The Manufacturing Industry Blog

Branding is a constant challenge for manufacturing companies across the globe.  As Xerox undertakes its biggest rebranding effort ever, I thought it would be interesting to take a look at some recent rebrandings and the struggles companies face in the process.

Recently, Infosys and Satyam underwent massive rebranding campaigns to move client perception from a low cost Indian providers to a leading business technology providers.  In these efforts, although the corporate message contains all the necessary content and momentum, the client experience is still lagging.  According to Forrester, Infosys Corporate Image and Client Experience don’t yet mesh, and it will take some effort on Infosys’ and Satyam’s part to close the gap.  It is easy to tell the world that you are going to be a different company through graphical image changes, however, it is extremely challenging to pull that through all of the dimensions of a global manufacturing company.

True rebranding at this level is not just an effort of populating web sites with new images, it is also ensuring the client makes the journey with you.  In a global market, it is difficult to make this happens.  Galen De Young touches on all the aspects of failure for rebranding efforts in the article Why Rebranding Often Fails.  The items highlighted are: 1.) Lack of true change, 2.) Make too big a leap, 3.) Lack of internal alignment, 4.) Failure to Clarify Positioning.

As manufacturers today move to a more services-oriented offering mix, the need to take all these factors into consideration for any rebranding effort is imperative.  Companies are required to live the new image prior to announcing the world.  Xerox has been evolving from a hardware provider to a business process outsourcing provider through the leadership of Anne Mulcahy and Ursula Burns, while working the internal cogs for some time.  Now that we have made the announcement, how do you think Xerox will fare?

I started the year reading new publications on predictions and trends in the manufacturing industry, new technologies, development of SaaS and SOA, AMR Research’s Manufacturing 2.0, Sustainability….you name it.  And then Oil hit $100 a barrel.

This could be the biggest issue affecting the manufacturing industry, above and beyond the trends and technologies.  Oil prices are already causing drastic changes in the automotive and airline industries, not to mention the burden on the chemical industry on which all industries rely.

More importantly, continued increases in oil prices will continue to shift economic power to other regions of the world, and away from the United States.  More and more manufacturers will be moving to oil rich areas of the world to help reduce costs and risk in the supply chain.

What do you think $100 Oil will do to the manufacturing industry?

I will be on vacation for the next two weeks, and back posting December 19th. In the mean time, give some more thought to collaboration in the manufacturing arena.

In a recently published article, Forrester discussed how the Enterprise Content Management (ECM) market is moving towards a mini-vertical focus.  According to this November 2007 report, The Content Management Market Goes Mini-Vertical, although 89% of top 100 technology vendors target manufacturing, only 49% of ECM companies target this industry.  What is your experience with vertical ECM?

The significantly smaller number of ECM vendors targeting manufacturing organizations may be a function of the specific requirements for content and records management that exist in manufacturing.  Areas like mitigation and risk, product development,  and government regulations compliance reporting have given rise to submarkets like eDiscovery and collaboration, which are not considered “vertical.”  The diverse nature of the manufacturing industry may restrict vertical ECM applications due to potential conflict with the existing Information Architecture created by ERP, MES and other mainline manufacturing enterprise systems.

It appears that manufacturing companies will continue to deploy departmental ECM systems that will have to integrate into the submarket solutions to fully address the specific needs of the organization.

Today, The Wall Street Journal reported that oil prices slipped slightly as the dollar continues to lose ground.  Additionally, the world is hoping that OPEC increases oil production as an outcome of the December 5^th meeting.  No industry is hoping for this reprieve more than the U.S. chemical industry.

The chemical industry is considered the backbone of American manufacturing.  According to a recent survey by the National Association of Manufacturers, AMR Research and The Manufacturing Institute, over 55% of U.S. manufacturers are significantly dependent on the chemical industry for basic chemicals, synthetics, paints and coatings, etc. that are used in almost everything from auto parts, to pharmaceuticals to diapers.

In a WSJ recent article on Dow Chemical, the CEO, Andrew N. Liveris discussed the difficulties in getting organizations and the government to understand the issues engulfing the chemical industry.  U.S. industries continue to collide over responsibility surrounding energy usage, pricing and costs, and without resolution, more and more chemical companies will be forced to move offshore.  Over time, Dow has closed 20 plants, and chemical companies no longer build in the
United States.  None of the 80 planned new builds are in the U.S.

U.S. manufacturers will be squeezed by cost pressures associated with the chemical industry cost burden.   Without help on the issue, it becomes difficult to manufacture profitably from a U.S. base.  As I have mentioned in a previous post, Growth of the U.S. Manufacturing Industry, innovation and entrepreneurship will remain in the
U.S., but the manufacturing operations will move offshore to remain competitively priced.

General Motors, Ford Motor Company and Toyota Motor Corporation all posted their quarterly numbers this week, and GM and Ford remain underwater.  The American Auto industry continues to loose ground to Toyota and other foreign manufacturers, as the auto makers struggle with less than stellar turn around progess.

The PricewaterhouseCoopers Automotive Institute predicts in the Global Automotive Financial Review 2007 edition, that automotive vehicle assembly will increase 19.1 percent from 2006 to 2014, and most of this growth will come from China.  While American manufacturers focus internally on turn around plans and operational improvments, imagine what will Toyota be able to accomplish in the growth areas of the global market?  Lacking the stable business practices and successes that continue to push Toyota further and further ahead in the global market, GM and Ford it appears will continue to languish.  Without huge progress in 2008, the great strides that have been made with the UAW will be too little, too late.

