The year was 1979.
The Pittsburgh Pirates were playing in their second World Series that decade, led by Willie Stargell and inspired by their famed “We are family!” slogan. The series did not start well for Pittsburgh. The Pirates were down three games to one before becoming the fourth team in baseball history to win the final three games and the championship. By the end of the Series, the Pirates scored 32 total runs and the Baltimore Orioles—their opponent for the second time that decade—scored 26. Pittsburgh scored 55 percent of the 58 total runs scored in the team’s last World Series. The Orioles scored 45 percent of the run total.
That is a 10 percent difference.
If being 10 percent better than your competition can land you a World Series ring, imagine what 30 percent can do. If 10 percent can lead to greatness, a 30 percent performance improvement could be revolutionary.
Especially in the manufacturing sector.
Small Steps Drive Efforts to Reshore Production Capacity
In my last post, I discussed improved productivity and efficiency among U.S. manufacturers as an important national strategic issue. In the aftermath of COVID-19, we need to reshore as much manufacturing capacity back to the United States—and we need to do it as fast as possible. That will only happen when American manufacturers become more competitive with their foreign counterparts. Thankfully, the vision of a more efficient, more productive manufacturing sector isn’t a pipe dream and it isn’t decades away.
Increases in productivity as high as 30 percent are possible with technology and data tools already on the market today. A thirty percent improvement in productivity in domestic manufacturing would place American manufacturers on more than just an even keel with their international competition. Increased productivity and efficiency combined with American ingenuity is hard to beat.
Cheap labor and lax environmental standards are no match for people-driven, technology-aided American innovation.
However, owners, executives, and plant managers usually aren’t required to make decisions based on national security and the need to be more responsive when the next domestic emergency occurs. Post-COVID, manufacturers facing new uncertainties in a tough economy need to adapt quickly to compete. Doing more with existing resources—is the name of the game now and for the foreseeable future. Every manufacturer in America (and across the globe) is having productivity-focused conversations that can tip the balance from survival to thriving and not because of abstract concerns about American industrial policy.
But the two issues are intricately linked.
America needs a manufacturing sector and domestic supply chains it can depend on. Manufacturers need to become more productive and responsive in order to weather the COVID-19 storm and recover from decades of competing with cheaper foreign manufacturers. That is an important point: Manufacturers cannot confront the current crisis with a strategy built on the idea that we need to return to February 2020. For many manufacturers, things were “okay” then. And, to some extent, they were. Many American manufacturers were surviving.
But when was okay ever good enough?
How did our complacency contribute to the COVID crisis?
On a macro-level, the dialogue around this sector relentlessly looks backward to a time when American manufacturing was the primary economic driver for communities across the nation. That era disappeared decades ago. On a micro-level, manufacturers cannot focus on a return to “okay” and settle for survival as a goal.
Instead, we need to look forward.
The Link Between Productivity and Competitive Advantage
In his seminal book Good to Great, author Jim Collins describes how hard it is to break through from one performance level (good) to a higher one (great). On average, most mid-market manufacturers in North America run at a 45% utilization rate. For simplicity’s sake, it is best to think of a utilization rate as the percentage of time quality parts or products are being produced.
Global benchmarks would say best-in-class companies run at an 80% utilization rate (or better).
If companies can improve daily utilization by just one hour on each machine, it could mean an additional $39,300 annually per machine just waiting to be tapped.
Manufacturers can create a formidable competitive advantage by using technology and data tools that give managers the ability to accelerate production, improve quality, minimize waste, and reduce downtime. The result of every plant utilizing tools that can deliver a 30 percent increase in productivity won’t end with improved plant performance. Collectively, if manufacturers embrace tools already available on the market, the result will be the reinvention of one of America’s most important economic engines.
This is a critical moment for American manufacturing—and that moment did not begin with COVID-19. The pandemic exposed what many owners and communities already knew: Our country’s manufacturing sector became trapped in a dynamic where being okay and surviving was often the best we could hope for.
That era is over.
Data tools and technology enable manufacturers to increase profitability, establish a more durable competitive advantage, create more jobs, foster more innovation, and strengthen their local economy. That is one of the unique things about this sector: A 30% more productive manufacturing facility has a compounding effect on the entire supply chain and a direct impact on the health and well-being of communities. Technology-aided increases in manufacturing productivity are a win for companies, plants, managers, employees, and America.
A win like that is a big win.
You could say that after being down three games to one, American manufacturers have a chance to win Game 7 and set the standard for others to follow.
Duane Clement is the founder and CEO of Data Inventions, Inc.