Sustainability, Humanity and the Smaller Manufacturer

12 February 2014


The Human Dimension


3P GraphicPrevious posts to this blog [1] proposed a view of Sustainability’s Triple Bottom Line where industry exists as an interface between the natural world and humanity. In essence, the Triple Bottom Line holds that industry must:


>> Minimize its demands on the natural world, and take actions to remediate past effects.


>> Provide humanity with the “stuff” of a comfortable life and the means by which that “stuff” may be attained (meaning jobs), while avoiding exploitation in any form.


>> Generate the profits necessary for maintaining its own vitality, for the present and for the future .


There have been many posts to this blog on industry’s relationship with to natural world and many on how industry — especially smaller manufacturers — might strive to thrive in perpetuity [2]. Now, in the sixth year since the Great Recession began, it appears to me that industry’s interface with humanity needs serious reflection. Unemployment and under-employment, especially in developed economies, persists at unsustainable levels. The gap in wealth between rich and poor continues to increase. The middle class seems to be melting away.


In 1950, manufacturing provided 27% of U.S. GDP and employed 31% of the American workforce. By 2010, manufacturing comprised just 12% of GDP and employed only 9% of the workforce.  Manufacturing as a mass employer has been in decline for years. Since the millennium, the one – two punches of Globalization and the Great Recession have turned gradual retreat into rout. [3]


Looking Forward


In America, a fortuitous combination of low energy costs (due to “fracking”), world – leading productivity and a weakening dollar has provided a respite in the declining fortunes of the manufacturing sector. This improvement in exports is certainly welcome. However, the improvement in exports — about 75% of which is as manufactured goods — has not resulted in anything resembling a sustainable turn-around manufacturing employment.


The fact is that, in developed economies, manufacturing as practiced in the 20th century has little relevance in the 21st. Manufacturing has increasingly becoming knowledge work, rather than physical labor. World – leading productivity is maintained through continuous investment in physical plant and in human talent (or skill, or know-how).


For Smaller Manufacturers


Productivity Gap GraphicThis places smaller manufacturers in a tough situation. There is a significant productivity gap between large manufacturers and small manufacturers in America. To the extent that competitiveness within a global economy depends on superior productivity, that gap needs be addressed. Smaller manufacturers need to lead the movement toward a sustainable, 21st century relationship between industry and the people industry affects. The most reasonable place for most smaller manufacturers to start is with the people they affect the most — those employed by the manufacturer and the manufacturer’s customers.


Deming's 4th PointOne approach is through focus on establishing and maintaining a meaningful market presence. That is, market presence based on intense customer interaction that leads to mutually beneficial (hence sustainable) relationships. Dr. Deming’s fourth point [4] is right on here, provided it is viewed symmetrically, by customer and supplier alike.

Strong customer relationships are earned and maintained through operations that reliably perform. That requires a motivated workforce that drives safe, clean manufacturing and business processes. Reliability and productivity can be continuously improved through:


>> On-going investment in human capabilities improvement, and


>> On-going investment in process and operational improvement


Given symmetric, mutually beneficial customer relationships, continuous product design innovation is possible. In this context, “product” means “that which the customer buys” — this includes tangible and intangible elements. There are myriad ways to combine tangibles with intangibles (packaging, shipping, installation services, warranties, lead times, technical support and on and on) to the benefit of specific customers.


An Example


Mesa Products of Tulsa, OK [5] describes itself as “Your One-Stop-Shop for Cathodic Protection and Corrosion Control Solutions”. Mesa’s customers are underground pipeline contractors and operators, primarily in oil and gas transmission. Mesa’s people understand the pipeline industry quite well. They leverage that understanding to provide an extensive line of tangible products and pipeline services, such that revenues are about equally split between goods and services. They manufacture some, but not all of the goods they provide to their customers.


Mesa stands out in the crowded oil patch supply services industry through intangibles. For example, Mesa talks about quality and service. Who doesn’t? But Mesa backs its claims with not one but two National Baldrige Quality Awards (2006 and 2012) in the Small Business category, along with a fleet of awards from other organizations. Mesa Products provides an example which is well worth studying. Fortunately, as a Baldrige Award winner, there is a lot of information readily available.


Chuck - Mt Wilson TrailThoughtful comments and experience reports are always appreciated.


…  Chuck Harrington
(Chuck@JeraSustainableDevelopment.com)


P.S
: Contact me when your organization is serious about pursuing Sustainability … CH


This blog and associated website (
www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.



[1] For example, see Double Take on the Triple Bottom Line, this blog: http://blog.jerasustainabledevelopment.com/2012/10/03/double-take-on-the-triple-bottom-line.aspx

 

[2] Adam Werbach, Strategy for Sustainability, Harvard Business Press (2009), page 9.

 

[3] Gary Pisano and Willy Shih, Producing Prosperity, Harvard Business Review Press (2012), Preface, pg. x

 

[4] Dr. Deming’s famous Fourteen Points for Management were originally published in his business classic Out of the Crisis. Deming’s fourth point as quoted here is from the Deming Institute’s website:  https://www.deming.org/theman/theories/fourteenpoints.  The remaining 13 points are also germane to this essay and well worth reviewing.