ACCENTURE 2013 GLOBaL MaNUFaCTURINg STUDY

How Leading Manufacturers Thrive in a World of Ongoing Volatility and Uncertainty

As part of our ongoing commitment to helping organizations achieve high performance, Accenture regularly conducts substantive research to shed light on key challenges our clients are facing and provide thoughtful guidance clients can consider in addressing those challenges. An important part of Accentures broader research efforts is our study of manufacturing. When we conducted the previous edition of our manufacturing study in 2011, we wanted to understand how manufacturers in United States had fared in the two years since the official end of the recession in June 2009 and where they saw their business and most important markets headed in the near future. We also wanted to get a sense of how companies were preparing for the future as they tried to reconcile their manufacturing operations to accommodate intensified, multifaceted volatility. What we found was manufacturers had seen an uptick in revenue during that time and were working to prepare their operations once again for growth. In 2013, we expanded the scope of our research to a global base of manufacturers in North America, South America, Asia and Europe that had global operations. Our goals for this most recent effort were largely the same as beforeto understand

how companies were performing and how they were aligning their operations with market challenges and opportunities. As youll read on the following pages, our research uncovered some very intriguing findings. From those findings, we gleaned four high-level insights. One, more than ever manufacturers need to align their investments to foster greater operational flexibility. Volatility is the new normal, and companies that are unable to quickly shift gears when the market changes are on the fast track to obsolescence. Two, globally consistent, repeatable operating models and reliable, predictable production facilities are fundamental to enabling the flexibility required in todays market. Three, digital technologies are becoming increasingly important in manufacturers efforts to improve their performance across the enterprise by streamlining processes, enabling faster and better decisions, and creating stronger relationships with customers. And four, manufacturers must excel on multiple fronts to be successful. The ability to balance critical factors such as cost, risk, flexibility, quality is critically important to competitiveness and growth.

One group of companies in this years research stood out in this regard. This cadre of manufacturing leaders are growing much more strongly and profitably than others in large part because they recognize the importance of operational flexibility to high performance and are committed to investing in the capabilities that will foster it. We believe there is much that other manufacturers can learn from how these leaders approach their business, as well as from our research findings overall. On behalf of Accenture, Id like to thank those manufacturing executives who gave their valuable time to participate in our study. I hope you find the results informative and useful as you consider how best to organize and equip your operations to execute your growth strategies in the coming year and beyond.

Russell Rasmus
Managing Director for Manufacturing Accenture

CoNtENtS
IntroduCtion KeY ResearCH FindinGs Perspectives on Growth Capturing Growth Driving Consistency and Flexibility Through Production Systems Avoiding the Pitfalls of Facility Relocation or Startup Getting the Most From Contract Manufacturing Solving the Manufacturers Skills Dilemma A Formal, Collaborative Approach to Asset Reliability Manufacturing Leaders The Benefits of Becoming a Digital Business How a Control Tower Can Help Manufacturers Make Better Production Network Decisions The Sustainability Journey: From Compliance Assurance to Performance Assurance AppendiX Methodology and Demographics 3 7 7 9 11
15 18 22 25

28 29 33
39

ConClusion 41 42 42

INtroDuctioN
The headlines in the media today offer a glimpse of the challenges manufacturers confront on a daily basis:
So which is it? Is the global economy a future train wreck, as one publication described it, heading for a fresh round of slowdowns, layoffs and cash crunchesor worse? Or has it turned the corner and are better days ahead? Unfortunately for manufacturers, its both. The fact is, todays economy remains as volatile and unpredictable as ever, with pockets of strong growth counterbalanced by sluggish demand and positive trends neutralized by negative ones. Thats causing headaches for all companies, but especially manufacturers, which face the formidable challenge of ensuring its asset-intensive, highly complex operations are capable of continually switching gears to accommodate the global economys ongoing stops and starts. To shed light on the factors shaping manufacturing in todays environment, as well as how manufacturers are refining their manufacturing strategy and operations to remain successful, Accenture embarked on a comprehensive research study of major manufacturers around the world. The study included a survey of 250 senior manufacturing executives in large companies headquartered in North America, Europe, South America and Asia. These companies have global operations and represent six main industry sectors (automotive, consumer products, industrial equipment, electronics and high tech, oil and gas, and chemicals and natural resources). At a high level, our survey revealed that while manufacturers overall are growing and remain optimistic about their prospects in the near future, economic and market volatility and shortcomings in critical areas of their operations could pose a threat to their growth agenda. More specifically, the following key findings emerged from our research:

Manufacturers have experienced steadily improving business performance since 2011.

Production levels, revenues, and margins all have increased during that time for the vast majority of participating companies, and most manufacturing executives are optimistic about continued growth in the future. In fact, executives believe their most important markets still offer plenty of growth opportunities.

Patchy world economy weighs on quarterly profits yet Upbeat forecasts adds to optimism over economic recovery. Asian economies encounter stiff winds but Consumer confidence high in southeast Asia. Europe continues to weaken world economies although European shares jump amid economic optimism. IMF issues dreary report card on future of world economy however Businesses pick up hiring on increased economic optimism. Asian stocks advance on China growth yet Global economy shifts as China falters, Japan, U.S. Rebound.

Penetration into emerging economies will shift the source of manufacturers revenues.
The market in which a manufacturer is based is likely to be among the companys three largest markets in terms of current revenue. Today, the United States, followed by China, are among the top three markets for the largest percentage of manufacturerswhich is not surprising given those are the worlds biggest markets. However, executives anticipate that within a few years, China and Brazil will become much more important sources of revenue.

Manufacturers are locating production facilities closer to sources of demand.

Since 2011, a surprising four in 10 manufacturers surveyed reported having relocated production facilities to new locations and, even more surprising, five in 10 said they started new production facilities during that timelargely to support entry into new markets and reduce operating costs. Consistent with their growing importance as revenue-generating markets as noted above, China and Brazil are the favorites for both relocated and new production facilities.

Introduction

Introduction

Economic and market volatility is the overriding threat to manufacturers growth agenda.
While manufacturers performance in the past few years has been encouraging and optimism runs highpossible storm clouds remain on the horizon. Executives participating in our study cited a variety of volatility-related factors as potential impediments to their ability to grow including global currency instability, unpredictable commodities costs, uncertainty about customer demand, political or social unrest in key markets, and potential changes in government regulations.

Contract manufacturing is on the rise.

Three-fourths of manufacturers in our study said they will augment their production facility network in the next 12 months through a moderate or extensive use of contract manufacturing. However, manufacturers diverge on how they view contract manufacturing as it relates to their own business: A majority see it mainly as a way to relieve short-term capacity constraints, while the remainder consider it a part of their long-term strategy.

manufacturing leaders, were far more likely than other companies in our study to also report having grown revenue by more than 10 percent since 2011 and to anticipate growth of more than 10 percent in 2013. Helping to drive such compelling business results are some underlying approaches and practices that leaders employand that are less evident among the rest of our survey sample. For example, leaders possess a strong belief that the ability to flexibly and dynamically alter production to match demand is critical to achieving their growth goalsand consequently have built an operating model that effectively accommodates the dynamic shifting of resources and activities both to different physical locations in their manufacturing network and within a specific facility in response to market developments or changes in demand. To support flexibility, leaders continually make adjustments to their production facility network to help them meet demand and control operating costs. For instance, leaders are twice as likely than other manufacturers to have relocated manufacturing operations since 2011, to have started new operations during that time, and to be considering relocating manufacturing operations in 2013 and 2014. Leaders also are much more likely to be planning to increase the use of contract manufacturing and see contract manufacturing in a more strategic light. While non-leaders view contract manufacturing as merely a way to relieve short-term capacity constraints, leaders see it as part of their long-term strategy and an important component of their broader production facility network. Leaders also appear to be more advanced than others in key capabilities that are critical to operating more flexibly and dynamically. They are likely to have a good understanding of the local cultural differences and needs in its most important revenue markets; be highly adept at accurately sensing market changes or opportunities before competitors do; have full visibility into its networks operations that enables them to effectively manage the network and make appropriate decisions to balance demand and capacity; and extensively use modular and consistent business processes and policies that enable them to quickly and dynamically allocate

Flexible and dynamic operations are vital to manufacturers growth.

Eight in 10 executives overall agreed or strongly agreed that the ability to flexibly and dynamically move production from one existing facility to another, or to change the product mix at an existing facility to match demand, is critical to achieving their growth goals. Yet many manufacturers are not confident in areas that are key to flexible and dynamic operationssuch as market-sensing capabilities, modular and consistent business processes and policies, and visibility into the full networks operations.

Digitization of manufacturing is creating challenges in attracting and retaining the right talent.
Overall, manufacturers in our survey appear to be confident they have a talent strategy that enables them to hire, develop and retain the skills they need to compete effectively, and more than three-quarters have increased their manufacturing workforce in the past few years. Yet many manufacturers still have several skills gaps primarily because they are unable to find or unwilling to pay the going rate for the more advanced skills needed in the digital environment.

Manufacturers are focused on improving their operating model to be more flexible.

To contend with an increasingly volatile and unpredictable global economy, manufacturers are striving to build a more flexible and dynamic operating model that enables them to quickly respond to changes in demand. In fact, seven in 10 said improving their companys operating model to more effectively support such flexibility is a priority in the next 12 months. One key to accommodating such flexibility is a high degree of consistency and standardization across all dimensions of the operating model, which helps enable manufacturers to seamlessly shift production from one facility to another.

