Accenture Research and Insights into Manufacturing Mastery

High Performance through Manufacturing

Consulting Technology Outsourcing

Contents
Introduction A Global Study on Manufacturing Practices Manufacturing Masters: Learning from the Best Insights and Recommendations On the Journey to High Performance 03 05 07 20 22

Introduction

Globalization has had a dramatic impact on every large company over the past decade. But its impact on manufacturers and their supply chains has been especially profound. For these companies, achieving high performance is more importantand more difficultthan ever. Some of globalizations biggest challenges involve managing the complexity of supply chains that extend around the world. The rise of economies in Asia Pacific, Eastern Europe and other emerging regions creates new customers whose needs are often quite different from those of a manufacturers long-standing customers. Matching supplies (steel, rubber, parts and other components of final products) that are sourced from every region with demand that is harder to predict and much more variable by customer segment and geography has made it far more difficult to run effective and efficient supply chains. Couple this with the increasing market volatility and

the geopolitical situations, and the complexity of global supply chains increases exponentially. In turn, all this forces companies to shift production from one plant to another to load-balance their manufacturing network, which can be contrary to lean principles that call for focused, repeatable manufacturing processes. Shifting supply around the world also increases the complexity of dealing with fluctuating exchange rates, unfamiliar tax and customs regulations, and special localized environmental laws. Determining the optimal places to manufacture although never straightforward has become infinitely more complex. Complicating the picture even more is the specter of global capacity constraints. Internal manufacturing capacity may not always be available to meet demand, especially when a companys factories are specialized or its suppliers capacities are located far away from the finished product factories. As a result, many

manufacturers total landed costs have spiked, squeezing profitability and eroding competitiveness. These companies now need unprecedented flexibility in their manufacturing strategies and operationsespecially in how they source material, a key cost component. The case of a consumer-durables producer illustrates the pressures on manufacturers. In 2008, its cost of direct materials had risen dramatically due to the global proliferation of raw materials and parts. To reduce its cost structure, the company brought together representatives of its engineering, procurement, manufacturing and marketing functions with its various suppliers to agree on material and part standards that would reduce complexity and costs as well as to seek other initiatives they could jointly pursue to generate supply efficiencies. Over the past 20 years, the rising cost of producing goods for a global market has forced manufacturers of 3

automobiles, computers, consumer electronics, telecommunications equipment, machine tools, furniture and many other products to shift much of their production overseas and to other low-cost manufacturing hubs. But more recently, a number of the macroeconomic drivers of the offshoring movement have changed substantially. In 2008, the US dollar plunged against major Asian currencies to its lowest value in five years, but has recently strengthened again. Crude oil prices skyrocketed and then came tumbling down. Labor costs in developing countries have increased steadily (in most cases, at a higher rate than the corresponding developed economies), eroding some of their manufacturing cost advantage. These and other factors have begun tipping the scales the other way. While offshore manufacturing remains attractive, many companies now are rethinking their production strategies. In fact, a number of US-based manufacturers are shifting production from offshore production facilities back to domestic or near-shore plants. For example, Tesla Motorsa producer of a zero-emissions, electric-powered sports carhas moved the assembly of battery packs from Thailand to San Carlos, California, next to its headquarters. Thailand's low labor costs no longer offset the high costs of shipping thousand-pound battery packs across the Pacific. Similarly, a number of manufacturers headquartered outside the United Statesincluding Suntech, a Chinese manufacturer of solar panels and related equipment are building American plants to reduce the high cost of shipping and be more cost competitive in the North American market. Globalization not only forces manufacturers to rethink their supply chains; it requires them to pursue new markets and compete against new competitors. To grow, many manufacturers have expanded into

