War, SARS, Economic Slowdown and Manufacturing

In the aftermath of the Iraq war, the world is a more dangerous place and its people are more insecure.  So charged Amnesty International last month, in its annual report; a document dismissed as being "without merit" by the Bush administration.  Nevertheless, higher degrees of security alerts, the sluggish economy, rising unemployment numbers, lagging consumer-spending patterns and health concerns over SARS, tend not to breed confidence.  And, for manufacturers, a customer-base that's feeling insecure about the future is less likely to purchase more than what they absolutely need for the present. 

With demand and price-points under attack, manufacturers have been forced to squeeze costs from every facet of their extended-enterprises, while, concurrently, increasing asset utilization.  Supply chain partners who refuse to share the hit must be replaced, and planning systems that can't dynamically re-plan to accommodate sudden changes, should be upgraded because they are not suited for today's environment.  "Upgrade" does not, necessarily, mean replace.  There's no time - let alone budget - to replace a planning system right now, and, for the most part, boards of directors are vetoing all expenditures that do not have a proven ROI up front.  No doubt, a growing number of manufacturing executives wish they'd followed their mother's advice and become doctors.

There are many possible treatments for managing these symptoms of consumer insecurity.  Some companies focus on improving business processes to optimize procurement and supply chain dollars, others work directly with their customers to try and get a more accurate picture of anticipated demand, and some companies focus on better identifying material and capacity constraints and improving factory plans and schedules.  All of these actions on their own are important, but, at the end of the day, the best answer is to share data from multiple applications and platforms, leverage its value and provide all stakeholders with visibility into the information and how it affects them.  This is not a new solution.  Adexa has been delivering that kind of integration and visibility to manufacturers for years, regardless of the systems, applications and platforms they may be running.  What's new is the need.  In the North American market, nice to have has become urgent to have.

In the Asia Pacific Region, where, in contrast to North America, the manufacturing industry has been booming, SARS has put the breaks on growth, but not derailed it.  Healthy consumers in affected areas have restricted their movements and curtailed their discretionary spending, but this is expected to be a short-term blip in an otherwise vibrant sector and Region. 
 

Since the lag-time between wholesale orders and deliveries can be as long as three months, the full impact of SARS on manufacturing is only now showing up.  A recent survey conducted by the Singapore Confederation of Industries (SCI) forecasts sales and orders in the region may fall by 20% until the situation is fully under control.  In Malaysia, SARS contributed to a general slowdown, of the countries GDP, which still grew at an enviable rate of 4%.  In China some forecasts predict SARS will reduce manufacturing activity by as much as 10%, however, the sector has been growing at a rate in excess of 25% for the last year.  A report from Singapore's Economist Intelligence Unit (EIU) concludes that economic damage to the Region caused by SARS will be short-lived.  It says that over the next 4 years, Asia Pacific will outpace the rest of the world with average growth rates in the neighborhood of 5.6%.  

The short-term impact of SARS on the manufacturing sector in the Asia Pacific Region is similar to the continuing impact of the slow economy and consumer insecurity in North America.  And the treatments for coping with the situation are also the same - increase asset utilization and intelligent decision-making by integrating data from multiple systems and platforms, and delivering visibility and collaboration throughout the extended-enterprise.  Manufacturing companies that implement these measures today, will emerge from the slowdown with momentum, and be well positioned to leapfrog competitors and capitalize on new opportunities when the markets pick up.

Final Thought
 
Our final thoughts for this edition of the Arrow go back to the early 1970's, when Bill Gates was trying to get computer time at Lakeside Prep School, and a 90-year-old rebel, by the name of Pablo Picasso, was focusing his parallax view of the world (see the Ann Grackin interview to understand what that means) on the impact of computers on our lives - perhaps this was a new fruit growing on the tree of analytical cubism.  Please keep in mind that Picasso's genius was visual - from the eye and the mind and the heart.  Picasso said: "Computers are useless.  They can only give you answers."  The questions and creative forces are within us all.

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