Friday, April 17, 2015

Industry Update: Four Hot Trends in U.S. Manufacturing

four hot trends in u.s. manufacturing
With the first quarter of 2015 under our belt, several aspects of the manufacturing industry have gained momentum. These trends are expected to continue and rapidly impact 21st century manufacturing around the globe.

Industry Growth for the U.S. & Michigan
It is a critical time for American, specifically Michigan, manufacturers. With a feeling of cautious optimism, manufacturers are experiencing upticks and improvements in business, yet they are still working harder to set a stronger foundation for growth. Indicators are pointing to a manufacturing comeback.

According to the Institute of Supply Management Report, “economic activity in the manufacturing sector expanded for the 27th consecutive month.” Industry Week named Michigan as one of its “Top 10 States for Manufacturing Jobs” earlier this year, citing that Michigan:

  • Employed more than 514,000 workers at approximately 12,500 companies
  • Boasts more engineers per capita than any other state
  • Has the 4th largest high-tech workforce in the nation

Innovation
Manufacturers are embracing innovation to revitalize the industry. As a result, innovation institutes are being established across the country to bring together manufacturers and STEM professionals. The American Lightweight Materials Manufacturing Innovation Institute (ALMMII) opened its 100,000 square-foot innovation acceleration center in Detroit on January 15 with a innovation exhibition featuring lightweight metals technologies, and a ribbon-cutting ceremony announcing its new program name, LIFT — Lightweight Innovations for Tomorrow.

ALMMII was founded by the Edison Welding Institute (EWI), and has partnered with a selection of Michigan businesses and universities. These companies include some of the world’s aluminum, titanium and high-strength steel manufacturers, along with universities with staff and students who are actively building the current landscape of technology development and research. The goal is to explore all the benefits of lightweight metals and to see where else they can be applied to provide more cost-effective options.

Technology
Additive manufacturing, most commonly known as 3D printing, and robotics are particularly emerging as hot trends in the manufacturing field. Although both 3D printing and robotics have been around for a while, recent advancements are allowing these technologies to become more affordable for small to mid-size U.S. manufacturers. These breakthroughs will help companies become more innovative and reduce production costs.

Exporting
Did you know that 95 percent of the world’s customers live outside the U.S.? Exporting enables manufacturers to target new customers and increase sales. It also allows companies to introduce new product lines and test new and innovative approaches. Companies are realizing these benefits and are prioritizing exporting initiatives.

Be on the lookout for more industry trends in U.S. manufacturing! And to stay current with manufacturing news and information, don’t forget to subscribe to our blog!

MMTC offers expert consulting services for manufacturers seeking business solutions regarding lightweight materials, strategic growth, innovation, capacity constraints, and more. For additional information on MMTC's programs and services, call 888.414.6682 or email inquiry@mmtc.org.


Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.

Friday, April 10, 2015

THE TRUE COST OF BUSINESS: Understanding Purchase Price Variance and Total Cost of Ownership

Many manufacturers determine a standard cost for their goods, services, and the production components they purchase throughout the year. Purchase Price Variance (PPV) is used to show the difference between the standard cost and actual cost in accounting.

NEGATIVE PURCHASE PRICE VARIANCE
I have a negative Purchase Price Variance. Does this mean I have made more profit? Well…Hold on. I’m not so sure! To calculate an item's PPV, subtract the standard cost from the actual cost. Sometimes you’ll end up with a positive PPV, while other times the PPV value will be negative. A positive PPV means the goods cost more than your standard cost, meaning the cost of goods has increased. A negative PPV means the goods actually cost less than your standard cost, leading you to believe that a negative PPV equals a larger profit. However, what is the true cost really?

TOTAL COST OF OWNERSHIP
Total Cost of Ownership (TCO) is a concept that examines all of the costs related to the acquisition, transportation, and storage of products within the supply chain.  How is it different than the way we have always looked at supplier prices? Traditional costing methods such as Purchase Price Variance (PPV) typically miss between 20-40 percent of the actual costs of acquisition. These methods only take into account the price for which the supplier is willing to sell the item. It usually includes the supplier’s manufacturing costs, overhead costs, and profit, but it may or may not include factors such as your costs for transportation and many other associated costs to bring the product to your location such as:

Shipping Costs
International multimodal transport costs and complexity tend to increase with distance. There is a potential cost for each transfer, inspection, storage and documentation requirements associated with each mode and country involved. A company importing goods must comply with a range of U.S. government requirements as well as the export regulations of the country of origin. Upon arrival in the United States, arrangements must be made to file entry documents at the port of entry, pay the estimated import duties, and secure the release of the goods from U.S. Customs and Border Protection. Companies often employ agents or brokers to assist them with these tasks. Each step in this chain of events involves costs that are often missed when determining the true cost of a product.