Manufacturers are striving to strike a balance between investments in new and existing assets.
Participating companies continue to make capital investments in new plants and manufacturing equipment and technologies, as well as investments in initiatives to increase the efficiency and productivity of individual manufacturing facilities, and in information technology solutions. However, a large majority of manufacturers also said they are focused on extending the life and contributions of existing assets through initiatives such as applying lean principles to reduce waste, total productive maintenance, automation technology, and analytics. In addition to the preceding, our research also enabled us to identify some of the advanced practices that correlate strongly with superior business performance. A small group of companies in our surveyabout 8 percentreported having increased their production levels, profitability and labor efficiency by more than 10 percent since 2011. This group, which we deemed

Introduction

manufacturing capacity across the facility network (including contract manufacturers) in response to changes in its markets. When it comes to people, leaders have a talent strategy that enables them to acquire or build the skills they need to compete effectively, are voracious acquirers of talent, focus their hiring on people in countries where demand is strongest or who have skills that are strategically important to the company, and tend to build a diverse workforce that includes full- and part-time employees, contractors and consultants. Finally, leaders increasingly are looking to make their current operations more reliable and responsive, which in turn boosts labor efficiency and supports a more flexible and dynamic facility network that can enable them to more easily adapt to changing market conditions. For instance, leaders are twice as likely as others to be focused on extending the life and contribution of

existing assetsparticularly through total productive maintenance and the use of operations analytics to help improve the efficiency and productivity of individual manufacturing facilities. Theres no doubt that these remain challenging times for manufacturers, even those that are optimistic about growth. But as the manufacturing leaders in our study suggest, those that are able to infuse a high degree of flexibility in their operations, squeeze more capacity and productivity out of the assets and infrastructure they already have, and get the right people in place where they are most needed are best positioned to grow and thrive in todays volatile global economy.

Introduction

KEY RESEarch FiNDiNgS

In embarking on this research effort, Accenture sought to understand manufacturers views on several key issues: Recent and future growth and the sources of that growth Challenges that might affect their ability to achieve their growth goals How well suited their operating model is to supporting their growth agenda Where they are locating production facilitiesand why Their ability to attract and develop the skills they need to grow Which investments do they consider critical to driving growth Our survey of 250 executives at global manufacturers (see Appendix for more details on research methodology and participant demographics) provided ample evidence that although manufacturers business performance has improved since the recession, executives remain wary of marketplace and economic volatility and are taking steps to infuse greater flexibility into their operations in response. This is especially true of manufacturers that have performed most strongly in the past few years. Their responses suggest that more flexible and dynamic operations have helped them substantially increase revenues and margins, boost production levels, and improve labor efficiency, and that they expect to continue generating such positive results in the future.

Perspectives on Growth
While some countries economies continue to experience the lingering effects of the Great Recession, manufacturers overall have rebounded. An overwhelming majority of manufacturers in our survey have experienced strengthening business performance in the past few years and most anticipate that trend to continue in the near future. Ninety-three percent of executives surveyed said their companies have posted overall revenue growth since 2011 (Figure 1) and virtually all manufacturers anticipate some growth in 2013 (with 63 percent anticipating at least six percent). For 60 percent of manufacturers, growth is expected to be mostly or entirely organic, compared with 21 percent, which believe growth will be primarily or entirely through inorganic means such as M&A, joint ventures, and alliances. Manufacturers output has increased as well, with 94 percent reporting their companys total production level has increased (Figure 1). Driving that output has been an increase in capacity: More than two-thirds of manufacturers overall said they increased capacity since 2011, with nearly three in 10 indicating the increase was more than 20 percent. Perhaps most important is that margins are up. Ninety percent of manufacturers have increased their overall profitability since 2011, and 22 percent have boosted profits by more than 10 percent (Figure 1). What is the source of manufacturers growth? The United States was cited by the largest percentage of manufacturing executives as the country from which their company currently derives most of its revenue, followed by China.

Furthermore, confidence in these markets remains strong. Regardless of which specific markets executives cited as their top three, 44 percent said they are highly optimistic these economies will grow in the next 12 months. Forty-one percent indicated moderate optimism, while just 15 percent said they were pessimistic about growth in their top markets. Beyond next year, executives see changes afoot as emerging markets appeared poised to make gains at the top of the list, with China and Brazil expected to grow in importance. However, while manufacturers remain optimistic about their business and their markets, the current environment is not without its challenges. One of the biggest challenges manufacturers face is the economic and market volatility that prevails in many markets and remains a major concern among manufacturing executives in all regions, especially those in mature markets. Executives participating in our study cited a variety of volatility-related factors as potential threats to their growth agenda, including global currency instability, unpredictable commodities costs, uncertainty about customer demand, political or social unrest in key markets, and potential changes in government regulations (Figure 2). Given these challenges, it is not surprising that 82 percent of executives overall agreed or strongly agreed that the ability to flexibly and dynamically move production from one existing facility to another, or to change the product mix at an existing facility to match demand, is critical to achieving their growth goals.

Perspectives on Growth

Figure 1: Total revenue growth, production level and profitability since 2011.
40% 35% 30% 25% 24% 20% 15% 10% 5% 4% 0% 2% 3% 4% 4% 7% 20% 22% 36% 36% 35% 36% 31%

34%

Declined / Decreased 1% to 10% Total Revenue Growth

Flat

Grew / Increased 1% to 5% Total Profitability

Grew / Increased 6% to 10%

Grew / Increased > 10%

Total Production

Figure 2: Issues manufacturers indicated could impact their ability to grow in 2013-14.
Global currency instability Unpredictable commodities cost Stronger competitors Pressure to reduce operational costs Uncertainty about customer demand Political/social unrest in key markets Potential changes in federal government regulations Applying innovation to stay ahead of the competition Weaker pricing power for finished goods/services Aging workforce/shortage of talent Extreme weather/natural disasters Shortage of commodities 15% 15% 14% 22% 25% 24% 27% 29% 33% 32% 36% 43%

Perspectives on Growth

Capturing Growth
As they pursue growth, manufacturers will rely on a number of levers to maintain or improve profitability. The most popular lever by far is improving operational efficiency, followed by improving quality, reducing labor costs, reducing inventory levels, and reducing material costs (Figure 3). Manufacturers also recognize that robust, sustainable growth is dependent on a solid base of operationsa base that includes the right production facility network, talent, and operating model that can help support the operational flexibility executives see as critical to driving growth. According to executives participating in our survey, manufacturers have made solid progress in these areas, but shortcomings in key aspects of their operations remain that could make it difficult for them to achieve their growth goals.

in demand. However, in no case was a specific dimension described by more than 27 percent of respondents as providing very effective support (Figure 4). The scenario is slightly better when it comes to supporting flexibility inside a single location. Nearly two-thirds said various aspects of their operating model accommodate to some degree the dynamic shifting of resources and activities within a specific facility (for example, switching over to producing a different product mix) in response to market developments or changes in demand. But again, no dimension was named by more 28 percent as providing very effective support (Figure 5). More specifically, executives feedback indicated shortcomings in key capabilities that can be critical to operating more flexibly and dynamically. For instance: Only 24 percent of executives strongly agreed their company is highly adept at accurately sensing market changes or opportunities before competitors do. Just 26 percent strongly agreed their company extensively employs modular and consistent business processes and policies that enable it to quickly and dynamically allocate product design and manufacturing capacity across the facility network (including contract manufacturers) in response to changes in its markets. Only 29 percent of executives strongly agreed that their company has full visibility into its networks operations, enabling them to effectively manage the network and make appropriate decisions to balance demand and capacity. Forty percent strongly agreed their company has a good understanding of the local cultural differences and needs in its most important revenue markets.

Operating model: More work needed to support flexible and dynamic shifting of resources to accommodate changes in demand
Recognizing the highly volatile business environment in which they operate, manufacturers are adapting key aspects of their operating model to make their operations (both network-wide and at the specific facility level) more flexible and dynamic and, thus, help improve overall operational and financial performance. However, most manufacturers have experienced uneven progress in creating more flexible and dynamic operations and consider improving their capabilities in this regard to be an important priority in the short term. Nearly 60 percent of all manufacturers indicated various aspects of their operating model accommodate to some degree the dynamic shifting of resources and activities to different physical locations in their manufacturing network in response to market developments or changes

Capturing Growth

Figure 3: Most common levers manufacturers will use to maintain or improve profitability.
Improving operational efficiency Improving quality Reducing labor costs Reducing inventory levels Reducing material cost Improving throughput in current facility 12% 35% 33% 31% 30% 57%

Figure 4: How effectively manufacturers operating model accommodates flexibly and dynamic shifting of production across different physical locations.
Organization structure and incentives system Information technology infrastructure Production facility network Business processes, policies, and capabilities Information technology applications Talent/skills base 3% 3% 4% 5% 3% 3% 6% 11% 9% 12% 12% 10% 1 - Very ineffectively Note: Due to rounding, totals may not equal 100% 30% 26% 29% 28% 29% 32% 2 3 33% 39% 41% 30% 32% 35% 4 27% 20% 17% 26% 23% 20% 5 - Very effectively

Figure 5: How effectively manufacturers operating model accommodates flexibly and dynamic shifting of production within a single location.
Organization structure and incentives system Business processes, policies, and capabilities Information technology infrastructure Talent/skills base Production facility network Information technology applications 4% 3% 4% 2% 3% 6% 6% 8% 10% 11% 9% 8% 1 - Very ineffectively Note: Due to rounding, totals may not equal 100% 25% 24% 26% 27% 29% 27% 2 3 37% 38% 35% 39% 40% 34% 4 28% 26% 25% 21% 19% 24% 5 - Very effectively

