The Four Pillars of Manufacturing Effectiveness

____________________________________________________________________________________________Bill CanisBill Canis

The Manufacturing InstituteThe Manufacturing Institute

October 15, 2008October 15, 2008

The Manufacturing InstituteThe Manufacturing Institute

ChairmanChairman: : Robert RatliffRobert Ratliff, founder and retired , founder and retired chairman, CEO and president, AGCO Inc.chairman, CEO and president, AGCO Inc.

TrusteesTrustees: Caterpillar, Dow Chemical, General Electric, : Caterpillar, Dow Chemical, General Electric, Procter & GambleProcter & Gamble

MissionMission: as the NAM’s nonprofit arm, strengthen the : as the NAM’s nonprofit arm, strengthen the manufacturing economy by--manufacturing economy by--• Increasing the knowledge of and respect for our industry; Increasing the knowledge of and respect for our industry; • Creating and implementing human capital strategies.Creating and implementing human capital strategies.

The Four Pillars of The Four Pillars of

Manufacturing EffectivenessManufacturing Effectiveness

1.1. Implementing innovation, including leanImplementing innovation, including lean

2.2. Using available financial resourcesUsing available financial resources

3.3. Attracting skilled workersAttracting skilled workers

4.4. Competing in the international Competing in the international marketplacemarketplace

The The Manufacturing FoundationManufacturing Foundation of the U.S. Economy of the U.S. Economy

• Engine of economic growthEngine of economic growth• ProductivityProductivity• Total compensationTotal compensation• InnovationInnovation• Contribution to international trade Contribution to international trade

Nothing's Made in America Any More?

0

200

400

600

800

1,000

1,200

1,400

1,600

1929 1940 1951 1962 1973 1984 1995 2006

Quantitiy Index (1929 = 100)

ManufacturingProduction

GDP

Manufacturing:Manufacturing:An Engine of GrowthAn Engine of Growth

-4% -2% 0% 2% 4% 6% 8% 10% 12% 14%

  Professional and business services   Information

    Finance and insurance   Manufacturing

    Real estate and rental and leasing   Retail trade

  Educational services, health care, and socialassistance

  Transportation and warehousing   Wholesale trade

Government   Arts, entertainment, recreation, accommodation,

and food services   Agriculture, forestry, fishing, and hunting

  Utilities   Other services, except government

  Mining   Construction

Contribution to GDP Growth (2001-2006)

0

1

2

3

4

5

2003 2004 2005 2006 2007 2008

Q4/Q4 Percent Change

Manufacturing

GDP

Source: Commerce Department, Federal Reserve, NAM forecast

GDP and Manufacturing Output

Manufacturing:Manufacturing:

ProductivityProductivity Powerhouse

0%

1%

2%

3%

4%

5%

1970s 1980s 1990s 2000-2006

Av

era

ge

An

nu

al P

erc

en

t C

ha

ng

e

Manufacturing Non-farm Business

Manufacturing: Manufacturing: Better CompensationBetter Compensation

0

10000

20000

30000

40000

50000

60000

70000

Manufacturing Rest of Workforce

20

05

An

nu

al

co

mp

en

sa

tio

n

(pe

r fu

ll-t

ime

wo

rke

r)

Benefits

Wages

Manufacturing: Jobs MultiplierManufacturing: Jobs Multiplier

Mfg

OtherSectors

0

5

10

15

20

25

Number of Jobs

Nu

mb

er

of

Jo

bs

(in

Mill

ion

s)

FIRE 4%

Const 4%

Mining 2%

Other 5%

Ag 8%

TCU 9%

Services 30%

Trade 37%

}

Manufacturing: U.S. Industrial R&D Manufacturing: U.S. Industrial R&D Outpaces Global RivalsOutpaces Global Rivals

137

100

72

16 6

56

21

43

7

0

20

40

60

80

100

120

140

160

180

200

UnitedStates

E.U. Japan Korea Canada

Bill

ion

s o

f P

PP

Do

llars Other

Manufacturing

Source: National Science Foundation

Manufacturing: Strong Contributor to Manufacturing: Strong Contributor to International TradeInternational Trade

0%

10%

20%

30%

40%

50%

1989 1993 1997 2001 2005

Tra

de

Sh

are

of

Gro

ss O

utp

ut

Manufacturing

U.S. Economy

Rest of Economy

The Four Pillars of The Four Pillars of

Manufacturing EffectivenessManufacturing Effectiveness

1.1. Implementing innovation, including leanImplementing innovation, including lean

2.2. Using available financial resourcesUsing available financial resources

3.3. Attracting skilled workersAttracting skilled workers

4.4. Competing in the international Competing in the international marketplacemarketplace

The Four Pillars of The Four Pillars of Manufacturing EffectivenessManufacturing Effectiveness

