Category Archives: Manufacturing

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).

Some Great Ideas to Revitalize the Innovation Engine, Part II

In yesterday’s post, we discussed some of the suggestions from Henry Nothhaft’s recent book, Great Again, on How to Revitalize our Innovation Engine. These suggestions included the liberation of entrepreneurs and start-ups from start-up killing taxes and regulations, the restoration of the VC engine to an earlier design where it worked well, and ending the indifference to domestic manufacturing. These are all great suggestions, but probably the most important suggestion Henry makes is to:

  • Fix the Busted Patent System
    It’s an IP economy and (legitimate) patents are critical for a successful innovation economy, especially since investors (and VCs) want to see IP and protection for that IP before (continued) investing. However, the patent office has a backlog of 1.2B that is growing daily, primarily because, what should be one of the few self-funding agencies is being treated as a petty-cash drawer by the politicians, who have cut 150M in funding this year alone. The patent office needs to be fully funded, needs field offices where patents are filed, needs to modernize, and needs to be able to price with the market (including fast-tracking pricing options).

About the only thing I’d add to Henry’s suggestion list is to:

  • Abolish sotware and business process patents
    The EU has it right. Software should not be patentable and business processes have existed since the day after the invention of money. All these types of patents do is clog up the patent system, enable the patent pirates, and stifle innovation as funds that should be spent on innovation get spent on overpriced lawyers instead.

So what does this mean to your Supply Management operation?

It means that if you want to enable long-term success, you should:

  • help your company establish an innovation fund
    to fund innovative new start-ups that are working on technologies that could revolutionize your manufacturing or supply chain
  • source (some product) domestically
    as not only will this help insure supply if the overseas option(s) suddenly become(s) unavailable (due to political unrest, a shipping disruption, etc.), but it will give you ready access to another source of innovation that will complement your own and support the local economy (which needs to be strong to increase local sales)
  • NOT buy from companies that support patent piracy
    if a company is flooding the patent office with software and process patents, don’t buy from them. Period. They’re the reason we have patent pirates, and if they all go out of business, or change their ways to stay in business, things might get better.