Capturing Growth 10

DriviNg CoNSiStENcY aND FlEXibilitY Through ProDuctioN SYStEmS

By Saurabh Bhatnagar, Managing Director, Accenture Management Consulting
Our study revealed that manufacturing leaders are twice as likely as other companies to extensively use modular and consistent capabilities that enable them to quickly and dynamically allocate manufacturing capabilities across the facility network in response to changes in its markets. One of the key approaches to drive modular and globally consistent capabilities is through the instantiation of a manufacturing production system. In todays volatile global economy, production systems have become increasingly critical to enabling manufacturers to operate more consistently and efficiently. But while the term production system is well known, its true meaning often is not. Thus, its important to clear up some misconceptions about production systems. At its most basic level, a production system is an integrated and value-driven management system that can enable consistency, continuous improvement and elimination of waste in manufacturing environmentswhich, in turn, drives flexibility and agility across the business. Additionally, more organizations are utilizing their production systems and their supporting resources as the platform for transformational change. A production system is not an information technology system, project management office or system, or a replacement of all existing methodologies, content, and structures. It is not a centralized standardization system or performance reporting tool, or a manufacturing or supply chain operations optimization system. And it is not a replacement or alternative to a functional management structure or simply a lean continuous improvement methodology. There are six critical elements to building a comprehensive production system. Strategy and Guiding Principles a comprehensive framework to align business strategy and value targeting with expected sustainable results Capability Management the enablement of manufacturing resources (people process, technology and policy) toward business strategy and coordinated value generation Change Management the establishment of a culture of continuous improvement and change through alignment of culture, organization, skills, talent acquisition, metrics, and rewards Technical Management the coordination of critical information technology to enable manufacturing capabilities to meet valuetargeting expectations Lean Principles a foundational element that drives customer focus, process standardization and waste elimination across the operation. Governance a process and framework for managing value realization and the continuous improvement lifecycle. Perhaps one of the most-overlooked of the preceding six elements is change management. Change management is vital to implementing and sustaining a new mindset and way of working across the enterprise. Indeed, changing a companys culture is extremely difficult, and a production system requires a major culture change. Thus, companies adopting a production system must take advantage of the entire change management toolset including leadership and organizational alignment, training and performance support, and stakeholder engagement and communicationand continuously take the pulse of the organization to help ensure that the changes are taking root. A leading-practice production system can be a major asset for todays manufacturer. There are myriad ways it can help a company achieve its objectives. One example is the experience of a large drug company, which refined its production system to dramatically improve the companys performance. Executives at the company wanted to get more out of their factories, but believed it wasnt possible because of a host of reasons they thought were beyond their controlhistorical performance, regulatory constraints, the complexity of the products being made, the age of the machines, worker skill availability, and the design of the facilities. However, a deeper analysis revealed that the plants actually were running at only 50 percent to 60 percent of capacityand that many of the factors impeding plant performance were not beyond their control, but rather, were losses the company could address. By adopting a new production system, the drug company is now able to match and lay out a plant to allow it to flexibly adapt to product run type; gather data on the performance of key process steps; and do production leveling. Furthermore, as part of the production system implementation, the company conducted training for shopfloor employees on basic problem-solving techniques. As a result of this effort, the drug company ultimately was able to boost the capacity of its existing network by more than 10 percent. Importantly, to sustain those results over time, the company took major strides to embed a continuous improvement mindset and culture across the company. Now, instead of seeing themselves as responsible only for running manufacturing lines, the companys plant employees see themselves as problem solvers who have an opportunity on a daily basis to improve the way the lines operate. That shift, in turn, is helping the company overall to be more proactive in identifying inefficiencies and other issues that can impede a plants performance. A major side benefit is that plant work is now more challenging and rewarding, and plant employees are happier in their jobs. Because it can enable manufacturers to be more flexible and dynamic and, in turn, respond more effectively to the volatility of the marketplace, a robust production system is fast becoming a must have for growth-oriented manufacturers.

11 Capturing Growth

Capturing Growth 12

The good news is that executives recognize their companies could do better and plan to take action. Seven in 10 said improving their companys operating model is a priority in the next 12 months (Figure 6). More than half said their companies are planning to invest in strengthening their talent and skills base in the next 12 months and nearly half indicated they are doing the same for their business processes, policies and capabilities. And about one-third said they anticipate investing in their organization structure and incentive systems, as well as in their IT infrastructure and IT applications (which are critical to manufacturers efforts to become a more digital business (Figure 7). Figure 6: Percentage of manufacturers believing it is a priority to improve their operating model.
Very significant 29% Significant

As they make such investments, manufacturers should be mindful of the important role that consistency can play in fostering flexibility in their operating model. Without a high degree of global consistency and standardization across their business processes, policies, skills and other capabilities, manufacturers may find it difficult to easily move production within or across facilities when market developments demand it.

was located in the United States (26 percent), followed by Germany (19 percent). Conversely, the biggest beneficiaries of manufacturers moves were China (34 percent) and Brazil (23 percent), although the United States also was a popular landing spot for relocated facilities for 13 percent of respondents. The relocation trend looks to continue in the next 12 months, with 37 percent of executives surveyed also saying their companies are considering relocating operations during that timemostly to reduce labor costs and enter a new market. Reducing transportation costs appears to be less of a driving factor for future relocations than they were with previous initiatives In addition to moving existing facilities, nearly half of the manufacturers in our study said they started new production facilities since 2011with the overwhelming favorite site being China (45 percent), followed by Brazil (30 percent), the United States (25 percent), and Africa (16 percent). Again, the most prevalent reasons for starting a new facility were entering a new marketwhich, perhaps, helps explain the increased popularity of Africa in this years studyreducing labor costs, and reducing transportation costs (Figure 9).

Production facility network: Plants are being relocated or built to support new market entry and reduce costs
As the pattern of demand continues to change, manufacturers face the ongoing need to evaluate where and how they make their products to improve responsiveness to customers while reducing overall operational costs. Such assessments can often result in the decision to relocate production facilities from one country to another or start up a new facility in a new market. Since 2011, about four in 10 manufacturers surveyed reported having relocated production facilities to new locations primarily to enter a new market, reduce transportation costs, or reduce labor costs (Figure 8). The relocation of facilities, at a global level, is indicative of a greater focus by manufacturers on emerging, growing markets. For instance, of those relocating operations, the largest percentage said the facility they shut down to make the move

44%

Neither significant nor insignificant

Insignificant 24% 2% 1% 2013 Global Very insignificant

Figure 7: Aspects of the operating model in which manufacturers plan to invest in 2013-14.
Talent/skills base Business processes, policies, and capabilities Information technology infrastructure Information technology applications Organization structure and incentives system Production facility network None 4% 23% 34% 34% 38% 47% 56%

13 Capturing Growth

Figure 8: Relocation of manufacturing facilities.

Have you relocated manufacturing operations to new locations since 2011? Which three factors are most important when selecting the locations of your manufacturing operations? Select one Entering a new market Reducing transportation costs Reducing labor costs 42% Increasing responsiveness / reducing lead time to customers Capitalizing on currency or tax advantages Desiring more favorable government regulations Gaining access to needed workforce skills Taking advantage of needed skills in that location Capitalizing on government incentives 54% Reducing the impact of volatile or rising oil prices Desiring to improve quality Yes No 4% 2013 Global Not sure Developing a new product that needed specialized operations Minimizing intellectual property theft Other 1% 12% 11% 10% 9% 16% 25% 24% 23% 21% 19% 30% 29% 29%

Figure 9: Starting new manufacturing operations.

Have you started new manufacturing operations since 2011? Which three factors were the most important in your decision to start operations there?

Entering a new market Reducing labor costs Reducing transportation costs 49% Increasing responsiveness / reducing lead time to customers Taking advantage of needed skills in that location Capitalizing on government incentives Desiring to improve quality Capitalizing on currency or tax advantages Minimizing intellectual property theft 49% Gaining access to needed workforce skills Desiring more favorable government regulations Yes No 2% 2013 Global Not sure Developing a new product that needed specialized operations Reducing the impact of volatile or rising oil prices 17% 17% 16% 16% 14% 12% 11% 9% 26% 25% 23% 30%

33%

Capturing Growth 14

AvoiDiNg thE PitfallS of FacilitY RElocatioN or Startup

By Michael Heilala, Senior Principal, Accenture Management Consulting
As we noted elsewhere in our report, manufacturers continue to make changes to their global production network in response to a variety of factorssuch as the need to support entry into a new market, consolidate facilities after a merger or acquisition, increase responsiveness to customers, reduce costs, or improve overall operational efficiency. Since 2011 about four in 10 manufacturers surveyed reported having relocated production facilities to new locations and nearly half started new ones. Furthermore, about 40 percent said they are planning to relocate facilities in the next 12 months. Such moves, while beneficial if done right, can be extremely challenging and fraught with riskespecially if they involve facilities in countries where the company has little to no experience or if the company lacks the capabilities needed to effectively execute the changes. Indeed, companies looking to relocate or open new facilities often face a number of major issues that can lead to project delays, major cost overruns, or plants that ultimately fail to meet the production and cost targets initially set for them. For example, companies typically struggle with managing project complexity especially coordinating the myriad work streams involved throughout the phases of a factory development project and integrating the new facility with the companys existing infrastructure, processes and local environment. Many organizations lack experience in facility development, which can lead them to spend too much time defining the project structure (including the project approach, team composition, reports, and key metrics), fail to accurately identify critical project risks, and not fully recognize the major factors that can make or break the project. Manufacturers also can have a shortage of key internal competencies. Developing one or more new facilities can require skills that are materially different from those needed to effectively operate a plant including competencies in large-scale project management and specific technical competences (for example, in equipment capability and capacity modeling)as well as some critical internal competencies that may not be fully available throughout the project (including global operating model development, lean factory layout design, factory design and construction management, local region/country sourcing and local recruiting, hiring and training experience). Furthermore, a lack of knowledge of local markets can have serious implications for a project. Manufacturers often find it difficult to navigate through the maze of unfamiliar government regulations, legal practices, customs and habits when setting up shop in a new country. In our experience, companies can more effectively manage their facility relocation or startup project by carefully addressing three dimensions of the initiative. Doing so can help manufacturers avoid overlooking critical-path requirements and identify potential capability shortcomings that could derail the effort. The business operations dimension is associated with the process and functional support the new facility will require. This includes spelling out the new factorys design (and how the design aligns with the companys overall supplier and manufacturing network strategy), the operational processes and back-office support (such as HR and finance) required to run the facility, and the production start-up activities needed to launch the facility. The technology operations dimension involves the technology required to support the facilitys operational processes; guides the build-out of the requisite technology infrastructure and network, systems configuration and data clean-up and conversion activities; and facilitates the implementation of the necessary physical and corporate support services. The change operations dimension targets the people aspects of the initiative. This includes driving the overall change program and communication strategy associated with the facilitys launch, as well as the subsequent staffing of the facility (including identifying the talent needed, developing a recruiting, hiring, training and competency management program, and overseeing ongoing skills development and workforce management initiatives). As they make significant changes to their production footprint to support their growth agenda, manufacturers will undoubtedly encounter their share of challenges. By considering at the outset of any project these three dimensionsand how they play out across the design, build and operate lifecycle of a facilitymanufacturers can better position a relocated or new facility to live up to its promise.

