.

Who doesn’t want to pour their own draft, when, how, and in the amount they want? It’s Frackin’ Awesome!

For details, check out this great article over in the RFID Journal about how the “wall of beer lets patrons draw their own drinks”. It’s … wait for it … Le-gen-dar-y!

Is Your Organization Serving the Right Market?

If your Supply Management organization is part of a global multi-national, chances are that it is buying from China and selling to the U.S. And, for a few of you (in heavy machinery, luxury goods, etc.), chances are that your Supply Management organization is producing Made in the USA goods and selling these to China. But should it be?

Ignoring the fact that rising costs in transportation and production (due to raw materials and the inevitable rise in labor wages) coupled with the decline of the US dollar often make sourcing close to home (in Mexico) or at home cheaper than off-shoring, especially when quality and risk-related costs are taken into account, the organization might be missing out on a much bigger opportunity — selling in China. As per this recent article in the Harvard Business Review that chronicled “What the West Doesn’t Get About China”, China is the world’s largest consumer of automobiles, motorcycles, mobile phones, luxury goods, and shoes and the world’s second largest consumer of home appliances, consumer electronics, jewelry, and the internet. Thus, if you are in the automotive, electronic, appliance, apparel, or jewelry industries, maybe the organization should be producing in China for China.

China, which is the world’s second largest economy, has over 1.3 Billion people and an emerging middle class flocking to urban areas. The Asian Development bank classifies over 60% of China as middle class. That’s almost twice the population of North America! And half of them have internet access, with most of them having broadband access in their densely populated urban centers. In fact, China now has about 90 cities with a middle-class population of 250K or more. The US and Canada combined have less than 70 such cities. And the projections expect this number to quadruple over the next 10 years. Plus, annual growth in some markets is as high as 60%.

In other words, if the organization is producing in China, then it should probably be producing for the local market (as well).