In response to the pressures of product complexity, competitive pricing, supply chain transparency and partner choices, manufacturers have embraced innovation.  According to The Economist, a company must replace 10% of its revenue stream with new products and services every five years in order to stay competitive in business. Through innovation, companies develop the flexibility to respond to market drivers, product niches and competitors.

However, when thinking about “product”, let’s consider more than just the unit shipped.  As manufacturers have become increasing closer to the customer as a result of the web and Boomerang Effect, the “product” has actually become the entire client experience.  This includes the physical product, the services associated with and around the product, the delivery of the product and services, and the environment the product produces.  These are all important areas where innovation can, and must occur.

The key will be effective collaboration.  It is critical to collaborate across the complete lifecycle of a product.  The ability to make design information available to marketing, customer service, and other functional areas, as quickly as possible, enables a free exchange of ideas that avoids poor design, improves the services associated with products, and creates a cohesive supply chain.

Surprisingly, much of the infrastructure needed for collaboration exists today within organizations and remains under utilized.  There is great potential for improvement; however, manufacturers continue to struggle with internal culture inhibiting collaboration and on which technology to standardize.  Will spreadsheets remain the most prevalent design/engineering collaboration tool in use in the industry today, as stated by Manufacturing Business Technology?  Or, will collaboration systems finally become part of the organizational fabric that will lead companies to success in the manufacturing market?

Even with the abundant research available on the importance of consistency during the client experience, it is not surprising to see a number of industries and companies miss specific segments of their client base.  Manufacturers have been taken a bit by surprise by a Boomerang Effect, according to RightNow Technologies.  Jason Mittelstaedt, states “as buyers have migrated to the web to complete research, they have also brought with them a direct line from manufacturer to buyer that did not exist 5 or 10 years ago.”  My last post on brand site “car speak” in the automotive industry is a great example.

As manufacturers become more involved with clients directly, they will need to apply high touch marketing concepts to customer touch points from the web, to the dealer, to customer service – throughout the entire product and client lifecycles.  With a portfolio of personalized tools – micro sites, brochures, e-mail, web content and digital collateral – new products and services can be marketed directly to targeted customers with precision and positive results.

Issues like confusing “car speak” can weaken the relationship with specific segments, and this presents an opportunity for manufacturers to quickly address gaps in their client experience strategy.  Missing these opportunities will cause relationships to become vulnerable to the efforts of competitors – A huge issue in the highly competitive markets.  The rise of specialized websites like AskPatty.com where women can get help in purchasing vehicles emphasize the need to do more to solidify manufacturers’ relationships with specific segments.

After seeing the slick, new advertising campaign for Cadillac, where Kate Walsh depicts a woman who is excited by her car, I thought that I would take a look at some other arenas of car buying engagement to see if the client experience for women is consistent across all customer touch points.

The first stop was the web, as buyers attack car research there first. Women make up half of new vehicle buyers with web access. But the cool, thrilling experience you get in the commercial is no where to be found on the web. The car websites that I visited were targeted towards men, and specifically, men who know about cars. Sites use terms that females tend not to understand. Mechanical terms cause the biggest issue. Women I spoke with can “venture a guess,” but do not understand what terminology like “suspension,” “power train,” and “trim level” actually mean.

Current research from Forrester reinforces the importance of the customer experience at all levels.  In the article Female Car Buyers Are Lost in Translation, they report on issues women have with brand sites.  It is surprising to see the entire auto industry neglect such a large and growing segment of its customer base. If manufacturers want to own more of the customer experience, versus handing it over to dealers, then they will have to engage women, and other segments, more effectively. As clients expect more from automotive engagements, dealers are adapting with specialized dealerships with focus on specific groups, like minorities and women. Potentially, pitting dealers against each other and reducing margin.  Take a look at this helpful site: AskPatty.com.

To boost competitive position with consumers, brand site owners must do more to engage various segment site visitors. For example, what about virtual personal shoppers that guide women through the “build a car” function, or something as simple as a glossary of terminology available on the web? Wikipedia anybody?

In an article on Union Math, Union Myths, The Center for Union Facts has estimated that the number of Union Members has decreased signifcantly in the past three decades.  There are several causes cited, but the main reasons are the changing job market, poor union leadership, and the relevance of unions to business today.  With the 2007 UAW negotiations nearing completion, the continued strength of the union is questionable.

The New York Times recently reported on the UAW meeting in July.  For the first time in its history the UAW has more retired members than active working members.  This obviously presents huge issues on medical costs and funding for the large automotives.  Current data shows that across the Big Three, at least $1000 in cost is added to each car for the costs of medical coverage for the UAW workers.  Will the UAW finally come on board with the rest of
America in expecting workers and retirees to fund larger and larger portions of their medical costs?

As referenced in The Economist article, The Road to Recovery, the Big Three “are uncomfortably aware of the importance of reaching an agreement with the UAW in the coming weeks, and removing approximately $100 billion in health care obligations to more than 1 million retired workers.”

I believe the UAW will have to.  The competitive landscape of the automotive industry is becoming more and more complex, and with the rising costs of fuel, more economic cars will be required world wide. 
US auto manufacturers will have to make the move to offshoring the manufacturing and assembly of their cars, gaining the low cost advance of the Asian workforce.  The innovation and development of new cars will remain in the
US, but won’t require the UAW for the effort.

Ultimately, GM, Ford and Chrysler can’t afford the UAW anymore.  How will the UAW negotations conclude?