15 Capturing Growth

Figure 10: Use of contract manufacturing.

Do you anticipate increasing your use of contract manufacturing in 2013-14? Why are you increasing the use of contract manufacturing?

26% 54%

50%

Yes, extensively 24% Yes, moderately No 2013 Global

46%

It will help us relieve short-term capacity constraints Use of contract manufacturing is part of our long-term strategy

2013 Global

Figure 11: Capabilities manufacturers could strengthen to improve facility location decisions.
Total cost analysis of options Skills and knowledge of staff Improved understanding of local market capabilities A comprehensive manufacturing location strategy Changing internal mindset to a longer-term, total value view 21% 40% 48% 46% 55%

As part of their production network, manufacturers also are planning to increase their use of contract manufacturing. Threefourths of those in our study said they will increase moderately or extensively their use of contract manufacturing in the next 12 months, with 54 percent doing so to relieve short-term capacity constraints and 46 percent considering contract manufacturing a part of their long-term strategy (Figure 10). Of course, determining where to locate production facilities can be a complex endeavor, especially when opening plants in new markets. Executives in our survey indicated they could make more effective location decisions by improving several key capabilities within their organizationsespecially their ability to conduct total cost analyses of the location options when considering where to move or startup a facilitywhich is

significant given that cost is the primary driver of location decisions among a large majority of manufacturers (Figure 11).

enables them to hire, develop and retain the skills they need to compete effectively in a todays economic environment. Manufacturers also have been active in bringing new people aboard. Since 2011, more than three-quarters of companies surveyed have increased their manufacturing workforce (Figure 12). Of those, manufacturers were most commonly adding skills that are strategically important and in countries where demand was strongest. Workers hired were more likely to be fullor part-time salaried workers as opposed to hourly workers or contractors. Among the small minority of manufacturers that actually decreased their workforce since 2011, reductions tended to be centered in countries where demand was weakest, and those eliminated were most likely to be full- or part-time contractors.

Talent: Manufacturers continue to hire and improve labor efficiency, but many face major talent gaps in key workforces
Its a given that people are the key to a companys success. Companies that excel in getting the right talent on board and developing critical skills in the workforce typically are better positioned for sustained high performance over time. Overall, manufacturers in our survey appear to be confident they have what it takes to build the right workforce for their business. Eighty-three percent of executives surveyed agreed their companys talent strategy

Capturing Growth 16

17 Capturing Growth

GEttiNg thE MoSt From CoNtract MaNufacturiNg

By David Douthit, Senior Manager, Accenture Management Consulting
According to our survey, a large majority of manufacturers are planning to increase their use of contract manufacturing in the coming year. Of those, more than half said they are doing so to relieve short-term capacity constraints. However, in our experience, contract manufacturing should be seen as not simply a capacity lever, but rather, as an integral part of a companys long-term global manufacturing strategy and an important component of its broader production facility networkwhich is how the vast majority of the manufacturing leaders in our survey view it. By approaching contract manufacturing more strategically, companies can significantly enhance the flexibility of their operations while avoiding the substantial costs associated with building or buying new facilities and investing in new equipment and personnel. do so with a variable-cost operating model (people, plant and equipment) tied to demand. And in some cases, a contract manufacturer can be used at the end of the manufacturing process to add features or functions to a standard product that make the product more relevant to local market needs. Next, a company should decide which kind of relationships it wants to have with a partnera highly strategic, collaborative one in which the partner may bring new capabilities to the table or even co-invest in a product, or a more transactional one in which the partner is solely focused on supplying standard goods at the lowest cost of ownership. Then a company needs to determine the level of control it wants to exert on those relationships. For example, a company may want to be intimately involved in all aspects of the relationship and have deep visibility into where things stand at any given point in the supply chain. It may prefer the oppositea hands-off approach in which the company assumes the parts or materials will be available when it needs them. Or it might be comfortable somewhere in the middle. Finally, an enterprise should implement the tools and capabilities that can enable it to effectively manage its contract manufacturing network. It is critical for a company to have the right people, processes and tools in place to ensure partners are delivering what they have committed to deliver, and that potential issues are identified and addressed well before they become problems. Contract manufacturing can be a powerful way for companies to extend their capacity and add important flexibility to their production networksomething that can be critical in todays highly volatile business environment. But companies may not realize the true benefits of contract manufacturing unless they make it part of their overall manufacturing strategy and manage as a key element of its production network.

A strategic approach involves four basic actions

The first is to carefully consider what the company should outsource and what it should keep in houseand under what conditions. For example, production involving items that are highly differentiating for the companythose that make it unique in the marketplaceshould remain in house. Lesscore items, as well as those that can be more effectively made by a third party, are good candidates for outsourcing to a contract manufacturer. Contract manufacturers also can be good options when entering a new market, where demand is difficult to predict and building new facilities, acquiring equipment, and securing trained resources with local market knowledge can be time consuming and expensive. A trusted third party can help a company quickly establish a presence, and

Capturing Growth 18

Figure 12: Manufacturers changes to their workforce since 2011.

How have you changed your manufacturing workforce since 2011? 2013 Global 14% We decreased it substantially 35% We decreased it moderately We decreased it slightly It remained the same 28% We increased it slightly We increased it moderately 14% 8% 2% 1% We increased it substantially

Please indicate how each of the following describes your approach to increasing your manufacturing workforce. We added workers whose skills were determined to be strategically important to the company Our increases tended to be centered in countries where demand was strongest We tended to eliminate workers in the lowest tier of performance Workers added were more likely to be full- or part-time salaried employees Workers added were more likely to be full- or part-time hourly employees Workers added were more likely to be temporary or full-time contractors 6% 5% 5% 7% 8% 8% Strongly disagree Note: Due to rounding, totals may not equal 100% 9% 11% 16% 13% 15% 17% Somewhat disagree 21% 16% 29% 23% 34% 29% Neither agree nor disagree 34% 38% 29% 38% 27% 32% Somewhat agree 30% 29% 21% 19% 16% 15% Strongly agree

Figure 13: Plans for change in use of various types of workers in 2013-14.
51% 39% 33% 29%

55% 42% 34%

47%

15% Full-time employees

19% 12% Contractors Part-time employees

24%

Increase No change Decrease

Consultants

19 Capturing Growth

This hiring trend appears poised to continue in the near future, with two-thirds of executives saying their companies plan to increase their overall manufacturing workforce by at least 5 percent between 2013 and 2014. The increase will largely be driven by boosts in the number of predominantly full-time employees and, to a lesser extent, contractors (Figure 13). Despite their vigorous hiring, however, many manufacturers still have several skills gaps, mostly in the blue-collar workforce (Figure 14) where they struggle to attract

the needed skills because they cannot pay what the talent demands. Nearly four in 10 respondents said their company has a sizable skills gap in their skilled trades labor workforce, and 35 percent said the same about their general labor workforce. The smallest gaps across all companies were seen at the top of the management hierarchy supervisors and executives. Regardless of where the gaps are, most manufacturers rely on a few key levers to close them and improve overall workforce performance (Figure15): performance

rewards tied to both individual success and enterprise profitability, competitive salaries and benefits, encouragement from leadership to pursue innovation and share ideas, training to keep the workforce current, and formal competency models that define required skills, career levels and appropriate curriculum.

Figure 14: Skills gaps in various manufacturing workforces.

