firm exemplifies how to differentiate. This
American-owned firm hosts mid-sized retailers that bring with them designs for new
products . . . sometimes in a full engineering design, sometimes scratched out on a
napkin. The company then brings in Chinese
engineers or marketing specialists to get to a
final design, marketing materials, and packaging for retail sale. Finally, the firm selects
a manufacturing plant out of the hundreds
they have vetted to make the products for
the retailer.
The reason the retailers create these
designs is to differentiate. You can’t out
“Walmart” Walmart, or out “Amazon”
Amazon. The trick is to specialize based on
your region, market segment, or just new
ideas. The American consumer has seen their
cost of living decline due to standardization
of life’s basic essentials. Once basic needs are
satisfied, people look for unique products
and services. This search for special products
provides an opportunity for manufacturers
and distributors to once again collaborate.
The differentiated supply chain needs creative designs working in real time therefore
it must hear the “voice of the customer.” We
must link distribution to design.
This link is much more difficult than
it sounds. First, the distribution system
must capture not only what the customer is
currently buying; it must identify what the
customer might be interested in next. This
implies advanced information analysis tools
like data mining and a better-managed link
to human customer contact systems. As information technology continues to advance,
the former is a given and subject to commoditization over time, the latter is not and,
therefore, is likely to be a source of competitive advantage.
Don’t Look Back, They are Probably
Gaining on You
As fast as these creativity efforts move, the
standardizing elements will be hot on their
heels. We can expect Walmart and Amazon
to adopt creative products as fast as they
can and even try to differentiate as well. The
differentiation process will have to be very
agile to remain a competitive advantage. For
the manufacturing community, just what
“agile” means is key.
This interconnectivity of design and distribution requires a community. Distribution
firms that share information with manufacturers (as in our Dongguan example) will
have to be transparent and, more importantly, able to assimilate and synthesize market
information before sharing it with suppliers.
When a community of manufacturers and
distributors collaborate and compete with
full support from other service providers, we
call it an industry cluster.
Famous clusters include Silicon Valley
and Detroit but clusters are everywhere.
South Texas has been developing a significant energy cluster driven by the Eagle Ford
oil and gas exploration and production. This
cluster brings together all the elements of an
advanced supply chain with products, services, and new technologies being developed
in real time. These capabilities will be sold
to other regions, like China and Mexico, as
they develop their resources.
Clusters bring together entire supply
chains with all the support mechanisms
necessary to compete. In many ways, national competitiveness comes from cluster
development, which drives productivity. The
community of businesses competes and collaborates to create new technologies and fill
gaps in the supply chain.
This is all fine and well for groups of
firms and communities but what does it
mean for the average manufacturing firm?
Manufacturers must control their channel
to market. This means taking ownership
over distribution. The manufacturer needs
a strong alliance with their distributor partners for their differentiated products and
a well thought through strategy for when
products go to commodity status.
Manufacturing Processes Make a
Comeback
Manufacturers have their own internal supply chain that is very complex. As information enters the manufacturing firm, it has
to be quickly assimilated into design. New
designs require changes in process capabilities. These changes involve a great deal more
than just flexible manufacturing systems.
They require nothing less than a constant
reexamination of equipment investment (financial capital), design for manufacturability (information capital), human resource
capabilities (human capital), and change
management (organizational capital). The
truly agile firm will link seamlessly to the
supply chain, listen, and change fast.
Oh sure, 3D printing will turn us all
into micro-manufacturers living in a Star
Trek world where we only have to ask for
products to be made exactly the way we
like. Maybe, but it is far more likely that
the complex design, manufacture, distribute
processes will simply become more complex and just absorb micro-manufacturing.
Products will be designed to capture volume
efficiencies at the beginning of the supply
chain, configured for higher level capability
at the traditional manufacturing operations,
receive further value add in the distribution
channel, and given its final character in your
home or on Main Street at your favorite
retailer.
Many products, coffee for example,
already have supply chains that operate this
way. High volume production at plantations, packaging and flavoring at manufacturing sites, marketing and preparation for
retail utilization in the distribution channel,
and final differentiation at your local Starbucks. Automobiles follow the same pattern:
frames and tires at high volume manufacturing, assembly at major manufacturing
plants, leather seats and specialized electronics in the distribution channel, and, coming
soon, programming your dashboard from
your home network.
Note, that in this world, the classic
manufacturing operation is no longer a
commodity but the controlling nexus of the
product/design supply chain. It is time for a
Manufacturing Renaissance to bring us the
differentiated products the world hungers
for.
F. Barry Lawrence, Ph.D., is the Director of the