heIn this special issue, PwC asked a panel of senior executives from large US-based industrial manufacturers about operational effectiveness and costreductionprograms in their organizations.
Solid success with low-cost country outsourcing
Outsourcing manufacturing to low-cost countries remainsa prevalent cost-reduction strategy among respondents.Fifty-three percent of US-based industrial manufacturershave either undertaken an outsourcing venture in the pasttwo years (46%) or plan to do so within the next 12 months(7%). Forty-one percent reflect no involvement.Outsourcing’s appeal is likely a product of its success.Seventy percent of survey participants rated theirexperiences successful (66%) or extremely successful(4%) and only 26% indicated mixed results. None rated itsoutsourcing efforts unsuccessful.
Mixed results on Lean and Six Sigma
While outsourcing is a prevailing strategy for cost savings,Lean and Six Sigma are the focus for operationaleffectiveness. Seventy-three percent of US manufacturersactively deploy either Lean (44%) or Six Sigma (39%) totheir organization’s operations. Surprisingly, 22% utilizeneither methodology. However, senior executives reportthere is room for improvement. While 49% are satisfied,stating their programs are effective (44%) or extremelyeffective (5%), an almost equal number (47%) had mixedreviews.
Lean progresses to non-manufacturing functions
Meanwhile, of those who employ Lean concepts to theirmanufacturing operations, one-half are also extending it toother functional areas. Of these, 92% are extending itsprinciples to their supply chain operations, 77% to theirengineering function, 69% to their product developmentprocesses, and 54% to their customer service area
Dissatisfaction with distribution and logistics
Senior executives expressed displeasure with theirorganizations’ distribution network and logistics approach.Thirty-seven percent were satisfied, with 30% reportingtheir distribution and logistics were effective and 7%reporting theirs were extremely effective. However, aplurality (54%) felt there was room for improvement. Fortyninepercent had mixed reviews and 5% believed theirswere ineffective. In PwC's view, this lack of satisfaction isnot surprising. There is a need for distribution networksand logistics strategies to evolve so they support newbusiness models that include global supply chains andoutsourced manufacturing.
Supply chain and risk assessments on the rise
As a result of these perceived gaps, 58% have taken stepsto resolve inadequacies within the past 12 months. Fortyeightpercent conducted supply chain effectivenessassessments and 39% conducted risk assessments.However, only 27% cited extremely or very effectiveresults, while 65% cited mixed results and 3 percent citedineffective results. The interesting fact here is that 39% ofrespondents completed risk assessments, a large numberif one considers that as recently as two years ago thispractice was not typical.