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By the Numbers By Randy Burgess “Manufacturing Sector Creates New Jobs” is a headline that American factory workers likely feel they were promised during last fall’s election campaign, but, guess what? The campaign is over and the jobs are being created in China, Taiwan, Korea, India and Mexico. It’s the same trend we’ve seen since the burst of the technology bubble and one that clearly has helped fuel the impressive turnaround in the manufacturing sector. It’s also a trend that has expanded in scope to include white collar manufacturing jobs, which has prompted a leading industry analyst firm to warn companies they’d better jump on the bandwagon or risk getting run over by it. American manufacturing production closed 2004 with increases in almost every sector. New orders were up, capacity utilization was better and, for the 19th consecutive month, the Purchasing Manager’s Index (PMI) indicated the manufacturing economy was expanding. On the downside, unfilled orders rose to just under $550 billion and inventories increased to just under $470 billion, which means profitability could have been a trillion dollars better with improved sales and operations planning, demand planning and supply chain planning. We could also include factory planning on the list since, although capacity utilization was better, it averaged only 77.8%, and many companies were far below that average. One of the world’s largest EMS (Electronics Manufacturing Services) companies recently set an objective of improving capacity utilization from 60% to 70% over the next year. Those surprisingly low capacity utilization numbers were revealed in connection with the announcement of new staff cuts of 10% - 15%, and a shift in production to new plants in lower-cost regions. The measures are aimed at trimming $1 billion in costs by early 2006, a figure that represents 12.5% of income. Pretty good ROO (return on offshore) and a strong indication that we won’t be getting back too many of the 2.9 million American manufacturing jobs that have been lost since 2000. AMR Research, which last year issued a report that connected the dots between earnings per share, demand planning and supply chain planning, has just released an alert on offshore IT strategy. The alert, written by the firm’s VP Lance Travis, states that companies that have yet to implement an offshore strategy need to get started immediately because, every day, their competitors are pulling further ahead. Companies that have already adopted offshore strategies reported savings of up to 40% on application development and maintenance and up to 80% on data center operations. The alert provides readers with recommendations on how to get moving with their own offshore strategies, and it can be viewed at: http://www.amrresearch.com/Content/view.asp?pmillid=17963. As businesses continue to develop and refine their offshore strategies they need to integrate a global supply chain and operations planning component. Without that the savings realized by lower execution costs may be eaten-up by higher supply chain and logistics costs. These areas are seamlessly addressed by Adexa solutions and we strongly urge you to contact us while you are in the planning phase of your offshore strategy. We can help you get a faster ROO. Randy Burgess is Adexa’s Manager of Communications
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