A new report released today by Capgemini and the University of Edinburgh examines
the changing ways in which manufacturers are doing business as a result of shifting
market conditions. The study, “The Global Networked Value Circle: A New Model
for Best-in-Class Manufacturing,” explores the evolving nature of today’s manufacturing
value chain and examines
the global value chains of some of the world’s leading manufacturers*, considered
to be ‘best-in-class’. The study introduces a new value chain model, known as the “value circle”, for manufacturers looking to optimize everything
from product design and the
manufacturing of goods to sales and supply chain management.
Consumer reaction to the global economic downturn has hit much of the manufacturing
industry hard. Reduced consumer demand has led to serious production cuts at factories
around the world. The old approach of a simple value chain in which manufacturing
firms take new materials, transform them into products and feed them into the
distribution system has gone. In the new value circle model, manufacturers are
increasingly engaging with their customers and distributors in the very process
of innovating, developing and delivering new products with close collaboration
for design, supply and customer satisfaction. This is leading to the transformation
of the traditional value chain, with inputs at one end and outputs at the other,
to a value circle involving interaction at all levels to create a continuous cycle of improvement.
As part of this shift towards a value circle, rather than linear value chain,
some of the new approaches being taken by manufacturers include:
- Product design and innovation – a shift from “doing it”, to “resourcing it”: Adopting new systems to capture and absorb new ideas and innovations from customers,
suppliers, collaborators and competitors as well as in-house resources around
- A shift from manufacturing to manufacturing-management: Where manufacturing is done by others, at any location globally, principally
in collaborative-partnership arrangements where both parties gain through mutual
learning and innovation.
- A shift from contracts to partnerships in supply chain management: Developing closer relationships with fewer suppliers, who are closely monitored,
giving both parties competitive advantage.
- Using IT to actively manage the value network: Manufacturing increasingly requires the creation and productive management
of highly complex global networks. Achieving this without loss of control, value
or margin requires the use of the latest IT approaches such as Radio Frequency Identification (RFID). These approaches are not just supporting the new network management approach
by making it feasible, they are driving it.
- A shift towards active partnerships with customers: Addressing customers’ needs and problems by developing closer relationships
that enable manufacturers to understand and then deliver what they require. This
not only improves customers’ lifetime experience with the manufacturer, but also
helps drive product development and innovation process, linking the two ends of
the value chain to create the new, more circular approach.
In order for companies to broaden their value chain, the study also identifies
three key capabilities for manufacturers. They must have the ability to identify
their core competencies. From here, they can partner with others to overcome weaknesses
in other areas and focus on developing world-class operations. However, this requires
the managerial and IT capability to form, develop, deepen and manage complex business
relationships. Companies must also have the foresight to identify the relationships
that will be key assets.
“As companies face shrinking consumption, slowing production and declining prices,
now is the right time to reassess their entire value chain as they look for ways
to keep costs low and improve efficiencies while continuing to innovate,” says Nick Gill, Global Manufacturing Sector Leader, Capgemini. “By adopting a practice of actively managing globally networked value circles,
best-in-class manufacturers will be well-placed to weather the current storm in
the market and take advantage of the upturn when it arrives.”
*About the study
This study, jointly conducted by Capgemini and the University of Edinburgh, is
based on wide-ranging research into some of the world’s leading manufacturers,
including a survey of eight companies and extensive documentary analysis of data
collected from academic research, industry reports, trade journals, media coverage
and press releases. It builds on findings from Capgemini’s recent “Manufacturing
in 2020” report, which interviewed over 130 executives from the industry.
Capgemini, one of the world’s foremost providers of consulting, technology and
outsourcing services, enables its clients to transform and perform through technologies.
Capgemini provides its clients with insights and capabilities that boost their
freedom to achieve superior results through a unique way of working, the Collaborative
Business ExperienceTM. The Group relies on its global delivery model called Rightshore®,
which aims to get the right balance of the best talent from multiple locations,
working as one team to create and deliver the optimum solution for clients. Present
in more than 30 countries, Capgemini reported 2008 global revenues of EUR 8.7
billion and employs over 90,000 people worldwide.
More information is available at www.capgemini.com.
Rightshore ® is a trademark belonging to Capgemini
Tel.:+44 (0)870 195 1055
University of Edinburgh
Tel.:+44 (0)131 650 9547