7/30/2019 ICE_ITALTRADE - Machines Italia Customer Line Integration MPI. http://slidepdf.com/reader/full/iceitaltrade-machines-italia-customer-line-integration-mpi 1/8 Integration New Opportunities fo Experienced Manufa turers By John R. Bran and George Taninec
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7/30/2019 ICE_ITALTRADE - Machines Italia Customer Line Integration MPI.
In their efforts to meet the rapid and continuously changing demands of customers in
the past quarter century, manufacturers have reconfigured nearly every aspect of thei
businesses. After repeatedly asking themselves a difficult question — “What value does
the production of a product bring to the business of manufacturing?” — many had to
face the stark reality: Production represents an ever diminishing share.
Controlling production and making products are no longer the heart of manufacturing
— and haven’t been for some time. Instead, leading organizations now work with
a team of partner companies, each of which brings its own expertise to meet the
needs of a particular customer group. As manufacturers adapt to this new realitythey optimize their business strategies and processes to create greater value for thei
customer — who promptly ask for more!
This new paradigm extends to the shopfloors of manufacturers themselves, as savvy
executives realize that their own suppliers — manufacturers of high-tech production
equipment and third-party line integrators — are often better at planning, designing
and installing new production lines and upgrades than they are.
How did this come to pass? Why do manufacturers now seek outside expertise to
execute a process so fundamental to their business successes or failures? A quick
review of recent structural changes in manufacturing offers insights in this growing
trend — and practical advice on how to profit from it.
From Mass Production to
On-Demand SatisfactionOnce upon a time, a single imperative drove North American manufacturers: Create
production lines that churn out products as fast as the machinery would allow and
then run every machine at full capacity — accepting as “unavoidable” the resulting piles
of inventory both in the plant and throughout the distribution system. Manufacturers
sought to maximize their machines’ output, thereby justifying (absorbing) the cos
of both equipment and labor. A good manufacturing facility was one that ran long
efficient production runs — without much focus on customization or demand
variation.
Today that world seems as ancient as the industrial dinosaurs that once stood astride it.
Customer Line Integration: New Opportunities for Experienced Manufacturers
7/30/2019 ICE_ITALTRADE - Machines Italia Customer Line Integration MPI.
Use of Inventory-Management Practices(% of U.S. and Canada Plants)
ource: IW MPI 2006 U.S. Census of Manufacturers, 2006 Canada Manufacturing Study
Manufacturers Are Suppliers And CustomersAs supply-chain manufacturing has taken hold, a
vendor community is developing to provide the
products and services that manufacturers still need, but
find unprofitable to maintain in-house. Manufacturers
are becoming these suppliers’ customers, and, like their
own customers, they demand total solutions instead
of products. For example, an increasing number
of winners of the ndustryWeek Best Plants Award
are demanding from their suppliers—and providing
to their customers—non-product customer value
attributes such as just-in-time and point-of-use
delivery, as well as on-site inventory management.1
Similarly, manufacturers who report the most progress
toward “world-class” manufacturing status are more
likely to be receiving and offering such value services
(see chart ), according to data from the IW/MPI 2006
U.S. Census of Manufacturers and the 2006 Canada
Manufacturing Study. For example, 59% of U.S. and
Canada plants that have made significant progress
toward or fully achieved world-class manufacturing
status receive just-in-time supplier deliveries vs. just
31% of plants that have made no progress toward
world-class.2 With the success that world-class
anufacturers have experienced by partnering with
component and material suppliers, is it any wonde
that manufacturers now seek similar success in line
integration by partnering with the vendors who provide
their production equipment?
Together, these structural changes, accelerated by new
technology and globalization, have forced manufacturers
to reinvent the production process. They’ve reduced
eadcount by implementing increasingly complex
roduction technologies that require integration
among a vast array of mechanical, electrical and
electronic components. And they’ve succeeded in
roducing more goods than ever while delivering them
at lower prices within ever tighter timeframes. Yet
these gains have been won at considerable risk, as the
ARC Advisory Group notes, “Engineering expertise onceaintained by manufacturers has shrunk to critically
ow levels. Many of the automation services that are
equired throughout the lifecycle of a plant or factory
can no longer be performed in-house. Users are
ooking to the next logical choice for these services—
the suppliers that provide them with the automation
roducts, systems, and software that keep their plants
unning.”
1 IndustryWeek Best Plants awardcompetition, IndustryWeek magazine, www.industryweek.com.
2 IndustryWeek ManufacturingPerformance Institute 2006U.S. Census of Manufacturers andthe 2006 Canada ManufacturingStudy, sponsored by dvancedManufacturing and theManufacturing PerformanceInstitute.
Within every challenge lies an opportunity. In their customers’ new demands for line integration and upgrade
services, smart machine equipment vendors are finding opportunities to grow their businesses, while
increasing both margins and customer retention rates. Indeed, service is the fastest growing segment of theautomation market today, according to the ARC Advisory Group. Their research shows that the worldwide
market for supplier-provided automation services is expected to grow at a 9.1% compound annual growth
rate over the next five years (see chart ).
Equipment vendors face the same
challenges as their customers.
Manufacturers no longer want to buy
machines; they, too, are looking to buy
solutions to their production problems.
The hardware that equipment providers
deliver no longer provides a competitive
differentiator for either the equipment
manufacturer that sells it or the
customer who buys it. ARC’s report notes,
“As manufacturers adopted standard,
commercial-off-the-shelf (COTS)
products and components to reduce the
cost of hardware they eliminated most
of the proprietary competitive advantage that automation suppliers could build into their hardware. With
hardware no longer a competitive differentiator, suppliers looked to their software and service offerings as
well as vertical industry expertise to make up for the losses experienced in the hardware business.”7
As manufacturers outsource elements of l ine design and implementation or upgrades, they do so at different
levels, creating opportunities for machine equipment makers of all sizes. Not all vendors will have the capacity
to deliver complete solutions, and not all customers will be able to invest in turnkey integration services.
Larger equipment manufacturers will work to capture the opportunities to provide full-line integration and
contract partnerships that provide continuous line integration and upgrade services.
Smaller equipment vendors will want to capture their share of this lucrative market by creating alliances
that offer extensive integration services, either with larger, full-service integrators, or with a group of small
manufacturers who, together, combine specialized expertise. In addition, there are significant opportunities to
provide line integration at each step of the integration or upgrade process, from consulting and engineering
and design through to spare-parts management and replacement. These opportunities also include installation
and training, system and device maintenance, and performance management.