1. 1. Implementing innovation, Implementing innovation, including leanincluding lean

48%

39%

27%

9%

4%

3%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Large-CompanyPlants

SMM Plants

Percent of Respondents

Lean

Lean and Six Sigma

Toyota ProductionSystem (TPS)

Lean DisparityLean Disparity

Source: Industry Week

Best Practices – InnovationBest Practices – Innovation

Require Require leanlean of your suppliers – of your suppliers – Supplier Partnership Improvement Supplier Partnership Improvement Plan (SPIP)Plan (SPIP)

Get the Get the front endfront end right – ensure right – ensure customer requirements before customer requirements before starting productionstarting production

Develop a Develop a cultureculture of innovation of innovation

The Four Pillars of The Four Pillars of Manufacturing EffectivenessManufacturing Effectiveness

2. 2. Using available financial resourcesUsing available financial resources

Best Practices: FinancingBest Practices: Financing

Best Practices - FinancingBest Practices - Financing Utilize Utilize local, state and federal governmentlocal, state and federal government financing financing

and tax programsand tax programs Protect your receivables through Protect your receivables through letters of creditletters of credit or or

credit insurancecredit insurance Establish relationships with accountants and lawyers in Establish relationships with accountants and lawyers in

the destination country, who will then introduce you to the destination country, who will then introduce you to the the foreign banksforeign banks

Consider Consider outside investorsoutside investors not only as a capital resource not only as a capital resource but for deep industry and international expertisebut for deep industry and international expertise

The Four Pillars of The Four Pillars of Manufacturing EffectivenessManufacturing Effectiveness

3. 3. Attracting skilled workersAttracting skilled workers

Five major challenges Five major challenges to the future manufacturing workforceto the future manufacturing workforce

1.1. accelerating technologyaccelerating technology2.2. retirementsretirements3.3. poor K-12 educationpoor K-12 education4.4. college or bustcollege or bust5.5. industry imageindustry image

College or BustCollege or Bust

0% 10% 20% 30% 40% 50% 60% 70%

Will Enter a 4-year college

Will enter anassociate degree

program oradvancedtraining

Will lack the skillsneeded for

employment ordrop out of high

school

Where the Jobs Are…

Where 9th graders areheaded

Best Practices - WorkforceBest Practices - Workforce

Invest 3% or more of Invest 3% or more of payroll intopayroll into trainingtraining Team upTeam up with other manufacturers, government and with other manufacturers, government and

education to develop needed training programseducation to develop needed training programs Establish Establish internshipsinternships Start your own local Start your own local Dream It. Do It.Dream It. Do It. manufacturing manufacturing

careers campaign careers campaign (www.dreamit-doit.com)(www.dreamit-doit.com)

•Dream It. Do It., San Antonio, TX•Dream It. Do It., Springfield, MO•Dream It. Do It., So Central Pennsylvania•Dream It. Do It., Minnesota•Dream It. Do It., Jamestown, New York•Dream It. Do It., Milwaukee, WI

•Dream It. Do It., Kansas City•Dream It. Do It., Nebraska•Dream It. Do It., Northeast Ohio•Dream It. Do It., Southwest Virginia•Dream It. Do It., Seattle/Puget Sound•Dream It. Do It., North Central Texas•Dream It. Do It., Southeast Indiana•Dream It. Do It., Will County, Illinois•Dream It. Do It., Greater Phoenix•Dream It. Do It., Virginia-State•Dream It. Do It., Conexus-Indiana State

Dream It. Do It. Campaigns Dream It. Do It. Prospects

The Four Pillars of The Four Pillars of Manufacturing EffectivenessManufacturing Effectiveness

4. 4. Competing in the international Competing in the international marketplacemarketplace

29%

64%

31%

61%

0%

10%

20%

30%

40%

50%

60%

70%

Import less than10%

No Imports Export less than10%

No exports

Pe

rce

nt

of

Re

sp

on

de

nts

Lagging Global Activity Lagging Global Activity of Small and Medium Manufacturersof Small and Medium Manufacturers

Source: Industry Week

Best Practices – Global CompetitionBest Practices – Global Competition

CustomizeCustomize Follow major customers Follow major customers abroadabroad Use international standards to Use international standards to drive drive

continuous improvementcontinuous improvement Utilize Utilize state and federalstate and federal export assistance export assistance

The Four Pillars of The Four Pillars of

Manufacturing EffectivenessManufacturing Effectiveness

1.1. Implementing innovation, including leanImplementing innovation, including lean

2.2. Using available financial resourcesUsing available financial resources

3.3. Attracting skilled workersAttracting skilled workers

4.4. Competing in the international Competing in the international marketplacemarketplace

Thank You

Bill CanisBill Canis

The Manufacturing InstituteThe Manufacturing Institute

bcanis@nam.orgbcanis@nam.org

202.637.3109202.637.3109