The manufacturing sector took a severe beating from late last year through most of this one. According to Dr Daniel J. Meckstroth, chief economist of the US industry group MAPI (Machinery and Allied Products Institute) Manufacturers Alliance, in his report ‘The “Great” Global Manufacturing Recession’ (dated June 23, 2009), the economic downturn put a violent end to a long period of manufacturing expansion worldwide in 2008.
For the five years running from April 2003 through April 2008, global manufacturing registered the average annual growth rate of 5.4 per cent. “Thereafter, the global downturn quickly unfolded as a cliff event—production declined like it fell of a cliff. Global manufacturing production declined seven per cent in the fourth quarter of 2008 and fell another 14 per cent in first quarter of 2009, compared to the same periods one year earlier,” Meckstroth wrote. “Global manufacturing production is expected to decline 10 per cent overall in 2009 compared to 2008.”
He also gave a breakdown of the severe decline in production by geography. In 2009, Western European production was expected to decline 14 per cent, North American manufacturing by 12 per cent, Central Europe and the Balkans by 15 per cent, and Latin America by eight per cent.
Asia, specifically, was expected to go down by nine per cent in 2009, having seen its manufacturing activity reduced by 11 per cent in the three months ending in April 2009. However, there is great disparity among the largest countries in the region, noted Meckstroth.
“For example,” he wrote, “Japan’s manufacturing production fell 34 per cent in the three months ending in April, while China’s production was up 9 per cent in the same period,” and for the year 2009, the total manufacturing production of Japan should decline 26 per cent, as China should see an eight per cent gain, against the backdrop of a seven per cent decline in total Asian manufacturing production.
In early February last year, Manufacturing Insights Asia/Pacific put out the 2009 edition of its annual report itemising its top predictions for the manufacturing industry. “Despite the gloomy outlook, Manufacturing Insights Asia/Pacific, an IDC company, believes that manufacturers can tap into pockets of opportunities to survive, stay ahead of the competition, ride out the storm and be ready for the upswing,” said a statement by the specialised research firm based in Singapore and Hong Kong.
Among the predictions for 2009 made by Manufacturing Insights Asia/Pacific were the following.
1) Greater emphasis on product quality placed by manufacturing firms. This is brought on by “recent high profile recalls of products manufactured within the Asia/Pacific”, which have “cast a cloud over manufacturing standards within the region,” prompting governments to enact more stringent legislation surrounding product quality control. In turn, brand owners will be looking more closely at their supply chains to improve product quality.
Manufacturing Insights Asia/Pacific believed the entire manufacturing process would come under closer scrutiny than ever before in 2009. It also said systems that contribute to enhancing quality controls, such as supplier relationship management systems, which enables user enterprises to “set up and manage scorecards to measure their suppliers’ performance against set criteria”, could see more investment within the year.
2) A “digital manufacturing strategy” adopted by new plants in the region. Despite retardation caused by the global recession, most of the region’s economies were continuing to grow. So, reasoned the analysts at Manufacturing Insights Asia/Pacific, “this growth [would] be translated into demand for more products.” As such, “companies that have made the decision to invest in new plants or upgrade their existing plants [would] be leveraging the latest processes and technologies and incorporating them into their plants to facilitate a digital factory strategy,” which is defined as one that “simulates the entire production process before the actual production even starts.”
3) Product life-cycle management (PLM) “the next big area of investment”. Manufacturing houses should be managing their product life cycles more extensively and presumably to deliver higher product quality. Investment of resources should be made in controlling processes ranging from the creation to the disposal
Altogether, the work done in PLM last year should ensure that research and development (R&D) leads to value-added deliverables”; that there is greater product development process control, which delivers greater predictability in “product development outcomes” as well as more “effective resource management”; and, that there is greater collaboration, which allows for contribution by different functions within the organisation to the product development process. Some companies should be working on establishing new revenue streams from enhanced programmes, services, and disposal and recycling programmes, too.
Cost is priority
A more recent report put out by Frost & Sullivan (released in early November), had an estimated 70 per cent of manufacturing firms citing cost reduction as their most important priority. The study was on how close manufacturing firms in Asia were to becoming world class manufacturers, and one of the measures was whether and how extensively they exercised Six Sigma continual product development and improvement processes to ensure quality control. Also, two thirds of the manufacturing firms covered in the study cited supply chain management as their main focus area for improvement.
The Financial Times of London published a report (Manufacturing lifts Asia recovery hopes, dated 2 November 2009) citing some persuasive numbers on Asia’s manufacturing recovery.
One was movement in the HSBC Taiwan’s manufacturing purchasing manager’s index (PMI), which rose from 57.5 in September to 59.8 in October this year. The piece noted that “this was the eighth consecutive monthly increase and the fastest monthly rate of expansion for two years” in Taiwan, which also saw “a fourth consecutive monthly rise in employment” in the same month.
HSBC’s China manufacturing PMI rose from 54.3 in September to 55.2 in October. HSBC’s chief economist for China Qu Hongbin was quoted attributing the surging index rates to “sustained expansion in new orders” along with rising employment. “The…strong recovery in the manufacturing sector should gain further momentum in the coming months…underpinning strong growth in the fourth quarter of 2009,” he said.
By most accounts, the manufacturing sector this side of the world is recovering, and is, with few exceptions, likely to do so more quickly than most of Europe and North America. And manufacturing firms here are going to be investing in technologies that deliver the following (in order of importance): operational efficiencies and reduced costs; overall product quality control; product manufacturing process and development controls; and, development of new revenue streams. MIS Asia
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