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Resurrecting America’s Manufacturing Dominance

Resurrecting America’s Manufacturing Dominance. Benchmarking. Why Benchmark? Good decisions begin with good information What’s the standard? Speculate about own performance. Identify best practices. Performance gap. Credible, objective insight. Identify strengths & weaknesses.

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Resurrecting America’s Manufacturing Dominance

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  1. Resurrecting America’s Manufacturing Dominance

  2. Benchmarking Why Benchmark? • Good decisions begin with good information • What’s the standard? • Speculate about own performance. • Identify best practices. • Performance gap. • Credible, objective insight. • Identify strengths & weaknesses

  3. SMI Annual Market Summary • Sales Size Category • <$4 Mil, $4-7, $7-12, $12-20, $20+ • Range of Common Experience • Lower Quartile • Upper Quartile • Trend Data – 5 years

  4. Financial Performance • Return On Investment • Product/Customer Profile • Income Statement • Balance Sheet • Financial Ratios • Asset Productivity • Employee Productivity

  5. Changes in World Commerce • Collapse of the Soviet Union – 1991 • 2 billion more people practicing capitalism • Globalization • Removed barriers to economic competition • Asia • Low wage, high-skilled workers • I.T. revolution • PC’s, Internet, Software • Cheap/Mobile connectivity, Cloud computing • World energy consumption • How to manage it

  6. Hyper-connected world • Source everywhere • Manufacture everywhere • Sell everywhere Create new jobs with greater ease & less money

  7. Changes in U.S. • Economic growth • Technological innovation • Social/Economicmobility • Budget deficits

  8. U.S. Prosperity depends on… • How well you analyze & apply all the data pouring through networks. • Your ability to provide better… • Health care • Education • E-commerce • Innovation • Customer service

  9. Education • Computers/robots make an educated person more productive • Less-educated workers are less-employable • Everyone needs a post-secondary education • Start preparing for vocational track or college track in high school

  10. Job Killers • Automation • Outsourcing – for lower labor costs • Efficiencies of process

  11. Shift in Core Values • Long-term investment => Instant gratification • Sustainable values vs. Situational values • Question authority; lack of confidence in leaders • Americans have little confidence in virtually every institution • Politics, science, teachers, religion, government, The Man • Weakening of our sense of shared national purpose • Partisan politics • Liberals vs. Conservatives, rather than Americans

  12. Mind-sets • Think like an immigrant • View that nothing is owed you. • You have to make it your own. • Think like an artisan • Make things or provide services with a distinctive touch & flair, personal pride. • Willing to put your initials on it.

  13. Pervading Work Beliefs ofOlder Generations • A job is what you are. • I remember when… • Good things come… • If your hands aren’t moving… • We have to have a system. • All this technology will never overcome the value of hard work.

  14. Pervading Work Beliefs ofYounger Generations • A job is a contract, not a calling. • Focus on the outcome. • Balance is more important. • Training/knowledge = versatility • Management should be partners with employees. • Life is too short to pay dues.

  15. Resurrecting Manufacturing There are no problems, only opportunities

  16. U.S. Productivity – 2010 • China $1 trillion plus in manufactured goods • U.S. $1 trillion minus • China 100 million factory workers • U.S. 11.5 million workers

  17. Reasons for productivity • More advanced machines, robots, and software • Greater valued added • U.S. worker can earn more than a Chinese worker.

  18. SMI Performance Overview

  19. Profit Margin = Profit/Sales

  20. Factors For Success

  21. Sales Growth

  22. Margin & S,G&A Trends

  23. Gross Margin Trends

  24. COGS Trends

  25. Direct Material Costs

  26. Plant Labor Costs

  27. S,G&A Trends

  28. Productivity Results • China • Mass-produced, low-value goods • Low-paying, low-skilled jobs • U.S. manufacturing • High-paying, high-productivity • Aircraft, medical equipment, scientific equipment, control systems, specialized industrial machinery, chemicals

  29. For greater productivity • More sophisticated machines • Operated by higher-skilled workers

  30. Sales to Fixed Assets Trend

  31. Sales Per Employee Trend

  32. Sales Per Direct Employee

  33. 21st Century Jobs Strategy • Productive workforce • Advance Internet bandwidth • Openness to talent from anywhere • Generous R&D funding • Role of law, patent protection, and investment • Manufacturing tax code superior to any other country • Hospitable to innovation and entrepreneurship

  34. The American Dream • Affluence • Work hard = rise in material circumstances

  35. Exceptionalism • What makes America special • Wealth • Power • Economic opportunity for its citizens • Example of liberty and prosperity • Hope in the American Dream • Youth • Openness • Dynamism • Best minds in the world • Enormous human capital • The deepest capital markets • Unparalleled institutions of innovation • A market no global business can ignore

  36. The Strategic Profit Model:A Valuable Management Tool

  37. Profit Margin

  38. Profit Margin Trend

  39. Asset Turnover

  40. Asset Turnover Trend

  41. Return On Assets

  42. ROA Trend

  43. Financial Leverage

  44. Leverage Trend

  45. Return On Net Worth

  46. RONW Trend

  47. Setting Priorities:Relative Impact of a 1% Improvement

  48. What happened there?

  49. A Series Of 5% Improvements

  50. SMI Benchmarking Studies Building on the basics to World Class manufacturing • Annual Market Summary– Financial Performance • Executive Compensation Report • Salaried Employee Compensation & Fringe • Mid-level Managers, Administrative, Sales • Wage & Fringe Benefits Report • Beginning & Experienced hourly wages

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