Skilled Trades Labor General Labor Maintenance Operations Management Supervisors Executives 8% 7% 9% 13% 11% 20% 1 - Minimal skills gap 19% 25% 2 3 21% 23% 23% 28% 40% 25% 4 33% 35% 36% 28% 24% 22% 24% 23% 18% 19% 14% 13% 8% 8% 12% 11%

5 - Extensive skills gap

Figure 15: Levers manufacturers use to close skills gaps and improve workforce performance.
Performance rewards tie to both individual success and enterprise profitability Competitive salaries and benefits are offered Leadership encourages innovation and provides employees with opportunities to share ideas Training is used to keep the workforce current and re-training is used rather than hiring/firing Formal competency models are in place defining required skills, career levels and appropriate curriculum Individuals are encouraged to proactively seek training on new topics and technologies Career advancement includes rotations through various roles and assignments to different countries or facilities Well-defined talent sourcing and selection strategy is in place Employee satisfaction surveys are conducted regularly and results are shared Global and local communities of practices, effective at sharing knowledge Full participation in coaching and mentoring activities Real-time critical feedback is provided and is an embedded part of the company's culture 12% 19% 22% 29% 28% 28% 32% 37% 40% 39% 46% 45%

Capturing Growth 20

21 Capturing Growth

SolviNg thE MaNufacturErS SkillS DilEmma

By David C. Shaw, Managing Director, Accenture Management Consulting

Although manufacturers in our study continue to hire workers and are confident in their talent strategy, many face major talent gaps in key workforces that could constrain their growth and make it difficult for them to keep pace with market demands. For instance, since 2011, more than threequarters of companies surveyed have increased their manufacturing workforce, focusing primarily on bringing in full- or part-time salaried workers with skills that are strategically important and in countries where demand was strongest. A large majority of executives surveyed agreed their companys talent strategy enables them to hire, develop and retain the skills they need to compete effectively in a todays economic environment. Yet many manufacturers remain plagued by skills gaps, especially in the trades labor and general labor workforces. Perhaps one reason is that just 28 percent of manufacturers said they had a well-defined talent sourcing and selection strategy in place. Given these gaps, and the need to continue building a robust workforce to achieve their growth goals, what steps should manufacturers take to attract, retain and build the skills they need? In our experience, the following have proven very effective.

understand what it should look for in new recruits. Formal competency models also can help manufacturers define required skills and career levels (something that only 37 percent of manufacturers in our survey have in place).

together on common initiatives. In such an environment, new types of rewards and incentives are important to encourage the desired behaviors outcomes.

Work with institutions further back in the talent supply chain to build the needed skills.
Manufacturers in many industries are finding it increasingly difficult to find qualified talent, especially people with the technical skills that are still critically important to a manufacturers business. To help fill that void, manufacturers should consider how they can partner with high schools, trade schools and community colleges to build curricula that can expose students to the skills manufacturers need. That way, when students do come on board, they have a head start on the skills that companies can mold and develop further.

Redouble employee learning and development efforts

It was surprising that only 39 percent of manufacturers said they use training to keep the workforce current, and that just 32 percent encourage individuals to proactively seek training on new topics and technologies. To minimize skills gaps, manufacturers should consider investing in training their employeesespecially those in key workforcesso employees have access to the latest approaches to developing the skills they need to be successful in their jobs. For instance, global and local communities of practices that encourage the sharing knowledge can burnish employees skills (yet only 22 percent of manufacturers in our study have them in place). Learning academies, as well, have proven highly effective in identifying and delivering targeted training and development for employees based on their roles and competencies.

Develop a broader definition of workforce

Manufacturers in our study are focused on hiring what could be considered a more traditional workforce: owned, salaried employees. However, needed skills can and should be found in other, less-traditional workforces, including contractors, channel partners, and consultants. Indeed, a majority of the manufacturing leaders in our study indicated they capitalize on all types of workers, which not only gives them a broader and deeper pool from which to find desired skills, but also gives them greater flexibility to scale labor up and down as business conditions and skill requirements demand.

As they continue to look for ways to fill their skills gaps, manufacturers should keep in mind a simple rule of thumb
In a typical organization, one-third of employees are high performers, one-third are acceptable performers, and one-third perform below standards and generally are unable or unwilling to make the transition to one of the other groups. How effectively a company addresses these three different segments has a major impact on an organizations overall skills base and, ultimately, on the success of the broader enterprise.

Revisit job descriptions and roles

Many manufacturers today still rely on outdated job and role descriptions when recruiting new talent. Often, those descriptions dont match the skills a company truly needs or the essence of the job its trying to fill. For instance, often the digitalization of manufacturing roles (even on the shop floor) have made previous role descriptions obsolete. Manufacturers should look to update their job and role descriptions to help better reflect their business and what kind of talent drives success today. A good starting point are the high performers in ones organization. By studying those individuals and identifying the traits and attributes that make them effective, a company can better

Rethink employee incentives

The environment within many manufacturers today is much less hierarchical than in days past and more collaborative, integrated and cross-functional. Indeed, its common to encounter work teams comprising salaried, contract, and union employees as well as people representing channel partners and even customers, all working

Capturing Growth 22

While these initiatives may have fallen short in helping manufacturers close their skills gaps, they appear to have contributed to an increase in overall workforce efficiency. Since 2011, about one-half of manufacturers said their labor efficiency has increased between 1 percent and 5 percent, onefourth said it rose between 6 percent and 10 percent, and one-tenth said it improved by more than 10 percent (Figure 16). Such gains can help manufacturers increase existing assets capacity and are a key driver of broader operational efficiency across a manufacturers facility network. Figure 16: Change in manufacturers labor efficiency since 2011.
11% Increased by more than 10% Increased by 6% to 10% Increased by 1% to 5% Was unchanged 49% Decreased by 1% to 10% Decreased by more than 10% 13% 3% 2013 Global Note: Due to rounding, totals may not equal 100% Don't track / don't measure

Investments: Manufacturers are striving to strike a balance between investments in new and existing assets.
To help support their efforts to improve their operating model, optimize their facility network and enhance their workforce, manufacturers are continuing to make targeted investments in key areas of their business. These include capital investments in new plants and manufacturing equipment and technologies, as well as investments in information technology and efficiency initiatives. But many executives also said spending on new equipment and technology will be tempered by efforts to get more out of what they already have. Since 2011, three-quarters of manufacturers have made manufacturing capital investmentsmostly in manufacturing equipment and machines and in existing manufacturing plant infrastructure (Figure 17), and in the next 12 months, capital investment is expected to continue (Figure 18). However, 66 percent of manufacturers also said they will be focused on extending the life and contributions of existing assets. In other words, manufacturers are redoubling their efforts to clean up their shop and become more efficient. In doing so, they are looking to life-extending initiatives such as applying lean principles to reduce waste, total productive maintenance, automation technology, and analytics (Figure 19).

Finally, information technology also is on the investment horizon for a large majority of manufacturers, as these companies continue their quest to digitalize a wider range of their businesses: Nearly eight in 10 said they are planning initiatives in the next 12 months to strengthen their IT applications. The largest percentage indicated those initiatives would focus on performance management tools such as dashboards and metrics, followed by quality assurance, ERP solutions, manufacturing planning and scheduling, manufacturing execution systems, plant operations analytics, and enterprise asset management solutions (Figure 20). Of course, as they increase their investments in key areas of their business, manufacturers must feel confident that they have a disciplined approach in place in order to get the return on those investments. By formally measuring and monitoring the value those investments deliver, manufacturers will be in a better position to justify future investments that can substantially improve operational and financial performance.

23%

Figure 17: Manufacturers capital investments since 2011.

Have you made manufacturing capital investments since 2011? What was the nature of the investments that you made?

Manufacturing equipment / machine 75% Yes No 22% 2013 Global Note: Due to rounding, totals may not equal 100% 4% Not sure Manufacturing technology New manufacturing plant construction 49% 45% Existing manufacturing plant infrastructure

60% 59%

23 Capturing Growth

Figure 18: Manufacturers capital investments for 2013-14.

Manufacturing technology Manufacturing equipment/machine Existing manufacturing plant infrastructure New manufacturing plant construction None 4% 30% 44% 50% 59%

Figure 19: Initiatives manufacturers are pursuing to extend the life and contributions of existing assets.
Applying lean principles to reduce waste Applying total productive maintenance (TPM) Applying automation technology Applying analytics 21% 49% 48% 67%

Figure 20: Manufacturers information technology investment plans for the next 12 months.
Are you planning any initiatives in the next 12 months to invest in/strengthen your information technology applications? What type of initiatives are you planning?

Performance Management (Dashboard & Metrics) Quality Assurance (QA) ERP Solutions Manufacturing Planning and Scheduling (MPS) 77% Manufacturing Execution Systems (MES) Plant Operations Analytics Enterprise Asset Management (EAM) Computerized Maintenance Management Systems (CMMS) Training and Collaboration Software 23% Yes No 2013 Global Lab Information Management Systems (LIMS) Other 1% 30% 29% 26% 23% 21% 16% 16% 39% 38%

53%

Capturing Growth 24

A Formal, CollaborativE Approach to ASSEt REliabilitY

By Jeff McKinney, Managing Director, Accenture Management Consulting

Reliability and maintenancethe processes, tools and investments that help complex and expensive assets continue to run at peak operating performancehas always been important for manufacturers that operate in asset-intensive environments. Today, its even more vital for manufacturers, for a number of reasons. For starters, assets have become very sophisticated and complex which, while boosting functionality, also means there is much more to go wrong. Second, because of recent economic conditions, many companies have been unable or unwilling to invest in new assets and, instead, have been squeezing even more out of older assets that are more prone to problems due to the accumulation of wear and tear. And third, with sustainability assuming greater importance among manufacturers, the ability to make assets run more efficiently and reliably so they consume less energy is increasingly attractive. The importance of reliability and maintenance is evident in our survey: Two-thirds of manufacturers said they are focusing on extending the life and contributions of existing assets, with about half of those companies indicating they plan to deploy comprehensive preventive maintenance programs in support of that pursuit. As they seek to improve their assets performance and longevity, manufacturers can learn from some of the worlds most successful manufacturers, which have adopted leading reliability and maintenance practices that help enable them to avoid the inefficiencies, costly breakdowns and delays that can negatively impact balance sheets, reputations and customer relationships. These successful companies tend to have a highly structured understanding of their critical assets and whats needed to optimize those assets performance. For instance, the typical large production facility has tens of