emerging economies such as China and India. While presenting vast new opportunities, these new markets come with the tall challenges of understanding the needs of a whole new set of customers and customer segments. Additionally, these emerging markets often present new competitors to global manufacturerscompanies that have been operating in these countries for years and, thus, are intimately familiar with market needs. They typically also operate with much lower cost structures, which enable them to manufacture in new, streamlined ways. Take Tata Motors, an automaker in India, or Chinese telecommunications equipment supplier Huawei Technologies. Both companies represent a new breed of flexible, nimble manufacturers. They are creating severe pricing pressures for Western manufacturers and providing attractive alternatives for customers in developing markets. They also present the threat of diversifying into developed markets. Finally, one of the greatest challenges to global manufacturing companies is the competition for supply chain talent. While attracting and retaining skilled people is difficult at all levels from hourly laborers to executive management the biggest shortage is in middle management: supply chain planners, production supervisors, warehouse and transportation managers and the like. These people are in high demand in such countries as Mexico, China and India. Many of the most talented middle managers in these countries lack global experiencewhich is critical as companies in emerging markets look to expand outside their domestic borders. This is especially true given that most companies lack standard ways of conducting supply chain operations across their organizations. Without such standard operating models, companies are at the mercy of localized, idiosyncratic ways of

planning transportation routes, operating warehouses, sequencing on the assembly line, scheduling the workforce and conducting other supply chain activities. That puts these manufacturers at the mercy of the few individuals who understand how to run these activities. Operations that depend on individual heroics are extremely fragile. They invite expensive bidding wars for their services and consternation when they retire or leave.

A Global Study on Manufacturing Practices

The aforementioned challenges are substantial, and they no doubt have made the working lives of manufacturing executives more difficult. Thus, its not surprising that many companies around the world have struggled to achieve superior performance in their manufacturing operations. As part of Accentures ongoing research on the characteristics of high-performance businesses, we conducted an extensive survey of more than 600 major companies around the world. We wanted to better understand the state of their manufacturing operationshow they were performing on key production metrics, and the extent to which they had adopted advanced manufacturing practices, capabilities and technologies. (See Figure 1) Overall, we found most companies struggling to produce much betterthan-average performance on key manufacturing metrics. We also found that lackluster performance largely was a function of immature manufacturing practices and capabilities in key areas. We gauged manufacturers performance on several commonly accepted core measures. For the survey respondents as a whole, high performance on any one metric was rare (see Figure 2). For example, we found the median percent of overall throughput was just 80 percent. Their asset utilization and overall equipment effectiveness were no better, and uptime versus scheduled was worse, at 75 percent. Manufacturing lead time clocked in at 10 days.ys.

By Geography

By Industry

By 2007 Revenue

6% 4% 9% 33% 36% 6% 3%

12% 6% 29% 36%

18% 31% 36%

6% 18% 17%

Europe Americas Asia Pacific

Communications Electronics & High Tech Retail Food & Consumer Goods Automotive & Industrial Equipment Travel & Transportation Biotech & MedDevices Natural Resources Utilities

Up to $500 million $500 million to $1 billion $1 billion to $5 billion $5 billion to $10 billion >$10 billion

Figure 1. Survey participant demographics. 5

Percent overall throughput: Customer promise kept percentage: Overall equipment effectiveness: Asset utilization: Material efficiency: Manufacturing lead time: Percent production to plan: Delivery to schedule: Capital project index: Uptime versus scheduled Downtime versus scheduled run time Workforce satisfaction (% satisfied)

80 percent 95 percent 80 percent 80 percent 95 percent 10 days 90 percent 90 percent 53 percent 75 percent 10 percent 80 percent

