Optimism, Cost Concerns in Fifth Annual Multinational Manufacturing Pulse Survey

Manufacturers on three continents confident about value chain improvements, but concerned over cost pressures, according to TBM Institute executive poll

Durham, NC — October 26, 2007 — Just over half (56 percent) of manufacturers sampled in six large industrial nations are optimistic about the year ahead and see many opportunities to gain market share through value chain improvements, although the majority (59 percent) of respondents say they are concerned about cost pressures, according to the survey results released recently by TBM Consulting Group.

Conducted in the third quarter, the survey for TBM's fifth annual "Multinational Manufacturing Pulse" report polled 3,082 executives from midsize to large firms in six major manufacturing countries in the Western Hemisphere: the U.S., U.K., Germany, Spain, Mexico and Brazil.

Opportunity to Leverage Value Chain for Growth

The survey revealed that while executives surveyed in the U.S., U.K, Mexico and Spain are optimistic about the future of manufacturing and envision many opportunities, respondents in Germany and Brazil are not as hopeful and expect more challenges in the coming year.

When asked to identify the greatest opportunities in the year ahead, manufacturers felt most optimistic about "value chain improvements" (70 percent) and "new product development/innovation" (49 percent). Other areas where respondents foresee opportunities include: global market expansion (38 percent); business improvement programs (38 percent); and human capital (38 percent).

Main Challenge: Costs

In thinking about the future, more than half (62 percent) of all manufacturers identified "cost pressures" as the main challenge for 2008, superseding concerns about "rising energy costs" (11 percent) and "quality issues" (23 percent). Additionally, more than one-third (36 percent) of respondents cited "people issues" as a source of angst over the next year.

"While cost pressures are always on the minds of manufacturers, this year's survey reveals a heightened concern," said Anand Sharma, CEO of TBM Consulting Group. "To compete in the global economy, leaders in these countries are under increased pressure to find innovative ways to manage the cost of doing business. By concentrating on value chain improvements, companies can sustain profitability and become nimble at responding to changes and opportunities in the marketplace."

Manufacturing Productivity Up

The majority (91 percent) of manufacturers surveyed in all six nations reported productivity gains over the past year and identified "continuous process improvement (Lean)" as the leading source of improved productivity (U.S. - 52.5 percent; UK - 50 percent; Germany - 47.4 percent; Spain - 75 percent; Brazil - 36.8 percent; Mexico - 36.3 percent).

Additionally, when asked to specify the productivity/quality improvement programs being used, nearly three-quarters (72 percent) of manufacturers identified kaizen as their primary method, up 29 percent from last year. Respondents also ranked Lean (63 percent) and ISO certification (84 percent) among the top three methods.

Unlike last year's survey in which new product development/innovation was identified as the leading source of growth, this year, manufacturers cited "responsiveness to market" (20 percent) as the primary engine for growth.

Similar to last year, resistance to change (40 percent) continues to be the greatest barrier to productivity improvement followed by a lack of leadership (25 percent).

Workforce Concerns: Lack of Innovative Thinking

Thirty percent of manufacturers polled in all six nations cited "lack of innovative thinking" as the greatest shortcoming of the workforce. Nevertheless, 72 percent of respondents report that they are "somewhat satisfied" with their companies' level of innovation.

When asked where innovation is most active in their value chain, manufacturers responded with the following:

  • New Product Development (39 percent)

  • Plant Floor (25 percent)

  • New Technology (11 percent)

Survey participants also identified the following as areas of significant weakness as it relates to the workforce:

  • Work ethic/motivation (20 percent)

  • Flexibility/adaptability (22 percent)

  • Technical skills (16 percent)

"The value of human capital to an organization should not be underestimated or overlooked; there should be continuous awareness of the state of the workforce and its level of engagement, empowerment and integration," says Mike Serena, managing director with TBM's LeanSigma Institute. "Today there is a toolbox full of techniques in the lean factory to activate and compel workers. By encouraging all workers to think, eliminate waste and find ways to contribute and add value, companies will be able to create a compliant, fully engaged workforce."

The survey is conducted annually by the TBM Institute in order to understand the core concerns of manufacturers in six industrial nations in the Western Hemisphere. This is the fifth year TBM is conducting the survey.