thousands of production and automation assets, each of which requires different skills, tools, techniques and supplies to keep them running. Companies that excel in optimizing these assets are highly adept at knowing what each asset needs and determining which assets are the most critical to the companys performance (and, thus, deserve the most attention). Successful manufacturers also consider reliability a shared responsibility between production and maintenance. In some manufacturers, the production team sees keeping assets running as strictly the purview of the maintenance function. This can lead to a dangerous situation, in which the production team, seeking to maximize uptime and drive down cost per unit, neglects preventive maintenance schedules and essentially runs the asset until it failsat which time they call in the maintenance staff to repair it. But the time and cost associated with bringing an asset back online when it reaches this point can be far greater than what the company would have incurred had it simply followed its preventive maintenance routines. The companies with the most productive, efficient and reliable assets typically eschew this We run, you fix mentality in favor of a more collaborative approach that results in a more globally reliable network. These organizations understand that maximizing asset uptime is everybodys job, not just the maintenance functions. Furthermore, successful manufacturers are analytically driven. They understand that a key to keeping assets running is to understand the conditions that cause them to fail and avoid them. Thats where analyticsparticularly, predictive analytics can be extremely valuable. Using predictive analytics, successful manufacturers can create models that highlight the likelihood of

various events and the impact those events could have on an assets performance. Using such insights, the companies can take the appropriate steps to prevent the events from happening and, thus, minimize issues that could negatively affect asset performance. Finally, successful manufacturers dont shortcut maintenance during times of austerity. The maintenance line item in a manufacturing budget is an easy target when a company is faced with cost-cutting pressures. But saving a little in preventive maintenance can have a negative effect on product cost and quality and ultimately can end up costing a company significantly more when the asset fails. No matter their cost or quality, assets will likely fail to produce what is expected of them if they are not maintained properly. By developing and using a formal capability to proactively and collaboratively manage asset maintenance and reliability, manufacturers can optimize their assets contribution to the companys overall business performance.

25 Capturing Growth

Capturing Growth 26

27 Manufacturing Leaders

Manufacturing Leaders
While most manufacturers in our study have made varying degrees of progress in strengthening their operating model, plant location network, and core talent and technology capabilities, a small group of manufacturers have excelled in building truly flexible and dynamic operations. And as a result, these companies are better positioned to manage through volatility and uncertainty and mitigate operational risk; they have grown more strongly in the past few years; and they are better positioned to capitalize on growth opportunities in the future. As mentioned earlier, 90 percent or more of companies overall indicated their production levels and profitability have increased since 2011, and 83 percent said their labor efficiency rose during that period. However, a small group of companies, about 8 percent of those participating in our study, reported the highest level of performancean increase of more than 10 percent on all three metrics. We call this elite group of companies manufacturing leaders. Manufacturing leaders, which spanned the spectrum of organization size, were far more likely than other companies in our study to report having grown revenue by more than 10 percent since 2011 (90 percent versus 13 percent), to be highly optimistic

that the economies of their top revenue markets will grow in the next year (80 percent versus 41 percent), and to anticipate revenue growth of more than 10 percent in 2013 (95 percent versus 15 percent). Furthermore, leaders were much more likely to indicate they plan to grow entirely through organic means in 2013 (70 percent versus 17 percent), as well as to strongly agree that the ability to flexibly and dynamically alter production to match demand is critical to achieving their growth goals (80 percent versus 30 percent). Given leaders strong growth since 2011, it is perhaps not surprising that three-fourths of leaders (versus onefourth of others) increased their capacity by at least 20 percent during that time. Some of that increase can be attributed to leaders opening of new facilities (discussed below). However, its reasonable to surmise that leaders significant boost in labor efficiency, combined with greater operational efficiency resulting from initiatives they are undertaking to improve the reliability and productivity of existing assets, has been responsible for creating additional capacity in facilities already on line. Interestingly, leaders top revenue markets did not differ dramatically from those of other manufacturers, suggesting leaders performance advantage is due not so much from where they get

their sales, but how they operate. In fact, a closer look at our data revealed that leaders tend to differ substantially from other manufacturers in a number of key areas.

Facility location
According to our analysis, leaders are more active in making changes to their production facility networkwhether it is in relocating plants or starting new ones. For instance, leaders are twice as likely (Figure 21) to have relocated manufacturing operations since 2011, and did so for two primary reasons: to enter a new market and to improve quality. Conversely, non-leaders decisions were driven primarily by cost factorsa desire to reduce transportation and labor costswhich were far less a concern for leaders. In the coming year, leaders appear likely to outpace non-leaders in relocations as well, with 70 percent of the former versus 34 percent of the latter indicating they are considering relocating manufacturing operations in 2013 and 2014. Similarly, leaders were about twice as likely as others to have started new operations since 2011 (Figure 22), with Brazil and China also the most popular locations for these new facilities among leaders. Leaders also favored North America for new operations,

Figure 21: Percentage of companies having relocated manufacturing operations since 2011.
Yes No Not sure 5% 15% 39% 57% 80%

4% Others

Leaders

Figure 22: Percentage of companies having started new manufacturing operations since 2011.
Yes No Not sure 10% 5% 2% Leaders Others 46% 52% 85%

Manufacturing Leaders 28

How a CoNtrol TowEr CaN HElp MaNufacturErS MakE BEttEr ProDuctioN NEtwork DEciSioNS
By Jose Bleda, Managing Director, Accenture Management Consulting
Global manufacturers today face a number of significant challenges in managing their supply chains. One of the biggest is deciding how to best leverage resources across their production network to help meet changing demand, increase competitiveness, and support the companys growth agenda. The challenge is especially difficult given three factors: manufacturers large, complex networks that often include many external entities such as contract manufacturers and logistics services providers; the large amounts of data manufacturers must sort through; and the economic and market volatility that require manufacturers to react more quickly or even anticipate problems before they occur. Perhaps the biggest impediment to making such resource-balancing decisions is a lack of visibility into the state of the network. As our survey found, only 29 percent of executives strongly agreed that their company has full visibility into its networks operations that enables it to effectively manage the network and make appropriate decisions to balance demand and capacity. Recognizing their challenges, leading organizations are embracing the concept of a control tower to help them more effectively leverage their network and, in turn, reduce costs, improve product availability, optimize working capital, and mitigate the risks of manufacturing network disruptions. The concept of a control tower is not new: A number of influential organizations have implemented control towers to help improve transportation and distribution. A major technology company, for example, has used its version of a control tower, called the Global Command Center, to coordinate parts logistics and field technicians to respond swiftly to customers requests, while a leading consumer goods manufacturer relies on a control tower to help it manage logistics in emerging markets by providing visibility into inbound and outbound distribution flows. By extending the control tower concept to the entire supply chainand, specifically, manufacturinga company can gain integrated visibility across all dimensions of the network, including demand, capacity (supplier, manufacturing, and distribution), inventory, orders/shipments in transit, and logistics partners. It also can use the control tower to conduct predictive analytics to make sense of the data it collects to trigger alerts, detect tipping points, run what if analyses of scenarios to model the outcome of potential decisions and, ultimately, initiate appropriate action. A control tower can also help enable a manufacturer to monitor the execution of supply chain activities, and alert one part of the supply chain when it will be impacted by anotherfor example, predicting raw material shortages and reallocating production and inventory accordingly. And, increasingly control towers are being used to help orchestrate the work of shared service centersenabling a super back office to optomize business process, IT investment and execution skills synergies across businesses and geographies. Control towers can take different forms (depending, for instance, on functional footprint or scope of control). However, all control towers generally need a few key common elements to be successful: Connection to suppliers and other trading partners (and their suppliers) to eliminate visibility gaps that create blind spots and can undermine the quality of the insights generated Built-for-purpose technology that complements, rather than replaces, typical transactional systemsi.e., systems of engagement versus systems of record High-quality data, which typically requires an industrialized master data management capability to ensure all systems are in synch An analytical capability to be able to identify potential issues (predictively) by modeling what if? scenarios and facilitating decision making. Sufficient organizational weight to be able to influence execution across both long-term and short-term horizons While many companies have used control towers in a more focused way, historically the barriers to establishing a broader manufacturing network control tower have been high and difficult to overcome. These include a high initial investment for the necessary technologies and facilities, a complex integration effort to tie into all relevant systems, long lead times to operationalize, and the difficulty and high cost associated with maintaining the capability (especially, technology upgrades and attracting and retaining the people to run it). However, that is changing quickly, as advances in technology (such as cloud and SaaS models) can make integration efforts easier and a growing number of providers delivering some or all control tower functions as a service can substantially reduce the time and cost associated with deploying and maintaining the capability. With manufacturers continuing to expand their operations around the world and increasing the complexity of their production networks, the traditional supply chain integration/optimization approach is not enough. A control tower is fast becoming an indispensible capability in the pursuit of growth in a volatile global economy.

29 Manufacturing Leaders

Manufacturing Leaders 30

with 35 percent reporting having opened new facilities in the United States and 24 percent in Canada. For non-leaders, China, Brazil and the United States were also the top three locations for new plants. Entrance into a new market was also leaders top reason for starting a new facility, but the desire to reduce transportation costs was seen as nearly equally important. Non-leaders efforts to start new facilities were largely driven by the need to reduce labor costs and to support the entrance into a new market. Contract manufacturing also appears set to play a greater role among leaders than nonleaders. In fact, 70 percent of leaders (and just 22 percent of non-leaders) said they plan to extensively increase their use of contract manufacturing in 2013 and 2014. Leaders are more likely than others to view contract manufacturing as part of their long-term strategy rather than as a way to relieve shortterm capacity constraints (the reason that was cited by a majority of non-leaders).