Figure 2. Performance across key manufacturing metrics by the overall survey sample is not high. We also probed a number of aspects of manufacturing operations and management. Here, too, we found an inconsistent level of sophistication in practices and capabilities. In fact, most companies have only basic capabilities in key manufacturing areas such as determining where to locate production, streamlining manufacturing processes and creating highly flexible operations that can be altered quickly and cost efficiently when the market changes. These three capabilities are core to creating manufacturing operations that support companies pursuit of high performance. Our survey respondents overall weakness in these areas goes far to explain the rather mediocre aggregate performance. Specifically, we found most manufacturers struggling to determine where to locate manufacturing to make certain productsthat is, how to assess costs and benefitslargely because they dont use modeling techniques and are unable to conduct what-if scenarios. Such scenario planning methods help manufacturers gain more insight on how to meet customer demand: where to locate the supply base and manufacturing plants, and which products to produce in which manufacturing facilities. We also found only narrow adoption of proven manufacturing improvement techniques such as Lean and Six Sigma, which have helped dramatically to reduce costs, cycle times and defects at many manufacturers. Our arguments are not meant to undermine the progress and major strides that many companies have made in linking manufacturing to other core enterprise functions. However, on average, the companies in our survey did not have superior levels of integration and/or collaboration across their supply chain. Similarly, highly modular manufacturing processes were not common across companies in our sample. Such processes are critical to flexible productionto create operations that can be changed rapidly and cost-effectively when customer needs change, to incorporate new technologies and to reduce costs. The biggest barriers to such flexibility typically are twofold: visibility, or the understanding of how well production is performing at the companys, its contractors, and its suppliers plants; and the ability to conduct what-if scenario planning, which we discussed briefly above. In general, our survey participants did not report having a high degree of visibility in key areas of their manufacturing operations.

Manufacturing Masters: Learning from the Best

Despite the fact that globalization has raised the bar of performance for manufacturers around the world, our research and client work have revealed that a number of companies have overcome the key obstacles we mentioned earlier. In the process, their manufacturing operations have become a major competitive differentiator and a key factor in their superior financial performance. We refer to this group of companies as manufacturing masters. The masters finished in the top 10 percent in our survey on three core aspects of manufacturing: cost effectiveness, as measured by several metrics including actual versus budgeted manufacturing costs, line conversion costs and s crap rates; customer service, as measured by customer lead times and the percentage of customer promises kept; and operational efficiency, as measured by asset utilization, overall equipment effectiveness and throughput, and several other standard production metrics.

We also identified a group of companies on the opposite end of the spectrum: the survey respondents we deemed the laggards those that finished in the bottom 10 percent in the three core areas. Laggards differ demonstrably from masters not only in their performance on the manufacturing metrics covered in our survey, but also in terms of the level of maturity of important manufacturing capabilities and practices. Understanding these differences provides numerous insights into the keys to superior manufacturing performance. Before exploring the differences between the masters and laggards in manufacturing capabilities and practices, it is revealing to see just how much better the masters are than the laggards in terms of operational performance. As Figure 3 illustrates, masters held a substantial edge over laggards across the metrics that Accenture has found to be strong indicators of manufacturing operations performance. The gap between masters

and laggards was especially noticeable when comparing the lead times among continuous and discrete manufacturers (see Figure 4).

Masters Percent overall throughput Customer promise kept percentage Overall equipment effectiveness Asset utilization Material efficiency Scrap rate Manufacturing lead time Percent production to plan Delivery to schedule Capital project index Downtime versus scheduled run time Workforce satisfaction ( percent satisfied) 85 percent 98 percent 92 percent 90 percent 98 percent 1 percent 3 days 97 percent 98 percent 90 percent 6.5 percent 80 percent

Laggards 50percent 86 percent 60 percent 50 percent 80 percent 10 percent 35 days 83 percent 83 percent 30 percent 19 percent 80 percent

Figure 3. Masters outperformed laggards on core manufacturing metrics.

Discrete Average Median Masters Laggards Masters Laggards 9.2 29 5 30

Continuous 7.6 63 4.5 40

Figure 4. Manufacturing lead times among discrete and continuous manufacturers.

High

Manufacturing Performance

Low Low Manufacturing Capability Maturity High

Figure 5. Maturity of practices and capabilities in key areas are strongly correlated to superior planning performance. However, while these figures clearly show the masters significantly outperformed the laggards in manufacturing, they do not explain why masters were that much better. To shed light on this difference, we compared the manufacturing practices and capabilities of these groups. While comparing how masters and laggards manage their manufacturing operations, we found a number of significant differencesones that correlate strongly with superior manufacturing performance. Masters are far more likely than laggards to excel in six areas: manufacturing strategy, manufacturing excellence (process improvement), operational flexibility, workforce engagement and productivity, health, safety and environment, and information technology. In other words, as Figure 5 shows, we found that sophistication or maturity of practices and capabilities in the preceding areas are strongly correlated with superior planning performance. We explore each area in the pages that follow.

