Few groups in US manufacturing are taking it on the chin these days like automotive suppliers. Those fortunate or savvy enough to have diversified are productive and growing, but many of them are suffering at levels heretofore unknown to them.

An article this week in USA Today ("Many auto parts suppliers failed to widen base," Money, 03/26/08) paints a gloomy picture of what was once a bedrock division of America's manufacturing base.

But in its gloom there can be found wisdom for manufacturing suppliers of all stripes, regardless of the industries or businesses you serve.
The piece begins with the well-known story of Plastech, and long-time, successful supplier to Chrysler in bankruptcy protection as of last month. Many more automotive suppliers, the story says, will follow suit in the coming months. And numerous factors are to blame: plummeting sales, pressures from OEMs and upper tier suppliers to cut costs, rising materials and energy costs, anemic credit lines, and competition with countries with low labor costs.

"'I don't think you'd be going out on a limb to say that the current economic environment for North American suppliers is probably the worst it's ever been,' says Stephen D'Arcy, global automotive leader for PricewaterhouseCoopers."

Gee, thanks for the lift, Steve.

The article goes on to describe how automotive suppliers got here:

"... when problems arose in the industry, the suppliers hadn't equipped themselves well to deal with them. In the good times, many did not invest in upgrading manufacturing processes to be leaner and more cost-efficient ... many suppliers couldn't see the longer-term benefit in investing the large amounts of money needed to reconfigure their manufacturing operations to be more competitive. The attraction to continue doing business with the same buyers - most North American parts suppliers are heavily dependent on U.S. automakers, and some do the majority of their business with just one - seemed to make sense when times were good and loyalty was rewarded with more contracts."

"There are many suppliers who were living in denial, and now that's all catching up with them."

But the wisdom in this piece begins with Laurie Schmald Moncrieff, owner of Michigan shop Schmald Tool & Die. Her words should resonate with all US manufacturers and they can't be overstated:

"'We always had the luxury of being order-takers and focusing inward. The phone always rang, and orders always came in. But now, because the market is turning over a lot, you have to continually be replacing customers. It's a new intensity of getting out there and keeping up with the market.'

And that can be especially difficult for smaller suppliers, who often earned business through personal connections and word-of-mouth, and didn't even keep a sales staff on hand. The smaller companies' products often go into the parts assemblies of larger suppliers, who in turn sell those to the automaker. Moncrieff says she's working to diversify into growing markets, such as helping other suppliers make parts for alternative-fuel vehicles. And she's attempted to earn new customers who work with automakers such as Toyota and Honda, but getting business from those companies can be difficult. Asian automakers take a long time to decide whether they want to do business with a new supplier, and will often visit the supplier's plants and the plants of the supplier's suppliers. It can be a grueling process for many small companies, but the payoff is big. Once an Asian automaker picks a supplier, the relationship could last decades.
"

And there's the rub - the landscape has changed, and suppliers in medical, aerospace, defense, and all industries should listen closely to their automotive brethren for the keys to survival:

• Diversify - expand your customer base, the industries you serve, and the products and services you provide. It's extraordinarily hard, but rewarding. And necessary.
• Get Lean(er) - cut costs, renegotiate contracts, improve efficiencies and services, and add value around (not just within) your products/services.
• Move On - along with a diverse customer base comes the freedom to abandon an expensive or unacceptable customer or escape from a contracting industry.

There'll be more Plastechs - especially if we don't listen, study and learn from them.

Spring has arrived in Atlanta. I have to tell ya, is sure beats Spring in the Midwest U.S.

With the warm weather come short sleeves, outdoor meals and rain showers.





During one such shower and a stop under a fixed umbrella recently, I noticed this tag underneath:

Hecho En China

I love the pidgin-like sound of this, and it is a perfect example of the global supply chain in action. I haven't seen such a clear, simple enunciation anywhere of how manufacturing is changing.

Imagine who sourced this umbrella. They must've sourced it to a Mexican supplier, who in turn sourced it to China, who printed the label for their customer, who sent back to their customer.

Suppliers as buyers. Buyers and suppliers. It's like a supply chain version of the Kinks' "Lola."

"Its a mixed up muddled up shook up world ..."

But as interesting, unsettling or exciting as it may be to you, it IS. And small and medium sized manufacturers must plug into these emerging channels with aplomb and smarts.

Automobiles, planes, farm and heavy equipment - all are manufactured by quilts and networks of suppliers from multiple countries. I guess it should come as no surprise that an umbrella manufacturer would follow the same logic.

But still, I find it compelling.

Manufacturing isn't just changing - it's already changed. And change is what happens to us when we weren't on the boat in the first place.