Operating model
As mentioned earlier, leaders are far more likely than non-leaders to be convinced of the value of flexible operations to achieving their growth goals. And it also appears that leaders operating model is better suited to supporting such flexibility: Leaders were more likely than others to say that all six dimensions of their operating model very effectively accommodate the dynamic shifting of production within a facility or across the facility network in response to demand (Figures 23 and 24). In Accentures experience, that means leaders typically have a high degree of consistency and standardization across their operating model, which can help enable leaders to quickly and easily move production within and across any of its plants when necessary. Leaders also appear to be more advanced than others in key capabilities that are critical to operating more flexibly and dynamically (Figure 25). They are about twice as likely to strongly agree their company has a

good understanding of the local cultural differences and needs in its most important revenue markets; is highly adept at accurately sensing market changes or opportunities before competitors do; has full visibility into its networks operations that enables it to effectively manage the network and make appropriate decisions to balance demand and capacity; and extensively employs modular and consistent business processes and policies that enable it to quickly and dynamically allocate product design and manufacturing capacity across the facility network (including contract manufacturers) in response to changes in its markets. However, leaders are not complacent. In fact, just the opposite is true: Eighty-five percent of leadersand just 24 percent of nonleadersconsider improving their operating model a very significant priority. Leaders are more likely than non-leaders to be investing in improving all six dimensions of their operating model in 2013 and 2014, especially talent and organization structure.

31 Manufacturing Leaders

Figure 23: How effectively manufacturers operating model accommodates the dynamic shifting of production across the facility network.
Production facility network Information technology applications Information technology infrastructure Business processes, policies, and capabilities Talent / skills base Organization structure and incentives system Leaders 16% 21% 17% 23% 18% 24% Others 35% 60% 25% 50% 50% 50%

Figure 24: How effectively manufacturers operating model accommodates the dynamic shifting of production within a location.
Production facility network Information technology applications Information technology infrastructure Business processes, policies, and capabilities Talent / skills base Organization structure and incentives system Leaders 17% 22% 23% 24% 17% 26% Others 50% 45% 50% 50% 50% 60%

Figure 25: Extent to which manufacturers agree with the following statements.
We extensively employ modular and consistent business processes and policies that enable us to quickly and dynamically allocate product design and manufacturing capacity across our facility network We have full visibility into out networks operations that enables us to effectively manage the network and make appropriate decisions to balance demand and capacity We are highly adept at accurately sensing market changes or opportunities before competitors do 23% 55%

28%

40%

22%

50%

We have a good understanding of local cultural differences and needs in our most important revenue markets

37% Leaders Others

80%

Manufacturing Leaders 32

ThE BENEfitS of BEcomiNg a Digital BuSiNESS

By Mark Pearson, Global Managing Director Operations Management Consulting
As noted elsewhere in this report, our research found that the manufacturers we identified as leaders are more likely to be applying analytics to extend the life of existing assets and to improve the efficiency and productivity of individual manufacturing facilities. We also found they are more likely to be planning a wide variety of initiatives in the next 12 months to invest in or strengthen their IT applications. And we discovered leaders were more likely to report that their IT applications and infrastructure effectively accommodate the dynamic shifting of production within and across facilities to respond to demand. This data indicates leaders are taking a much more aggressive approach to technology than most other manufacturers. But the data also demonstrates that leaders are at the forefront of becoming digital businesses. Digital technologies, indeed, are transforming the world around us. They are giving rise to disruptors that drive much of the volatility in which global businesses operate today. Yet ironically, digital technologies also often represent a solution to the challenges they help create. For example, two of the driving forces of digital business are big data and analytics, the combination of which enable companies to gain insights as never before into their customers, suppliers and their own operationsand use those insights to make decisions that drive higher overall performance. Two emerging themes, in particular, illustrate the positive impact digital technologies can have on a manufacturers operations. production rates and lead times, as well as more effectively balancing manufacturing across the plants production line. Furthermore, analytics and telemetry data are revolutionizing the way manufacturers manage their assets by enabling manufacturers to monitor and predict asset reliability. These manufacturers can now structure and schedule proactive maintenance activities that will result in the least production downtime, and can also generate significant improvements in MRO part inventory and sourcing strategies. New technologies also are being used to dramatically enhance plant safety. Marathon Petroleum, for instance, is using an innovative solution developed by Accenture and three other partners to automate gas exposure reporting and remove the human factor of managing safety risk at one of Marathons biggest refineries. The solution includes monitors worn by employees that detect the presence of multiple types of hazardous gases. Data on each employee is sent wirelessly in real time to a dashboard monitored by managers and, in an emergency, an alarm is automatically sent to the dashboard. Additional mobile-mounted apps in company vehicles enable Marathon to monitor the conditions to which employees are exposed as they visit remote locations such as water wells. In fact, technology is greatly enhancing the integration point between engineering and manufacturing, which has long been an area of lost value within most manufacturers. Many leading manufacturers are extracting this value with digital capabilities that include 3D design modules and video work instructions for the assembly floor that help ensure proper installation, quality and troubleshooting. Additionally, electronic feedback of design issues from the assembly floor back into design and engineering helps manufacturers incorporate such data into next-generation products and the larger innovation lifecycle on a timely basis. In the future, digital technologies hold tremendous promise to revolutionize the integration between engineering and manufacturing processes through 3D printing. Today, 3D printing technologies already are helping manufacturers such as GE, Mattel and Ford improve several dimensions of their manufacturing process, including direct parts production, prototype creation, tooling, and spare parts provisioning. Several pending breakthroughs may enable 3D printing to ultimately meet its lofty goals, and leading organizations are closely following these developments. With economic and market volatility now the norm for virtually all global enterprises, businesses must become more dynamic simply to survive, let alone thrive. Manufacturers should consider how the leaders in our study have embraced digital technologies to make their operations more flexible and responsive and, in the process, more productive and profitable.

Closed-Loop Digital Product Lifecycle

Digital technologies enable companies to continuously monitor the performance of products in the field and automatically feed that data back to manufacturing and engineering in real time. This, in turn, helps companies more easily spot and correct quality defects in products, more quickly uncover and address field failures, and identify promising new designs. Computer Aided Process Planning and Shop Order Control Modules further streamline production by empowering planning organizations to electronically author and update work instructions for real-time availability, driving reduced lead time and improved quality.

Digital Factory
Digital technologies are transforming the ways in which manufacturers design and operate their plants and the assets within them to drive efficiencies. For instance, leading companies are deploying technology solutions that support the plants manufacturing process, layout, operations and specialized areas like FMEA quality control activities. By leveraging simulation technology, companies are more accurately planning resources, buffer requirements,

33 Manufacturing Leaders

Manufacturing Leaders 34

Talent
Leaders are focused on building a strong talent base to help them succeed yet, because they value talent so highly, they are more likely to be critical of the skills they have in house and wary of possible talent shortages that could hamper their efforts to grow. For instance, leaders are twice as likely as other manufacturers to strongly agree that their talent strategy enables them to acquire or build the skills they need to compete effectively (70 percent versus 35 percent), and nine times more likely to say they increased their manufacturing workforce substantially since 2011 (75 percent versus 8 percent)with most leaders saying people hired were in countries where demand is strongest (79 percent) or have skills that are strategically important to the company (68 percent). On the other hand, because the performance baras well as the needamong leaders is high, leaders also have major concerns about talent. They were consistently more likely than other manufacturers to say they have extensive skills gaps across all workforce roles (Figure 26), and they were more than twice as likely (35 percent versus 13 percent) to cite the aging workforce or shortage of talent as a factor that could impede their ability to achieve their growth goals. That is why leaders are intent to remain voracious acquirers of talent. They are 12 times more likely than other companies in our study to say they will increase their overall manufacturing workforce by more than 20 percent in 2013 and 2014 (60 percent versus

5 percent) and, in doing so, a large majority anticipate capitalizing on all types of workers: full- and part-time employees, contractors and consultants (Figure 27). And regardless of what type of worker they are hiring, leaders recognize that if they want quality, they have to pay for it. For example, while leaders were similar to others in most of the major skills challenges they said they encounter across all workforce roles, they did differ substantially in one area: Leaders were consistently far less likely than other manufacturers to say they lacked skills in a particular workforce because they couldnt pay what workers demand. Furthermore, leaders were more than twice as likely as others to say they offer competitive salaries and benefits to close their skills gaps.

preferred means for extending asset life (Figure 29). Leaders also are twice as likely as others to say they are investing in operations analytics to help improve the efficiency and productivity of individual manufacturing facilities (Figure 30). The clear message is that manufacturing leaders are increasingly focusing on making their assets more reliable and responsive, which in turn can boost labor efficiency and support a more flexible and dynamic facility network that helps enable leaders to more easily adapt to changing market conditions. Finally, leaders appear more focused on strengthening their information technology base in the coming year as they intensify their efforts to become a digital business. All but one said they are planning to invest in IT applications in the next 12 months, compared with 76 percent of non-leaders. The majority of leaders expect to direct those IT investments toward ERP solutions (58 percent) and performance management tools (58 percent), while 47 percent plan to invest in computerized maintenance management systems.

Investments
All of the leaders in our study, and threefourths of the non-leaders, said they made manufacturing capital investments since 2011. Leaders were somewhat more likely than others to direct those investments toward new plant construction and manufacturing technology. Going forward, leaders appear to be more focused on making capital investment in new plants and technology once again, but also in manufacturing equipment and existing plant infrastructure (Figure 28). Leaders also signaled a greater interest in getting more out of what they already have. Half of leaders, compared with 21 percent of non-leaders, said they are concerned with extending the life and contribution of existing assetswith the vast majority of leaders citing total productive maintenance as their

Figure 26: Percentage of manufacturers reporting they have significant skills gaps in these workforces.
Maintenance Skilled trades labor General labor Supervisors Operations management Executives Leaders 6% 12% 12% 10% 7% 10% Others 20% 30% 25% 35% 32% 35%

35 Manufacturing Leaders

Figure 27: Percentage of manufacturers planning to increase various types of workforces in 2013-14.
Full-time employees Part-time employees Contractors Consultants Leaders 47% 30% 37% 26% Others 65% 70% 70% 90%

Figure 28: Manufacturers plans for capital investments in 2013-14.