Manufacturing Strategy

Comprehensive business case for make vs buy decisions 32% Analyze past decisions when making Location decisions

55%

43% 21%

Sophistication of modeling tools used 4% Use modeling techniques to make location decisions

33%

33% 12%

Masters Laggards

Figure 6. Masters have a more sophisticated approach to make versus buy and facility location decision making. Two of the most consequential decisions for heads of manufacturing are whether to make or buy and where to locate plants. Masters appear to be far better at determining whether to insource or outsource and where to set up production (see Figure 6). More than half the masters develop comprehensive business cases for make versus buy decisions, which was the case with only about one-third of the laggards. Masters are twice as likely to analyze past facility location decisions when make new decisions. In addition, one-third of the masters use modeling techniques in location decisions, while only 12 percent of the laggards did so. And masters are about eight times more likely to use sophisticated modeling tools to determine whether to make or buy. In making their sourcing and facility location decisions, masters are far more likely to rely on a range of factors, both quantitative and qualitative. As shown in Figure 7, masters were more likely than laggards to factor in capital cost, government or local tax incentives, labor availability, transportation infrastructure and proximity to customers. A multibillion-dollar oil-field services company shows the value of making shrewd make versus buy decisions. The company operates more than a dozen plants around the world, which provide more than 100 products for the extraction of oil from the ground and seas. Soaring global demand for oil and gas forced the firm to rethink its manufacturing footprint that is, where and how to increase capacity. The company developed a five-year manufacturing strategy to meet future expected demand. Considering its markets, countries in which to manufacture, supplier locations and other criteria, the company developed a whole new plan. It built four new plants in 2007, and by 2009 had doubled its manufacturing capacity. The strategy is expected to boost earnings by more than $1 billion over 10 years.

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71% 67% 58% 50% 42% 67% 67% 62% 54%

21%

Capital cost

Government or local tax incentives

Labor availability

Transportation infrastructure

Proximity to customers

Masters Laggards

Figure 7. Masters are more likely to consider a range of factors when developing their manufacturing strategy.

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Manufacturing Excellence
Use of proven continuous improvement techniques 50% Entire organization has clear mandate 59% Prioritize improvement opportunities based on business, product strategies Use analytics monitoring to sustain improvements 31% Focus on process improvement, but pursue innovation when opportunities arise Masters Laggards 57% 39% 71% 50% 71% 76%

90%

Figure 8. Masters implement continuous improvement programs to align with business and product strategies and monitor their effectiveness to ensure sustainable improvements. Manufacturing processes that arent measured, evaluated and improved subject a manufacturer to considerable riskof defective products, inefficient production (and eroding margins) and customer defection. The past decade provides numerous examples of manufacturers across industries that took their eyes off their assembly lines and other plant operations and rapidly lost market share. The masters we studied were much more likely to use proven techniques for continuous manufacturing process improvement such as Lean, Six Sigma or other techniques. Two-thirds of masters compared with only one-fourth of laggards routinely use kaizen events (that is, a short-term project for improving a process). Masters are more than twice as likely to use analytics monitoring. (Analytics monitoring, also known as manufacturing performance management, is an approach to improving manufacturing operations through metrics and data. In aligning operational objectives with strategic goals, it enables managers to make data-driven decisions and push operational performance metrics and accountability to the people who can improve those operations.) About three-quarters of masters compared with 59 percent of laggards said their entire company has a clear mandate to implement continuous improvement strategies. And more than three times as many masters than laggards track, audit and report the results of these improvement strategies (see Figure8).