Facebook

Ever have doubts that the Internet is being used by manufacturers? Ever think that your own Web site isn't used for "serious" research - like, for instance, customers looking for you to make things for them or do business?

Take a look at some of the largest work groups established on Facebook. (Yeah, I said Facebook.) Names of the companies are accompanied by the total members in that group.

• Shell Oil - 7,335
• General Electric - 9,024
• Vodafone - 7,438
• Intel - 8,157
• Apple - 8,729

If these guys are using Facebook to network amongst themselves, do ya think they might be using the Web to look for you?

PikiWiki

Here's another free collaboration tool that manufacturers and engineers may find useful. PikiWiki lets you create and manage a Web page by dragging & dropping all kinds of files into it - documents, poser points, video, images, whatever. But the best part is whoever you invite can come in and do the same thing. While this tool looks and smells a little childish in its approach, the concept can help you work more effectively long-distance.

Just don't let your colleagues see this on your machine, or you might not live it down for a while.

Over on MFG.com, the Interim Tax Rates For Exported Goods enacted by the Chinese government on exported goods in January '08 have been translated into English and are available as a PDF file for download.

For anyone currently sourcing to China or considering such a move or expansion, MFG.com has a page dedicated to China Sourcing that you'll want to check out. And if you're a supplier, you'll want to view this information as well, as it can help you develop long-term strategies for your business and capitalize on these changes.

The main push of the page is to point out China's on-going shift from low-cost country to higher functioning technology provider. Think Japan in the 1970's or Korea in the 1980's. China's current, similar shift began with its membership in the World Trade Organization in 2001; but it wasn't until June of '07 that changes were made to offset the economic conditions that made China the preeminent choice for companies to use for low-cost manufacturing.

Along with the above-mentioned translation, here's some of what you can find through MFG.com's China resources page:

• "Surviving China's Rapidly Changing Sourcing Tides" - You can listen to and view this Webinar originally broadcast in July of '07. Hosted by SpendMatters founder and sourcing guru Jason Busch, it contains a wealth of info and commentary on the shifting prospects of sourcing to and competing with China. You may also download a printed script of the Webinar broadcast, as well as get the Q&A that followed in printed form.
• VAT Rebates Affected In June '07 - You can download translated lists of all products and materials affected by the VAT rebate cancellations or reductions from earlier in 2007.
• Executive Briefs - Read and download executive briefs for buy and supply side professionals that help to define the shifting Chinese economy and manufacturing base, and how best to handle these movements.

In a recently released study, it appears that the China cost is rising and other LCCs are emerging as viable alternatives to manufacturers doing business there.

In "China Manufacturing Competitiveness 2007-2008" (conducted by Booz Allen Hamilton and the American Chamber of Commerce - Shanghai), this shift is examined from results gleaned from 66 mostly foreign-owned companies in the manufacturing-rich Yangtze River Delta.

(You can view a summary of the survey here.)

Among the findings of note are 70% attribute China's rising costs to tightening of the RMB, while over half said that rising labor costs were the driving force.

Also worthy of mention: about 20% say their parent companies have firm plans to move some of their work to "other" LCCs - outside of China.

Now THIS is what we're talkin' about. A site that's stone cold rockin' for manufacturing and design geeks, and devoid of hype.

Can it get any better?





iMechnica is hosted and nurtured with love by the Harvard School of Engineering and Applied Sciences. It's a community of students, faculty and professionals that are knee deep in the world of mechanics - "mechanicians," they call them.

But, oh - the content on this site ... you're going to have a hoot just playing "Hide The Cursor" on this one.

Anyone can join the site, gaining access to a goldmine of engineering pragmatism and knowledge. It's entirely community-contributed, so there are rough spots.

But you'd have to click far to find a more complete, competent online technical community.

A recently released study from Deloitte Consulting entitled "Why Settle For Less? Deloitte Consulting 2008 Outsourcing Report (PDF)," offers some interesting lessons for anyone considering or dead in the middle of outsourcing. As a matter of fact, both outsourcing professionals and suppliers can gain valuable insight into the pitfalls and rewards of any outsourcing relationship.

Consider these findings from the report:

• Over 1/3 of all respondents said they wished their companies had spent more time evaluating and selecting vendors.
• The "dissatisfied" sampling identified these as the source of their negative experiences: underestimated scope; higher-than-expected costs; and poor quality communications, service, and reporting from their suppliers.
• Nearly half of the executives participating said that, if they could start outsourcing projects over, they would define service levels that matched their companies' business goals better.

Planning and communication. Both sides of any outsourcing relationship should focus passionately on both, whether the other does or not.

In fact, especially if the other doesn't.