Manufacturing technology Manufacturing equipment/machine Existing manufacturing plant infrastructure New manufacturing plant construction None 0% 4% Leaders Others 58% 48% 43% 27% 50% 60% 70% 75%

Figure 29: Initiatives manufacturers are pursuing to extend the life and contributions of existing assets.
Applying total productive maintenance (TPM) Applying lean principles to reduce waste Applying automation technology Applying analytic Leaders 38% Others 46% 54% 54% 68% 92%

48% 19%

Figure 30: Initiatives in which manufacturers plan to invest to improve plant efficiency and productivity.
Operations analytics Lean transformation Factory flow optimization Inventory management & control Quality management Plant asset reliability Production planning Energy management Environmental health & safety Leaders 10% 10% Others 20% 18% 18% 15% 20% 25% 20% 26% 25% 37% 40% 32% 45% 45% 43% 50%

Manufacturing Leaders 36

37 Manufacturing Leaders

ThiNgS MaNufacturiNg LEaDErS Do DiffErENtlY

Manufacturers in our survey that excel in production output, profitability and labor efficiency are more likely than other manufacturers to:
1 Have built an operating model that very effectively accommodates the dynamic shifting of production within a facility or across the facility network in response to demand 2 Have relocated or opened new manufacturing operations since 2011 to support their entry into a new market 3 Extensively employ modular and consistent business processes and policies that enable them to quickly and dynamically allocate manufacturing capacity across the facility network (including contract manufacturers) in response to changes in its markets 4 Plan to extensively increase their use of contract manufacturing and view contract manufacturing as part of their long-term strategy 5 Achieve the right balance between new capital investments and extending the life and contribution of existing assets 6 Plan to strengthen their information technology base in the coming year 7 Have full visibility into their networks operations so they can effectively manage the network and make appropriate decisions to balance demand and capacity 8 Have a talent strategy that enables them to acquire or build the skills they need to compete effectively 9 Be highly adept at accurately sensing market changes or opportunities before competitors do 10 Have a good understanding of the local cultural differences and needs in its most important revenue markets;

Top 10

Manufacturing Leaders 38

ThE SuStaiNabilitY JourNEY: From CompliaNcE ASSuraNcE to PErformaNcE ASSuraNcE

By Gary Hanifan, Managing Director, Accenture Management Consulting
Among the data generated in our survey are three very interesting findings: that increasing operational efficiency is the most popular lever for maintaining or improving profitability; that manufacturers are making changes to their global footprint by moving production facilities closer to customers; and that manufacturers are increasingly looking to get more out of their existing assets through efficiency and maintenance programs. Key drivers shaping these trends include the changing regulatory landscape, increasing customer demands, and competition for natural resources. What do these results have in common? Besides demonstrating that manufacturers continue to look for ways to boost their margins, they all contain an underlying sustainability message. For instance, by definition, improving efficiency is a sustainability play because it is based on consuming less to produce more. Moving production facilities closer to customers certainly can help improve responsiveness, but it also can reduce the impact on the environment through fewer emissions and less fuel consumed to ship products. And getting more out of existing assets can mean that equipment wont be reduced to scrap and, while its operating, will consume less energy and generate less waste. These results arent surprising. In the past decade, sustainability has matured as manufacturers progressed in their sustainability journeyfrom seeing sustainability primarily as a nice to have or a matter of compliance to, ultimately, as a business imperative that can help them reduce costs, mitigate risk, increase revenue and burnish their brand. When they used to talk about sustainability, manufacturers would focus on impending regulations that might negatively affect their business. Today, while the cost of regulations is still a concern for manufacturers, they
39 Manufacturing Leaders

are thinking about sustainability in a much broader way. They are making conscious choices and are implementing green policies that help enable innovation through initiatives such as resource efficiency, closed-loop processes, and robust EHS systems. For instance, if they are building a greenfield plant, should they pursue LEED certification or create a living building? What options do they have in terms of lighting, heating, energy, construction methods, and water that could help them offset the cost of a new plant to effectively make the facility cost neutral? Many manufacturers also have become huge advocates and practitioners of recyclingnot only to support their efficiency push, but also for commodity assurance, something that is especially important as prices rise on key commodities or as competition increases and causes supply shortages. The companies on the leading edge of sustainability have gone even further, and are now thinking about all things operational being inherently valuable to the sustainability agenda. They see that every operational efficiency play or risk mitigation initiative can have a sustainability impact. They recognize that sustainability can actually help increase revenue. They know that customers value it and are often willing to pay more for products that are sustainably produced. They see the impact sustainability can have on their ability to enhance their brand and image, engage with customers, and recruit and keep the best and brightest talent. They proactively look at how to design sustainability into their products from the beginningfor instance, eliminating from product designs or packaging certain components or materials that cant be recycled or are harmful to the environment. As they continue their sustainability journey, or look to begin it, manufacturers should keep in mind three elements that can be critical to help position a sustainability agenda for success.

The first is data. Manufacturers must collect the right data on sustainability initiatives (both internal and among suppliers). With that data, a manufacturer can determine the extent of the opportunity possible, set desired targets for its sustainability initiative, and define the right metrics that will gauge progress and return on investment (which, in our experience, has consistently been a six- to 18-month payback). The second element is process. Manufacturers can make one-off decisions based on the data they collect, but until those decisions are institutionalized, the company cant count on repeating its results year after year. Thus, sustainable practices should become part of the fabric of how the company does business, which typically requires the creation of multiple cross-functional processes. Finally, effective sustainability practices typically require governance. Change management is the key here. The decision to pursue a sustainability agenda should flow from the top, and be a part of the formal objectives of employees. A company should must have formal sustainability policies and procedures, clearly defined responsibilities and accountability for making sustainability happen, and ongoing monitoring, tracking and reporting of progress. The most innovative manufacturers recognize that the best sustainability initiatives typically involve four dimensions: cost reduction, revenue generation, brand enhancement, and risk reduction. For these companies, sustainability is no longer just something to pursue because regulations require it or its the right thing to do but, rather, because sustainability has a strong business case and, thus, has truly become a business imperative.

Manufacturing Leaders 40

CoNcluSioN
While its true that the global economy overall has improved in the years since the recession, improvement certainly has not been geographically equitable. Most European economies are still struggling to find their footing, while demand in emerging markets continues to expand (albeit more slowly than their blistering pace of recent times) and North America seems to have finally turned the corner. Yet even in the face of hard facts, many observers still find it difficult to come to a consensus of where the global economy is headed in the next few years, let alone the next 10 or 15. Given the ongoing uncertainty and volatility inherent in todays economic conditions, manufacturers must be ready for whatever is thrown at them. And that can mean infusing greater flexibility into their operating model, production network and talent base to better enable them to respond to the sudden swings in marketplace and economic conditions that are the hallmark of the business environment today. Indeed, as the manufacturing leaders we profiled in our study have demonstrated, such flexibility can help position manufacturers to grow more strongly, post higher margins, increase production (often without buying or building new facilities), and improve the efficiency of their workforce. By being able to, for instance, dynamically shift production within a facility or across the facility network in response to demand, these leaders are less vulnerable to downward swings in some markets and better positioned to capitalize on new opportunities in others. This, in turn, can help them put even more distance from less-able competitors that are left scrambling to figure out how to align their operations with unforeseen changes. Furthermore, as leaders demonstrated, people remain key to competitive advantage. While its tempting to put the brakes on hiring during uncertain times, leaders maintain their focus on attracting and cultivating the skills they need to stay ahead of the game. And that typically can require not only paying the going rate for top talent, but also using innovative approaches such as learning academies to close skills gaps in critical workforces. Finally, manufacturers should actively consider ways to improve the reliability and productivity of the assets they already have to help boost capacity, instead of defaulting to buying or building new. Tools such as total productive maintenance and operations analytics, favored by the manufacturers in our study, can help extend the life of facilities and equipment and make them more responsive to the needs of the business. In summary, the overriding message from our research is clear: Manufacturers that plan to grow this year and in the years ahead must be able to move quickly, confidently and cost-effectively to capture growth opportunities that present themselves in an unpredictable global economy.

41 Conclusion

AppENDiX
Methodology and Demographics
In May and June 2013, Accenture embarked on a research initiative designed to shed light on the factors shaping manufacturing in todays environment, as well as how manufacturers are refining their manufacturing strategy and operations to remain successful. The study consisted of a web-based survey of 250 senior manufacturing executives (Figure 31) in companies headquartered in North America, Europe, South America and Asia. These companies have global operations and annual revenues that range from $500 million to more than $50 billion. Participating companies represented six main industry sectors: automotive, consumer products, industrial equipment, electronics and high tech, oil and gas, and chemicals and natural resources (Figure 32). Figure 31: Participating executives titles.

Job Title
Managing Director, Senior Director, or Director C-Level executive (e.g. CEO, CFO, COO, CTO, CMO, CRO) Senior Vice President, Executive Vice President, or Vice President Total

Count
107 91

Percent
43% 36%

52 250

21% 100%

Figure 32: Participating companies industry.

Industry
Industrial Equipment Electronics and High Technology Consumer Products Automotive Chemicals and Natural Resources Oil and Gas Total

Count
49 48 44 39 36 34 250

Percent
20% 19% 18% 16% 14% 14% 100%

Appendix 42

For More Information

To learn more about how Accenture can help you develop more dynamic manufacturing operations go to www.accenture.com/manufacturing, or contact: Russell Rasmus Overland Park, Kansas russell.rasmus@accenture.com Kristine Renker Chicago, Illinois kristine.m.renker@accenture.com

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.
This document is intended for general informational purposes only and does not take into account the readers specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.

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