In this special issue, PricewaterhouseCoopers asked a panel of senior executives from large US-based industrial manufacturers about operational effectiveness and costreduction
programs in their organizations.
Solid success with low-cost country outsourcing
Outsourcing manufacturing to low-cost countries remains
a prevalent cost-reduction strategy among respondents.
Fifty-three percent of US-based industrial manufacturers
have either undertaken an outsourcing venture in the past
two 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 their
experiences successful (66%) or extremely successful
(4%) and only 26% indicated mixed results. None rated its
outsourcing 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 operational
effectiveness. Seventy-three percent of US manufacturers
actively deploy either Lean (44%) or Six Sigma (39%) to
their organization’s operations. Surprisingly, 22% utilize
neither methodology. However, senior executives report
there is room for improvement. While 49% are satisfied,
stating their programs are effective (44%) or extremely
effective (5%), an almost equal number (47%) had mixed
reviews.
Lean progresses to non-manufacturing functions
Meanwhile, of those who employ Lean concepts to their
manufacturing operations, one-half are also extending it to
other functional areas. Of these, 92% are extending its
principles to their supply chain operations, 77% to their
engineering function, 69% to their product development
processes, and 54% to their customer service area
Dissatisfaction with distribution and logistics
Senior executives expressed displeasure with their
organizations’ distribution network and logistics approach.
Thirty-seven percent were satisfied, with 30% reporting
their distribution and logistics were effective and 7%
reporting theirs were extremely effective. However, a
plurality (54%) felt there was room for improvement. Fortynine
percent had mixed reviews and 5% believed theirs
were ineffective. In PwC's view, this lack of satisfaction is
not surprising. There is a need for distribution networks
and logistics strategies to evolve so they support new
business models that include global supply chains and
outsourced manufacturing.
Supply chain and risk assessments on the rise
As a result of these perceived gaps, 58% have taken steps
to resolve inadequacies within the past 12 months. Fortyeight
percent conducted supply chain effectiveness
assessments and 39% conducted risk assessments.
However, only 27% cited extremely or very effective
results, while 65% cited mixed results and 3 percent cited
ineffective results. The interesting fact here is that 39% of
respondents completed risk assessments, a large number
if one considers that as recently as two years ago this
practice was not typical.
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More information
Contact
Karen Vitale
US Industrial Products Advisory Leader
+1 973 236 5347
Mike Giguere
Operations Effectiveness
+1 617 803 6377
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