Tight Lines Advisors’ Strategic Approach to Accelerating Manufacturing Productivity Provides Pathways for Re-Shoring Trend Sustainability
In spite of its exodus during the last several decades, the manufacturing industry remains at the center of the U.S. economy, and is highly connected with most other sectors, such as transportation, retail, mining, utilities and business services.
Gross output of U.S. manufacturing industries — counting products produced for final use as well as those used as intermediate inputs — totaled $6.2 trillion in 2015, about 36% of U.S. gross domestic product, nearly double the output of any of the other big sectors: professional and business services, government and real estate.
Manufacturing companies also account for about 77% of what the private sector spends on research and development each year. Industry experts suggest that if it weren’t for manufacturing there would be considerably less innovation in the United States.
Most recently, a number of market forces have aligned to make the re-shoring overseas operations a consideration for U.S.-based manufacturers. Among the influential factors are a growing reduction in the wage gap between American and foreign labor, lower U.S. energy costs, and a greater ability to control scheduling, supply-chain and quality.
Moving to a potentially higher cost labor area can be a difficult consideration, however, “More than any other factor, what truly makes re-shoring both viable and sustainable is productivity,” states John Abplanalp, Founder and President of Tight Lines Advisors LLC, a firm that partners with manufacturing companies to improve their operational performance at the gross margin and bottom line while driving their competitive position and creating true value.
“When productivity improves, margins improve,” continues Abplanalp. “Conversely stagnant or reduced productivity squeezes margins, adversely impacts growth and inhibits marketplace competitiveness.”
Concern over a possible slowdown in the re-shoring trend was recently noted in a March 2017 Labor Department report indicating that the U.S. domestic workforce is not gaining productivity rapidly enough to provide for robust economic expansion that the U.S Government is projecting. Findings revealed that across the board, worker productivity fell 0.6% since January. A much bigger drop than expected, this statistic underscores the main challenge to greater economic growth.
Yet, despite the ups and downs of the economy over decades many companies have thrived through continuous productivity improvement. One such example is Nucor Steel, a plant headquartered along the Cooper River in Huger, South Carolina. With more than 150 facilities and $16 billion in sales last year, Nucor is well positioned to take advantage of an upswing in the domestic demand for steel. The company uses advanced technology to turn scrap metal into skyscraper-worthy support beams, paper-thin water heater linings and delicate sheets that can be molded into Christmas ornaments and fishing lures.
“Nucor is very progressive and nimble, expanding its range of products, processes and capabilities to reach new markets,” comments Abplanalp. “Their approach to maximizing productivity is consistent and company wide, which enables them to turn cold scrap steel into product very quickly and efficiently.”
Another key factor is the stability of Nucor’s workforce. Workers stay one, two and three decades with the company while encouraging family and friends to join them. Good benefits and pay-for-performance bonuses inspire loyalty. A no-layoff tradition, even during the Great Recession, means the Company has been able to retain its trained workers who are ready to stoke up when demand picks up. Nucor maintains the highest margins, lowest costs, and highest paid employees, with the lowest percentage of labor costs in the steel industry. This is something that can only be achieved through exceptional productivity.
A FIVE-PHASE APPROACH TO SUSTAINABLE PRODUCTIVITY
Achieving dramatic results and measurable benefits such as the previous example demonstrates requires a comprehensive, holistic approach to make re-shoring both viable and profitable; something the five-phase Tight Lines Performance AcceleratorSM offers. This principled strategic operating approach forges an exceptional and mutually beneficial relationship between a company and its various stakeholders.
PHASE 1: Analysis and Assessment
An initial consultation with company executives, senior management and team leaders is conducted resulting in a detailed holistic plan. Key operational and market issues are identified and reviewed, and a customized process is developed.
PHASE 2: Bottom-to-Top Issues Resolution
A comprehensive on-site information-gathering effort of all manufacturing and non-manufacturing operations is conducted. Working together with management, areas of process improvement are defined, prioritized and addressed.
PHASE 3: Top-to-Bottom Improvements
Process work is initiated in areas specifically targeted for improvement. The entire organization is evaluated and appropriate changes to its operational structure; facilities layout, training and marketing are implemented.
PHASE 4: Staying The Course
A company vision and long-term mission incorporating strategic and tactical goals is formulated and begins implementation. Sustainable standards of performance are established and responsibilities are assigned to maintain and further enhance efficiency, growth and profitability.
PHASE 5: Company Vision Reset
The company’s transformation into a purpose-driven company progresses as all departments continue to experience improvement through innovation, collaboration and efficiency. A path to a projected COGS reduction of 8-12% is put in place.
The gross margin improvement, greater competitive positioning and sustainable value creation can lead to OEM, supply chain relationships and ultimately, success for all stakeholders. “The ability to use productivity as a way to offset the headwinds of dynamic market shifts, both domestic and globally, makes re-shoring a smart option for companies looking to do more, more efficiently and more profitably,” concludes Abplanalp.