The U.S. manufacturing industry is back in the black.
At least that’s the read out based on a newly released 2014 ranking of the largest U.S. public manufacturers. With domestic manufacturing revenues exceeding $6 trillion in 2013 and the Institute for Supply Chain Management reporting 13 consecutive months of expansion in the manufacturing sector, faint signs of recovery are there, but uninspiring.
What’s certain about a rapid domestic manufacturing recovery is that it isn’t. Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation, believes recovery will be moderate through 2015 and asserts, "It remains clear that factory sector activity is being impeded by the persistent questions and difficulties of a sluggish U.S. economy and the numerous region-specific issues in the global business picture."
Could the answer to local recovery lie in global business?
For decades, manufacturers have located close to supply and demand. These strategies have shifted to address market trends: from on shoring to maintain greater control, to off-shoring in order to reduce labor and energy costs, to re-shoring with the desire to lower logistics costs and increased speed-to-market.
A new concept of next-shoring, introduced by McKinsey thought leaders earlier in 2014, highlights the trend of moving manufacturing close to demand and innovation to develop the agility required to enable product variety and customization.
This emphasis on physical proximity has been a focus for manufacturers in the past. But in a mobile, social and digital era, U.S. manufacturers should redefine proximity in new ways to increase competitiveness and accelerate economic recovery.
According to Tom Coughlan in Enhancing Innovation through Virtual Proximity, virtual proximity is the level of emotional closeness between individuals, leveraging information and communications technologies to build and maintain relationships.
To harness the collective intelligence of their global suppliers, partners, customers and team members, manufacturers must embrace virtual proximity to build these connected relationships, while they stabilize and grow both local and global markets.
Obviously, this model requires balance. Companies need physical proximity to key inputs to enable just-in-time manufacturing and reduce distribution costs when demand is close at hand. But harnessing the power of virtual proximity holds promise for building the manufacturing ecosystem of the future. Here’s how to make this work:
- Get Closer to Suppliers: Establish deeper relationships with suppliers through face-to-face interaction on collaborative decision environments. Integrate your supply chains, provide education on your processes and systems, and continuously improve their capabilities. Build win-win relationships, rather than transactions that benefit only the most powerful party.
- Draw Closer to Demand: Use big data to understand both local and global demand and how these patterns are continuously shifting. Look for micro-trends that could have macro implications. Use virtual centers of excellence to customize products and services for rapid distribution, much the way Zara taps its insights into fast fashion sales to take regional trends global.
- Tap the Power of the Network: Innovation is at hand: It’s in the minds of your current and prospective employers, your suppliers and your customers. Give them the tools to share their knowledge and work collaboratively on solving business problems.Use data analytics to support your best thinkers and social influencers and incentivize them to train others. It’s part of our DNA to share and innovate. Provide key contributors with the video, content, and audio tools they need to contribute ideas face-to-face, use meeting recordings and process and document mockups to continue work offline, and teach others. Millenials, who are digital natives and free thinkers, may help you unlock game-changing ideas. Manufacturers need them: They’ll constitute 50 percent of the workforce by 2020.
- Redefine Proximity to Talent: Cast a wider net to attract worldwide talent. Invest in building a manufacturing ecosystem that lifts the capabilities of both current and prospective employees. Respect employees’ individual work preferences – to live and work as they see fit, learning and contributing around the clock, locations, and devices. And help global teams build close, personal relationships they can leverage to solve complex problems for the company – and further their own careers.
As U.S. manufacturers plot their next move, they would do well to heed the call of innovation and talent streams. Come closer, both say, by blending the physical and virtual to create a new model of collaboration that not only unlocks the door to new revenue streams — but also individuals’ futures.
John Paul Williams is the Director of Industry Solutions at Polycom. You can reach him by email at JohnPaul.Williams@Polycom.com.