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Positive impact on company performance 54% Satisfied with results 42% Results tracked, audited and reported 17% Masters Laggards

73%

60%

53%

Figure 9. Masters monitor and get better return on their continuous improvement efforts. Many manufacturing masters indicated they apply their relentless focus on continuous improvement to their supply chain partners. One-third of the masters compared with one-fourth of the laggards routinely use Lean and Six Sigma principles to improve the operations of third-party and contract manufacturers. Furthermore, internal initiatives are more likely to produce results for masters than for laggards in large part because masters are more likely to track, audit and report the results of these initiatives (see Figure 9). Three-quarters of the masters, versus about half of the laggards, said their continuous improvement efforts improved company performance. And masters were much more likely to be satisfied with the results of these initiatives. Take the case of a global maritime propulsion system manufacturer in Europe. It built a new plant that shifted the company away from traditional cell-based production set-ups to line manufacturing principles. However, the switch over caused problems in in-bound material supply and logistics. The company performed root-cause analysis to understand the barriers to production by using the kaizen technique. A cross-functional team used continuous improvement methods, set key performance metrics and instituted changes. Manufacturing production rebounded, with lead times in material inspection falling 75 percent, and relations between shopfloor supervisors and plant workers improving significantly. Take the case of a global maritime propulsion system manufacturer in Europe. It built a new plant that shifted the company away from traditional cell-based production set-ups to line manufacturing principles. However, the switch over caused problems in in-bound material supply and logistics. The company performed root-cause analysis to understand the barriers to production by using the kaizen technique. A cross-functional team used continuous improvement methods, 13 set key performance metrics and instituted changes. Manufacturing production rebounded, with lead times in material inspection falling 75 percent, and relations between shopfloor supervisors and plant workers improving significantly.

Operational Flexibility
Masters are much more likely to anticipate issues on both ends of the supply chain that could affect production: with suppliers (for example, sourcing problems) and customers (including distributors). And they are much better able to ratchet production up or down to deal with dynamic market conditions and mitigate the risk of market fluctuations (see Figure 10). For example, nearly twice as many masters as laggards use dynamic production scheduling tools. As well, masters are far more likely than laggards to model tradeoffs between redundant costs and risk. Masters will routinely use modeling tools to conduct what-if scenario analysis and develop contingency plans based on this analysis. They also use these tools to quickly evaluate alternative production strategies to meet changing customer demand or react to changing transportation, labor or other volatile supply chain costs. But masters realize that such flexibility has a cost. As a result, most (57 percent) create modular products and services to reduce costs and enable rapid changes in products and distribution services to meet fastchanging customer needs. In contrast, only the minority of laggards (39 percent) modularize their products and services. Masters are also much better at gathering and evaluating the supply chain data that is critical to providing upstream and downstream visibility. For example, nearly three times as many masters (76 percent versus 26 percent of the laggards) have historical data on factory machine utilization, setup and performance. This visibility allows masters to understand the risks and trade-offs of moving production from one facility to another to account for changing market conditions. More masters (48 percent) use realtime information on the status of production machines than do laggards (30 percent). Masters also are more likely than laggards to monitor a wide range of vital manufacturing indicators (see Figure 11), most notably raw material inventory, production time and queue time of critical process steps, work-in-process inventory and supplier/vendor quality performance. Monitoring such indicators provides visibility to decision makers, who can use these indicators to predict supply chain performance issues and react to potential problems before they become noticed in the supply chain. Finally, the majority of masters but the minority of laggards have full visibility and predictive capabilities for their own operations. And masters are more likely to have such visibility into their partners operationsas well as a formal process for escalating supply chain problems quickly (see Figure 12). Japanese juggernaut Honda demonstrates the power of flexible manufacturing. In 2001, the company was able to introduce a new car model without making a huge investment in new tools and factories. Honda made its assembly plants flexible enough to build a greater variety of vehicles. This required installing common machinery such as robots in each plant, as well as common assembly techniques. Honda predicted the change would save nearly $1 billion a year in manufacturing costs. 1

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Use of dynamic scheduling tools 35% Ability to model tradeoffs between redundancy risk 23%

67%

Masters 58% Laggards

Figure 10. Masters are better prepared to respond to market changes and risk.

