The Changing Manufacturing Landscape

To get a sense of how the manufacturing landscape is changing at a rapidly accelerating rate, we spoke to Brian Jones, CEO of Nypro, Inc. Nypro is a 50-year-old leading global provider of precision plastics injection molding and related manufacturing solutions with more than 12,000 employees, 40 manufacturing facilities in 17 countries, and nearly a $1 billion in sales annually. Nypro makes a wide variety of plastic-molded products from syringes to cell phones to computer parts. "During the past three years, the way in which we conduct business has been turned upside down, driven by extreme demands for efficiency that will separate out the new winners of the manufacturing world," claims Jones.

Historically, different manufacturing companies, even in the same industry, have chosen different operational models to serve their customers. Some companies have used a supply and distribution model that relies heavily on centralization and concentration of resources in fewer, larger locationsa pattern that resembles the "hub" structure used by today's airlines. The assumption was that the scale of a larger, more centralized operation could offer better value to the customer than a less-centralized, more distributed model, mostly through resiliency to increasing demand.

Nypro took a different approach. In contrast, Jones points out that, "At Nypro, we had more of a services-business mentality. We would find a location near one of our largest buyers and set up a facility there. The general rule was that we had to be close enough to the customer that their head engineer could drive out to our facility in the morning for a meeting or inspection and be back before lunch," explains Jones. "For 25 years we operated this way and were very successful. We were able to service our customers with extreme diligence."

Then, things changed dramatically. "Three years ago, the world turned upside down. The drive for efficiency and simplification was like a large explosion. Those of us that saw it had to first understand it, then embrace it, and then redesign to match it. After just three years, the competitive, supply, and customer landscape is almost unrecognizable," continues Jones. "Our major customers were on a rampage to wipe out as much as 85% of their supply chains. We saw one major cell phone buyer first drop from many hundreds of suppliers down to 100, then down to a mere 20 as of a couple of months ago," explains Jones.

Jones believes that what large customers want is dramatically reduced supply chain complexity, and that one way to achieve that is to reduce the number of links (or kinks) in the chain. Typically, this means that their suppliers must either learn to accommodate them, or get out. "You now need to supply customers from multiple factories all around the globe but as a single concerted organization."

"You want to hear about the instantaneous always-connected business? Try having a meeting with a large cell phone manufacturer, arguably the most connected set of humans alive. While you're in the meeting explaining the status of a project, good or bad, they are immediately keying into their personal communicator your status and instantly everyone back at their headquarters knows your situation. A few years ago, you at least had the time it would take for them to get back to their hotel and fire up the laptop. In the modern world, we're intertwined with our partners and our status is their status; there is no hiding," states Jones.

Essentially, what has happened is that the large buyers have forced the best of both worlds from their suppliers like Nypro: They want the nimbleness of a small services-oriented, nearby supplier yet with the heft of a broad and scalable one. These two entirely different manufacturing models have now been forced together as a result of the efficiency demands of customers, both in terms of product cost, but even more so in terms of time to market.

An effort to streamline operations and reduce overall time to market is driving another important trend: the outsourcing of an increasing number of manufacturing process steps. Nypro not only builds, it is also now engineering more of Motorola's cell phone line. "Within the last three years, Motorola has outsourced about two-thirds of their work. The new concept is original design manufacturer. We do the market studies and iterate products and study consumer needs and values and then we build and manufacture and assemble as much of the product as they will allow. The only projects left back inside such companies are those that they truly believe are their intellectual property or define their much more forward-looking businesses. This change has raced in and altered business models up and down the chain, and within a mere few years."

Nypro's large customers are driving this with unprecedented energy. Gone are the days of just aiming for a 10 percent improvement. In Nypro's new world, customers are expecting that manufacturers implement radical new redesigns of their processes by leveraging real-time communication, collaboration, and shared data. They have insisted on an unprecedented 85 percent improvement in time and money savings. How can that be achieved?