Shipping Time / Inventory
Shipping time has a direct impact on cost required to carry sufficient buffer inventory to cover customer demands until replenishment inventory arrives. Costs involve not only the dollar value of the inventory itself, but also the financing cost of the investment and carrying costs related to storing excess inventory.

Quality Costs
Quality cost issues result from increased travel and oversight time to control, mitigate or resolve the quality issues for off shore suppliers. Low quality issues can result in increased inspection, unhappy customers, product returns and shortages, and possible legal liability.

Supplier Oversight
Executives and other employees may need to travel to further develop or strengthen relationships. These employees may oversee design, production, or shipping or resolve unforeseen issues like supply chain disruptions or production errors.

Currency Fluctuation
When purchasing products from a foreign country in their native currency, the history of currency fluctuation must be taken into consideration. As an example, the price may be quoted for an annual contract, but during the year currency value versus the U.S. dollar may have changed making the price higher in U.S. dollars. In order to protect against currency fluctuation, you may choose to purchase a position on the foreign currency at the present price.

Intellectual Property
Protecting intellectual property (IP) rights is often a necessary step in both the U.S. and foreign markets. IP is any product of the human intellect that the law protects from unauthorized use by others. For small and medium companies, protecting IP rights in the U.S. is easier than in most overseas jurisdictions.

Payment Terms
Payment terms may be important to your choice of sources. Having to purchase a letter of credit or payment in advance requires financing and other costs prior to the availability of product for sale such as taxes, surety bond premiums, customs broker fees, and storage expenses.


The MMTC provide clients with Supply Chain education through group training and on site mentoring including Leadership Overviews (MIT Beer Game), Supply Chain Assessment, Supply Chain Executive Strategic Planning, Partner Engagement and Development, Risk Management and Total Cost of Ownership. For more information on MMTC's consulting services related to Total Cost of Ownership and Supply Chain Management, call MMTC at 888.414.6682 or visit www.mmtc.org

Friday, April 3, 2015

Moving On With Mobile: New Google Ranking Changes and the Impact on Manufacturers

The almighty and powerful Google has spoken! On Tuesday, April 21, Google is making a change. In a statement released by the organization:

"Starting April 21, we will be expanding our use of mobile-friendliness as a ranking signal. This change will affect mobile searches in all languages worldwide and will have a significant impact in our search results." 

How does this impact Michigan manufacturers?
In today’s global economy, your website plays a critical role in the sales process. Your target audience has the power to research you (and your competitors) online. Through Google and other search engines, they can easily research products, parts, capabilities, pricing and reviews in an instant. If you don’t have a great Internet presence, especially in this day and age, you’re going to run into two problems:
  1. Your prospects aren’t going to find you when they’re looking for your products and services online.
  2. Your lack of participation and effort will discourage potential customers. Think of your website as a digital salesperson. If your employed, human sales person is unprofessional and disheveled, it can hurt your sales. The same thinking applies to an outdated website.
What exactly does this mean for me?
mobile responsive websites for manufacturers
In a nutshell, Google’s announcement intends to reward websites that are mobile-friendly. And, in case you are unaware, mobile-friendly sites need to be designed in a particular way to appear correctly when you’re viewing them from a phone or tablet. Google will reward these websites by giving them better mobile “search engine rankings”. Conversely, if your website is not mobile-friendly, it could negatively impact your ranking.

So, when people enter in a particular word or phrase (or products and parts!) when doing a Google search on their mobile device, mobile-friendly websites will appear more towards the top of the list. Let’s face it, people click on page 1 or 2 of search results…not page 50.

Why all the changes Google?
Google makes changes in response to technological advancements and societal trends. In this case, they realized the amount of people accessing and searching the internet from their phones or tablets has skyrocketed in the past couple of years. In fact, mobile usage accounts for 60% of time spent online, exceeding desktop-based digital media.

Pew Research found that in 2011, only about 35 percent of American adults owned a smartphone. Today, roughly two out of every three American adults, or 64 percent, own a smartphone.

AH! So how do I fix this? What can I do?
If you’re looking to navigate these changes, you have two main options:

  1. Embrace a Responsive Web Design: If you have a responsive web design, the size of your website’s pages will adjust to the viewer depending on their device. Google recommends this option. This option is highly flexible and you only have to create and maintain one website.
  2. Create a Mobile Site: Mobile sites are technically a separate website created solely for mobile devices. This option is a short-term, less expensive fix resulting in a duplicate website dedicated to just mobile. While less costly, this also means extra steps and more work for you. If you update a page on your traditional website, you’ll also have to go over to your mobile website and update it there too. Also, mobile sites are rendered for today’s devices. Next year’s devices may throw this for a loop!
While it may take a little time for the changes to full go into effect, you want to start preparing now. Make sure your website is mobile friendly and reap the benefits from Google!

For more information on MMTC's Website Effectiveness and SEO program, click here. You may also contact us at 888.414.6682 or via email at inquiry@mmtc.org.


Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.