90%

86% 81% 72% 65% 50%

81% 67% 54% 39% 71%

55%

Raw material inventory (stock level and accuracy

Work-inprocess inventory (stock level and accuracy)

Finished goods inventory (stock level and accuracy)

Production time and queue time of critical individual process steps

Supplier/ vendor quality performance

Set-up time Masters Laggards

Figure 11. Masters are more likely to monitor a wide range of key manufacturing performance indicators

Full visibility and predictive capabilities (own operations)

67% 42%

Formal model for quickly escalating problems 50% Full visibility and predictive capabilities (partner operations)

71%

43% 30%

Masters Laggards

Figure 12. Masters have greater visibility into their own and partners operations. 15

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Workforce Engagement and Productivity

Formally measure employee engagement 46% Formally measure employee productivity

67%

Productivity is rising in all areas 24% Complete program to provide training to improve productivity

50%

95% 78%

48% 12%

Masters Laggards

Masters Laggards

Figure 13. Masters are more likely to measure employee engagement as well as employee productivity. Masters appear to be far more focused than laggards on making their manufacturing workforce more productive and satisfied with their work (see Figure 13). How do we know? First, while the majority of masters and laggards measure worker productivity, masters are still more likely than laggards to measure this key aspect of the manufacturing workforce. Furthermore, the majority of masters monitor employee engagement, while only a minority of laggards do so. The age old adage of what gets measured, gets performed is certainly true in this case. Half of the masters, compared with one-fourth of laggards, said productivity is rising in all areas of their workforce (see Figure 14). We believe one reason for rising productivity among masters is they measure this more diligently and have programs that boost

Figure 14. Masters are more likely to say productivity is risinga fact that seems to correlate with more prevalent employee training.

employee productivity. For example, nearly half the masters, but only 12 percent of laggards, had complete training programs for boosting worker productivity. Such training programs are more likely to be formal in nature among masters, which also are more likely than laggards to have formal employee coaching. Finally, masters are also more likely than laggards to formally seek process improvement ideas from shop-floor workers, and are more apt to have a regular way for shop-floor workers to report problems and submit improvement ideas.

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Health, Safety and Environment

Externally published HSE vision Formal HSE vision program across all departments Measure and report weekly 10% Issues and resolutions are documented / widely available Monthly / quaterly updates and training Rewards for identifying and resolving HSE issues Masters Laggards

63% 53% 80% 46% 45%

81% 44% 71% 40% 52% 32%

Figure 15. Masters are more likely to have leading practices in health, safety and environment While some manufacturers may view this issue as a nice to have when times are good, our survey data suggest companies that take greater responsibility for workers health and safety on the job, as well as for their plants larger environmental impacts, outperform those that dont (see Figure 15). Nearly twice as many masters had a formal health, safety and environment (HSE) program across all departments. Furthermore, tracking HSE indicators is one thing; sharing that data is another. Here again the masters stood out. Nearly twice the percentage of masters documented and distributed information on HSE issues and how they were resolving them. In addition, masters are more than four times as likely as laggards to measure and report their manufacturing safety statistics weekly, and are much more likely to review and update HSE information quarterly or monthly and hold monthly training to improve HSE. Thus, it is no surprise that masters also are more likely to reward their employees for identifying and helping the company solve HSE issues.

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Information Technology

Integration of information sources and systems 44% IT support approach 46% Level of user acceptance

52%

76%

71% 50%

Programs to increase user acceptance

46% 53%

Masters Laggards

Figure 16. Masters do a better job capitalizing on manufacturing technology. Simply put, manufacturing masters are better at exploiting IT (see Figure 16). They are more likely to embrace IT to improve production processes, integrate systems and data, and track the impact of technology than are laggards. Workers and managers in masters manufacturers also are much more likely to adopt manufacturing technology71 percent versus 50 percent in the laggards. Such technological prowess is not due to spending much more on IT but, rather, to the fact that masters take a more rigorous approach to managing their return on that spend. Our research found masters are nearly four times as likely as laggards to require a detailed business case with quantified return on investment projections (40 percent versus 11 percent). And the majority of masters (65 percent) track their spending on manufacturing IT, while only 40 percent of the laggards do so.

