How can manufacturers manage rapidly changing costs?

How can manufacturers manage rapidly changing costs?
Firms need to put measures in place to manage instant changes in pricing

Elly Yates-Roberts |

This article was originally published in the Autumn 2019 issue of The Record. Subscribe for FREE here to get the next issues delivered directly to your inbox.

A recent spat between the US and China involved ‘currency manipulation’, so I took a look at how exchange rates have moved since the euro was launched on 1 January 1999. The US dollar is up by 4% and the Japanese Yen is up 12%. The Chinese Yuan, meanwhile, is down 10% and the Great British pound is down a massive 24%.

Currencies are particularly affected by interest rates, economic prospects and ease of capital transfers. The numbers traded are mind boggling – and far, far greater than actual trade requires. In other words, speculation is rife.

The world of manufacturing is complex, but exchange rates can alter just because of a few words uttered by the world’s powerful. We can complain about these changes, but we have to live with them. Manufacturing within a country is safer as it shields us from currency movements, unless much of our raw material is imported from a different country. Realistically, the cocktail of costs we carry; labour, capital, materials, transport and tariffs can change very fast.

With all this in mind, we need to look carefully at how Industry 4.0 concepts can help us manage rapidly changing costs. The first step is product design. We can do this wherever the skill sets are present. This will vary, depending upon the industry. Often a mixed team is chosen, with specialists in countries with high labour costs and some of the less critical skills located in a low-cost labour market. Designing using additive manufacturing, otherwise known as 3D printing, can help deliver to transferrable manufacturing units. The second step of process design concerns the manufacturing process. This step is crucial for manufacturing flexibility. Mixed in with the physical design is the impact of available labour skills, cost of labour, lean, six sigma, available maintenance services etc.

In practical terms, moving a manufacturing plant requires some beautifully orchestrated digital smart manufacturing. For the good order this requires globally deployed enterprise resource planning, product lifecycle management, manufacturing execution systems and manufacturing operations management systems with as much of the control and mechanical layer standardised as possible. While they are very tempting, point to point and local solutions should be avoided. They will bring long term costs for manufacturing. It’s hard work to get this right but imagine the satisfaction of outsmarting politicians!

Mike James is chair of the board of directors at ATS Global and a leading global expert in Industry 4.0

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