Global Manufacturers Lack Flexibility Described as Critical to Their Growth, Finds Accenture Study

Still, manufacturers remain optimistic as they make operating model improvements

Business Wire
Global Manufacturers Lack Flexibility Described as Critical to Their Growth, Finds Accenture Study
.

View photo

Areas in which manufacturers plan to invest to shore up their operating models (Graphic: Business Wire) …

NEW YORK--(BUSINESS WIRE)--

The vast majority of global manufacturers lack the ability to swiftly respond to marketplace uncertainty and volatility despite the fact that they believe flexible operations are vital to future growth, according to a new Accenture (ACN) study. Still, broad optimism about the outlook exists among manufacturers, with 85 percent of respondents expecting growth in the economies of their top markets through 2014 as they commit to improving their operating models.

More specifically, 82 percent of the 250 global manufacturers participating in the study, “Accenture 2013 Global Manufacturing Study: How Leading Manufacturers Thrive in a World of Ongoing Volatility and Uncertainty,” agree that their ability to dynamically move production from one facility to another or to change their product mix at a plant will be critical to growing their business. However, at best only 27 percent believe any component of their operating model was very effective at accommodating a shift in resources and activities to alternate locations. Additionally, only 24 percent of those surveyed thought their company is highly adept at sensing market changes or opportunities before their competitors. Consequently, 72 percent plan to improve their operating model in the next year.

“Manufacturers are finding that their existing operating models are not effective in this new volatile marketplace, but there is clear evidence that they are responding by making a range of investments to create more flexible and consistent operations in the future,” said Russ Rasmus, global managing director of the Accenture Manufacturing practice. “Those investments are being made across operating model components, ranging from talent, business processes, policies and capabilities; to the information technology infrastructure, organizational structure and production facility networks to drive flexibility into their operations.”

One key operating model decision involves the balance of investment between new and existing plant assets. Sixty-six percent of responding manufacturers are focusing on extending the life and contributions of existing assets. To do so, Accenture found that 67 percent will apply lean principles; 49 percent will apply total productive maintenance, 48 percent will apply automation and technology and 21 percent will apply analytics.

“By improving the reliability of existing assets, manufacturers have an opportunity to boost capacity without buying equipment or building facilities,” said Rasmus. “With this approach, they can also scale up and down with greater efficiency as business requirements change, while also optimizing their productivity.”

Manufacturers also are investing in and integrating digital capabilities into their operations, with 77 percent planning to invest in information technology. Topping their list of IT priorities is performance management (53 percent) – the development of dashboards and metrics that can help management monitor performance and provide early warning of changes in the business and operations environment.

“Manufacturers are making information technology investments a higher priority as they focus on automation and driving a digital strategy across their enterprises,” said Rasmus. “In tandem, manufacturers will have to put in place the right talent and skills as part of the effort to maximize the return on these investments.”

Also a reflection of the respondents’ optimistic outlook, 66 percent of the manufacturers reported that they will expand their workforces, and 76 percent had increased their workforce in the last two years. Hiring in the manufacturing sector will continue to be strongest in Brazil among global companies represented in the study.

Skills gaps are most prominent among the skilled trades labor workforce, where 38 percent of the manufacturers reported a significant gap. Thirty-five percent said the same about their general labor workforce. To close these gaps, manufacturers most frequently said they tie performance rewards to an individual’s success and enterprise profitability (46 percent) and offer competitive salaries and benefits (45 percent).

Relocations and contract manufacturing

As they focus on their operating model, manufacturers are also modifying their plant network and placing the greatest emphasis on new market entry, according to the Accenture report. Since 2011, 42 percent of the manufacturers had relocated operations, with China and Brazil being the top beneficiaries of those moves, and 49 percent established new manufacturing sites, with China, Brazil and the United States being the most common locations, according to the study.

Additionally, 76 percent of the manufacturers expect to make greater use of contract manufacturing through 2014 which can help them create greater flexibility in their operations and avoid costs associated with building or buying new facilities, equipment or hiring personnel. More than half (54 percent) will do this to relieve short-term capacity constraints while the balance of the respondents (46 percent) are increasing its use as part of a long-term strategy. The increased use of contract manufacturing will be most prevalent in Brazil (97 percent) and least in France (67 percent) and the United States (66 percent).

To read the full report visit: www.accenture.com/manufacturingresearch.

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.

MULTIMEDIA AVAILABLE:http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50754491&lang=en

Contact:
Accenture
Barbara Lyon, + 703-947-1838
barbara.d.lyon@accenture.com

View Comments