The Importance of Advanced Manufacturing to the Changing Global Economy
There are many definitions of “Advanced Manufacturing.” However, the truth is that Advanced Manufacturing is not a static entity. What was considered advanced decades ago is now traditional, and what is advanced today will be considered mainstream in the future. Most simply, Advanced Manufacturing is about innovating products and processes in the manufacturing cycle to operate more productively. Some research talks about utilizing technology to gain these innovations, others attribute the changes to the role of the customer in the manufacturing process. Regardless of the reason, it is clear that the global economy is demanding more from manufacturing, and Advanced Manufacturing seems to be the answer.
Participating in Ausbiotech’s Australian Advanced Manufacturing Summit, Cincom’s Business Development Manager, Graeme King, says:
“Economies that have had the most success in Advanced Manufacturing are those that recognize that it is not just about products. Advanced Manufacturing includes the full suite of activities from the concept, research and development and design stages all the way through to post-sales services. It is about adding value to the production line, and it is very much about securing a place in the global supply chain.”
Over the last half century, some of the most drastic changes to the industry have been a consequence of a redistribution of manufacturing skills and hubs in the global supply chain. Australia in particular felt the brunt of lower-cost plants with businesses such as Pacific Brands, South Pacific Tyres, Sidchrome, Bridgestone, Mitsubishi, Nissan Golden Circle and now Holden (planned complete closure by 2017) all closing Australian operations. Similar effects were seen in other Western countries such as the USA and the UK, to a lesser extent.
Most recently, however, along with moves to Advanced Manufacturing, industry writers are predicting a move to “near-shoring” or “on-shoring.” This trend will see manufacturers developing their products closer to where they will be sold in an attempt to accelerate time-to-market and better meet retail and consumer demands. According to IndustryWeek, the rise in a more technical labor force to manage supply-chain operations, rising wages in Asia and higher shipping costs have also contributed to the shift.
Both the UK and the USA have already seen a rise in businesses bringing manufacturing closer to home. In a paper by Tamara Ogilvie for Enterprise Connect, we see that:
“One in six UK manufacturers brought previously outsourced production back to the UK in 2013, compared with only four per cent of manufacturers who offshored a new aspect of their operations in the same year. In the same year in the US, more than half of the surveyed manufacturing executives by the Boston Consulting Group were planning to bring production back to the US from China and elsewhere.”
Australia has not yet followed this trend with business statistics still favoring offshoring. Ogilvie suggests that high wages despite increased unemployment could be to blame. The UK, USA and Australian economy case studies bring to light the importance of innovation in the manufacturing cycle. In our connected world, there is little margin for error; cost and the consumer are still king.
The Ripple Effect of Advanced Manufacturing on the Global Economy
Because the impact of a healthy manufacturing sector has a ripple effect on the economy, it’s important for nations to be able to measure where they stand. The following chart, taken from the Advanced Manufacturing Partnership (AMP), shows economic activity generated by $1 of sector output in the U.S. economy.
On average, each manufacturing job supports 2.5 jobs in other sectors, and at the upper end, each high-tech manufacturing job supports 16 others. Compared to all other sectors, manufacturing has the largest multiplier. Over the next 10 years, Advanced Manufacturing will become increasingly globally linked as automation and digital supply-chain management become the norm across enterprise systems, thus extending this “ripple effect” worldwide.
The following three charts, created from IndustryWeek 1000 (2014) data, show the distribution of publicly held manufacturing companies by country and region. What is interesting about this is not that the largest companies are in the United States or Europe, but that the distribution of highest-growth firms (those firms with growth rates above 30 percent) is different than the distribution based on revenues. So, although companies in BRIC countries do not have an overall presence, they have a higher number of companies with a higher growth rate than the US, EU and other countries.
- EU = European Union
- BRIC = Brazil, Russia, India, China
- Other = Australia, Indonesia, Malaysia, New Zealand, Philippines, Singapore, Bermuda, Canada, Cayman Islands, Chile, Mexico, Hong Kong, Japan, South Korea, Taiwan, Thailand, Turkey, Israel, Saudi Arabia, Norway, Switzerland, South Africa
How Cincom Defines Advanced Manufacturing
As stated earlier, in its simplest form, Advanced Manufacturing is about innovating products and processes in the manufacturing cycle to operate more effectively. However, Cincom takes the definition a step further. When we use the term, “Advanced Manufacturing,” we mean that the process from inquiry to delivery (and after) is seamlessly integrated and driven by real-time data related to every aspect of the business. Decisions are made with confidence and with customer satisfaction as the end goal.
These are the characteristics most frequently found in our definition of Advanced Manufacturing:
- The ability to concurrently produce configure-to-order (CTO) and engineer-to-order (ETO) products as well as utilize project-based manufacturing and mixed-mode production capabilities with ease.
- An emphasis on demand-driven manufacturing, where the buying and selling process is an integrated extension of the manufacturing operation.
- A customer focus, using lean manufacturing techniques that eliminate anything that does not deliver or increase customer value or improve the customer experience.
That’s why Cincom chose to take a modular approach to the many advanced capabilities that make up our Manufacturing Business Suite—all of which are built upon the popular Microsoft Dynamics® AX platform. Microsoft Dynamics AX is a robust system that includes capabilities for financial management, business intelligence and reporting, supply chain management and human capital management. Microsoft Dynamics partnered with Cincom to extend the capabilities of Microsoft Dynamics AX ERP to meet the special needs of CTO and ETO manufacturers because we have deep industry experience sharpened from successfully serving these types of manufacturers since 1968.
Cincom modules are designed specifically for manufacturers of highly engineered products and services. They intensify Microsoft Dynamics AX features with critical components for CTO and ETO manufacturers, such as advanced capabilities for:
- Configure-Price-Quote (CPQ)
- Product Data Management (PDM)
- Project-based Supply Chain
- Indirect Cost Allocation (ICA)
- Project-based Manufacturing
- Earned Value Management
- GovCon Compliance
Together, Microsoft Dynamics and Cincom have created the first ERP system developed specifically for the needs of CTO and ETO manufacturers. It combines the comprehensive functional scope and highly adaptable framework of Microsoft Dynamics AX and Microsoft Dynamics CRM with specialized selling, engineering, contract, project and aftermarket service capabilities from Cincom natively embedded throughout.
Many of Cincom’s extended capabilities are modular and can be added to Microsoft Dynamics AX individually to meet specific needs. However, when the full suite is combined with the proven breadth and user familiarity of Microsoft Dynamics AX, these capabilities deliver an advanced, end-to-end, highly industry-focused ERP solution that goes beyond anything available until now.