Innovative Thinking Leads to Region’s Positive
Manufacturing Signs
By Joel M. Rosenthal, CPA, Alpern Rosenthal
With national reports of manufacturing’s demise, it is welcome
news to hear that Western Pennsylvania’s manufacturing sector
is not just surviving, but it is being rebuilt and thriving in today’s
economy. While some may doubt this trend, specific statistics from a
recent survey that Alpern Rosenthal and the University of Pittsburgh’s
Institute for Entrepreneurial Excellence at the Joseph M. Katz Graduate
School of Business conducted of the region’s manufacturers indicate
otherwise. The survey sheds light on trends in operations, employment,
revenue, industry performance and management techniques.
For three consecutive years, the survey has shown an upward movement
of employment and revenue growth projections for the region’s
manufacturers. In the next three years, a large majority of companies
expect job increases (94%) and many envision significant job growth
(43% expect employment to increase by 10% or more). In addition, 95%
expect to see revenue growth in the next three years and 75% plan an
increase of 10% or more.
But why the optimism among manufacturers? What are they doing differently
now that has them predicting a brighter future? Just like momentum at
a sporting event, these things are often difficult to predict, but one
contributing factor lies in their management techniques and how companies
have reinvented their operations. Most manufacturers have realized that
they must change old fashioned attitudes towards production processes
that have been prevalent for decades.
In today’s competitive global economy, production and management
styles must be adaptive to change for a business to be successful. It’s
no secret that competition within the industry is fierce and will likely
remain so for some time, but manufacturers that can adjust and rework
operations – from top to bottom – are the ones that will
succeed. And they will not only succeed, but they will likely serve
as role models for other manufacturers to learn from.
Research has revealed that companies that implement industry-accepted
management techniques will be the ones that thrive in tomorrow’s
economy. Some of the most innovative practices include lean manufacturing,
participatory management, six sigma, total quality management and theory
of constraints. Companies that utilize these techniques, including some
of those who have won the Manufacturer of the Year awards sponsored
by the Pittsburgh Business Times, have seen quality improvement and
impressive bottom line results.
While each of these techniques uses different philosophies, methods
and processes, the end result is often the same – better production,
lower costs, improved turnaround time and enhanced quality. Some of
these practices analyze and dissect management processes to achieve
end results while others emphasize perfect first-time quality, resolving
and solving problems at its source, and waste minimization. They each
require an organization to be flexible in its overall operations. These
methods are also a long-term process as continuous improvement in operations
is emphasized.
According to the regional survey, the number of Western Pennsylvania
businesses that are using and have knowledge of these techniques are
gradually increasing. Companies with larger revenue amounts are more
likely to implement many of these processes, but they are applicable
to all manufacturers regardless of whether they are producing widgets
or heavy machinery.
Western Pennsylvania is fortunate to have multiple companies who are
implementing these practices (lean manufacturing seems to be the most
common technique) and are now considered world-class manufacturers.
There is much to learn from these businesses. And the key is the willingness
to adapt to change at the top of an organization. There are many family-owned
businesses in Western Pennsylvania and we are seeing new generations
assuming the responsibility of managing businesses and implementing
new ideas and techniques. These forward thinking management techniques
will likely serve manufacturers well because as the regional survey
indicated 31% of respondents see globalization as a threat to their
company as well as 35% see offshoring as a threat.
Regardless of size, companies who implement quality control and innovative
practices will be more likely to succeed in today’s economy. We
have seen several positive movements in the survey’s analysis
and we are hopeful these trends continue as manufacturers seek out new
resources to be best-in-class.
Joel M. Rosenthal, CPA, is a Shareholder and Director of Alpern
Rosenthal’s Manufacturing Services Group. He can be reached at
412.281.9560 or at jrosenthal@alpern.com.
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