The Lucrum Group

The increased focus on U.S. manufacturing by government and industry is certainly welcome.  However, it is missing a key element if we are to be truly successful and globally competitive.  Competition today is not about an individual manufacturer in the U.S. competing with an individual manufacturer overseas.  Rather, it is about U.S. manufacturing supply chains competing against overseas manufacturing supply chains—and U.S. manufacturing supply chains are significantly disadvantaged.  Until that missing element is considered in our policies and efforts, the U.S. cannot reach its full potential.

Background

U.S. manufacturing supply chains are faced with several key challenges that create this disadvantage.  These challenges impact our global competitiveness by negatively affecting time, cost and agility—particularly for complex manufactured goods in industries such as aerospace, defense, medical devices and so on.  Some of the specific challenges include the following.

More suppliers per chain

The U.S. has embraced outsourcing individual manufacturing processes to a greater extent than have companies in Europe and Asia.  That means that it typically takes a greater number of U.S. manufacturers to make a product, creating a larger manufacturing supply chain than what you would find overseas.  The more companies involved in the chain, the less efficient and agile it becomes.

Greater variety of disparate software tools

Many software programs are used in manufacturing, in categories such as ERP, MRP, CAD and CAM.  In the U.S., companies in a supply chain are likely to have a greater variety of software programs that don’t communicate well within each category. (i.e., ERP to ERP)  While some of the top tiers in a supply chain may do a great job of integrating software, that is not the case as you move to the lower tiers.  The result is a very ineffective ability to communicate up and down the chain that only gets worse as the chain gets longer.  This problem is compounded even further by the fact that many of the small- to medium-sized manufacturers often have no ERP or MRP at all.

Different cultures

In the U.S., our culture has largely been one of an individual nature.  In business, that translates into placing profit margins and shareholder value above sharing or partnering.  The challenge comes when individual companies with different strategies, priorities and cultures need to work together for a common goal.  That does not happen easily in the U.S., if at all.  However, European and Asian cultures are much more open to collaborating for the common good, which can help make for a powerful supply chain.

Granted, we’re not about to change American culture overnight, so we can’t really tackle this last challenge.  We’re also not about to suggest a mass consolidation of all the small- and medium-sized manufacturers, so the first challenge is out as well.  However, we certainly can and must address the software communications challenge.  By making the connections between supply-chain nodes much more efficient, we can minimize the impact of the other two challenges.

Solution

The U.S. government must lead the charge in the development of a secure, nationwide manufacturing coordination infrastructure.  Such an infrastructure would allow manufacturers of all sizes to plug in once and connect to many, regardless of disparate software packages.  This infrastructure bus would facilitate robust communications between companies with various software programs for ERP, MRP, CAD, CAM and other categories.  It also would allow participation by those smaller companies that have no software in some of the categories.

Imagine what could happen if such an infrastructure existed.  Buyers could quickly find the right manufacturer with the right capability and capacity at the right time, speeding assembly (or reconstitution) of the supply chain.  Technical data files, such as 3D models, could be communicated discretely across all participants while protecting intellectual property.  Production changes could be communicated seamlessly and instantly up and down the chain.  Suggestions for improvements could be made from anyone in the chain, helping drive greater innovation.

In short, the result would be a highly efficient manufacturing supply chain, regardless of the number or size of manufacturers involved.  The right manufacturing coordination infrastructure could help reduce both time and cost while increasing quality and innovation.  Just as the interstate highway system contributed 31% to U.S. productivity growth in the 1950s, a common manufacturing coordination infrastructure could have an immediate impact on productivity and the U.S. economy today.

Considerations

There are several very important considerations to building and running this infrastructure.

It’s not easy

While it may not be rocket science, it’s still very hard.  The first hurdle is developing new (or enhancing existing) standards that will enable the exchange of very complex manufacturing-related information.  Second is developing the algorithms and technologies that facilitate the interaction between the disparate software packages.  Third, and maybe the hardest of all, is driving adoption of these solutions.

The government shouldn’t own it

Because building the foundation is so hard, the U.S. government should take the lead on developing the technologies and standards that will make up the manufacturing coordination infrastructure.  However, private enterprises should handle deployment and management of the infrastructure because it will grow faster and stronger as a valuable commercial service than if it were a public utility.

The need for speed

There are a number of government programs that are already starting to address pieces of the solution, giving us hope for a solution in the not-too-distant future.  One example is the Manufacturing Services Network Models Project currently underway at the National Institute of Standards and Technology (NIST).  This project is developing standard production network models of manufacturing services to help address some of the challenges described above.

There is another government program to mention, but it should serve as a wake-up call for the U.S.  The South Korean government is already creating a manufacturing coordination infrastructure with a program called “i-Manufacturing.”  This infrastructure connects all participants in a manufacturing supply chain, especially the small- to medium-sized manufacturers.  It is already demonstrating substantial reductions in cost and time, helping make South Korean supply chains even more globally competitive.

The countries that do this first and get it right will create a significant competitive advantage for their country’s manufacturing industry.  The U.S. should certainly be one of those countries.