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Insights and Recommendations

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The findings of our research are consistent with what we have learned through our extensive work with global manufacturers around the world: that sophisticated manufacturing practices and capabilities can mean the difference between average and market-leading performance. Specifically: Developing a dynamic global manufacturing strategy by modeling and achieving the right trade-offs across various key factors can lead to a revenue uplift of 20 percent to 30 percent in three to five years. Adopting and internalizing bottomline-driven and proven manufacturing excellence principles can lead to a reduction in operational cost by 5 percent to 15 percent. Integrating manufacturing with product design, planning and scheduling, S&OP, and service can reduce time to market by up to 20 percent.

Building operational flexibility by using modeling techniques and creating visibility into leading indicators that help anticipate and address supply chain issues before they occur can help substantially reduce fixed cost through better asset utilization. Achieving a high degree of employee engagement among manufacturing personnel can boost employee productivity by 5 percent to 10 percent. Tightly integrating manufacturing IT systems can lead to better return on those IT investments while helping to ensure the ability to meet compliance and regulatory requirements. In addition to the preceding benefits, achieving manufacturing mastery can lead to as much as 13 percent higher throughputs, 15 percent better equipment effectiveness, 30 percent more uptime and 75 percent reduction in lead times.

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On the Journey to High Performance

The twin vectors of increased global sourcing of products and materials and the increasing global demand for goods and services require manufacturing models to be changed fundamentally, not tweaked incrementally. Consider how Tata Motors reinvented the way an automobile is designed and assembled to produce a $2,500 car (the Nano). Tata started from scratchnot simply taking existing automobiles and removing expensive features from them. In a similar way, manufacturers of every product must conceive of radically new ways to produce and distribute their products. Manufacturers could consider using a model such as the one popularized by Sun Microsystems, in which functions and operations traditionally performed in-house are outsourced to partners given great visibility into the companys business processes and capacities. Or it might be a completely different, nearsourcing strategy driven by rising energy and labor costs.

Whichever model a manufacturer chooses, achieving high performance will be difficult simply by conducting business as usual. Increasingly, maintaining the status quo is a bigger risk in a world where new customer demands, challenges and competitors lurk around every corner.

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Notes
flexibility give Honda edge, Joe Miller, The Detroit News, January 7, 2001.
1Quality,

Contacts
Amit Gupta Chicago, United States amit.m.gupta@accenture.com Emilio Mostoles Madrid, Spain emilio.mostoles@accenture.com Zeljko Nikolic Sydney, Australia zeljko.nikolic@accenture.com

Special acknowledgement and thanks are due to following people for the effort and time they invested in the preparation of this report: Jonathan Wright, Rup Banerjee, John Calder, Brooks Bentz, Mike Engoian, Fred Hajjar, Ruchir Gupta, Varadaraj Shanbhag, Derek Jones, Scott Egler.

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About Accenture Accenture is a global management consulting, technology services and outsourcing company. 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. With more than 181,000 people serving clients in over 120 countries, the company generated net revenues of US$23.39 billion for the fiscal year ended Aug. 31, 2008. Its home page is www.accenture.com.

About Accenture Supply Chain Management The Accenture Supply Chain Management service line works with clients across a broad range of industries to develop and execute operational strategies that enable profitable growth in new and existing markets. Committed to helping clients achieve high performance through supply chain mastery, we combine global industry expertise and skills in supply chain strategy, sourcing and procurement, supply chain planning, manufacturing and design, fulfillment, and service management to help organizations transform their supply chain capabilities. We collaborate with clients to implement innovative consulting and outsourcing solutions that align operating models to support business strategies, optimize global operations, enable profitable product launches, and enhance the skills and capabilities of the supply chain workforce. For more information, visit www.accenture.com/supplychain.

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