1. Professor Ann Vereecke Vlerick Leuven Gent Management School
Manufacturing in Western Europe Survival of the fittest Lessons learned for Flanders
Professor Ann Vereecke
Vlerick Leuven Gent Management School
Universiteit Gent

2. Headlines in the business press
downsizing
rightsizing
relocation
delocalisation
restructuring
outsourcing
going footloose

3. Added value of the industrial sectors
Industrie stabiel in termen van bruto toegevoegde waarde,
Maar werkgelegenheid is gedaald, en we verwachten dat die nog zal blijven dalen; nu nog amper de helft van 30 jaar geleden.
Niet enkel in Vlaanderen. Je ziet hetzelfde in andere geïndustrialiseerde landen (Frankrijk, Duitsland)
Fourth level
Fifth level

4. Deel van de verklaring ligt in de stijging van de arbeidsproductiviteit. Deze hebben we vooral in de industrie gezien, waar kapitaal meer en meer arbeid is gaan vervangen.
We produceren dus meer (of toch minstens even veel) maar met minder mensen

5. Markets in emerging countries are growing
By 2004, China was among the world’s top5 markets for many goods
World’s largest market for steel and machine tools
Largest for mobile phone subscribers
Second largest for electricity transmission equipment
Fourth largest for cars and trucks
By 2010, China will be the largest producer of cars in the world
Chinese are buying 70% more cars in 2009 than in 2008
Tweede deel van de verklaring zit in het verschuiven van de markten. We weten allemaal waar de groeimarkten zich op vandaag situeren.
Om een voorbeeld te geven: China...
Kasra Ferdows,
Sept 2009

6. Lessons learned from a Flanders DC research study
Global Plant Networks

7. The board room of a global company
What is the optimal location for our factories?
Which factory should play which role?
.... ?

8. 1995-1996 study 2005-2006 study Research set-up
Company A: globalized by establishing greenfields
Company B: global player after merger
Company C, D: acquired by globalizing player
Company E, F, G, H: rationalization by closing down some plants
Zeer dynamsich beeld dus van de voorbije 10 jaar:
Bedrijven zijn getransformeerd door fusies en acquisities. Sommige namen zelf het iniitiatief, anderen hebben het ondergaan.
Wat betekent die dynamiek nu op vlak van productie? Welke transformatie hebben deze bedrijven ondergaan? Wat kunnen we daaruit leren?
In total: 59 plants in ; 82 plants in

9. Evolution in number of plants
vergelijking van het aantal fabrieken in deze 8 bedrijven: evenveel gesloten als er nieuwe zijn gebouwd; een even groot aantal is er door acquisities bijgekomen.

10. Plants by City in 1995 A E B F C G D H
De transformatie is ook heel sterk te zien in de geografische scope van deze 8 bedrijven: van eerder europees naar zeer globaal.
Plants by City in 1995
A E
B F
C G
D H

11. Plants by City in 2005 A E B F C G D H
Een aantal onder hen zijn geëvolueerd van europese naar globale productienetwerken, met fabrieken in bijna alle continenten
Plants by City in 2005
A E
B F
C G
D H

12. The strategic role of the plant
Low-cost
input factors
Technological
know-how
Market
Reason for exploitation
Contribution to strategy
high
low
© Ferdows, HBR 1997
Model Ferdows geeft inzicht in de verschillende types van fabrieken;
Neergeschreven in 1997, maar blijkt zeer nuttig om te kunnen voorspellen welke fabrieken kans hebben om te overleven.

13. The strategic role of the plant
product development
Low-cost
input factors
Technological
know-how
Market
Reason for exploitation
Contribution to strategy
high
low
© Ferdows, HBR 1997
process development
logistics
quality assurance
maintenance
production

14. Reason for exploitation
input factors
skills &
know-how
market
Reason for exploitation
Level of strategic role
low
source
contributor
off-shore
outpost
lead
server
medium
high
expert
market- master
brain
© Ann Vereecke
Based on Ferdows, HBR 1997

15. 1995 strategic role - 1995 mkt mstr lead contributor source offshore
server
offshore
labor
Skills &
knowhow
market
none

16. Status strategic role - 1995
Survivors by 2005 ?
labor
Skills &
knowhow
market
none
Status strategic role

17. 18 plants left the networks
input factors
skills &
know-how
market
Reason for exploitation
Level of strategic role
low
source
contributor
off-shore
outpost
lead
server
medium
high
expert
market- master
brain -3 -2 -1 -4
no role
© Ann Vereecke 2009
Based on Ferdows, 1997

18. 42 plants added to the networks
input factors
skills &
know-how
market
Reason for exploitation
Level of strategic role
low
source
contributor
off-shore
outpost
lead
server
medium
high
expert
market- master
brain +7 +2 +1
+21 +4 +3
other role
© Ann Vereecke 2009
Based on Ferdows, 1997

19. 1st set of conclusions
The market was and still is the main driving factor of factories
Server and off-shore plants are flexible assets in the multinational plant networks
Lead plants have a safer future.

20. Status strategic role 1995 Belgium
labor
Skills/knowhow
market
none
Status strategic role 1995 Belgium

21. Network position of the plant
Degree of communication between plants daily, weekly, monthly, less frequent Exchange of innovations between plants Product, process, managerial innovations Visits to and from other plants Number of days spent by manufacturing staff people

22. Network position of the plant
receiver plant
innovations
isolated plant
active network player
innovations
mfg staff
hosting network player
mfg staff
innovations

23. Network position of the plant - 1995
receiver plant
innovations
isolated plant 11 26 8 4
active network player
innovations
mfg staff
hosting network player
mfg staff
innovations

24. Surviving plants? receiver plant isolated plant active network player
innovations
isolated plant
11-2
26-7
8-0
4-1
active network player
innovations
mfg staff
hosting network player
mfg staff
innovations

25. Surviving plants in Belgium?
receiver plant
innovations
isolated plant
1-0
5-3
5-0
2-1
active network player
innovations
mfg staff
hosting network player
mfg staff
innovations

26. Conclusions
The market was and still is the main driving factor of factories
Server and off-shore plants are flexible assets in the multinational plant networks
Lead plants have a safer future.
Network players have a safer future.
Isolated and receiver plants are vulnerable

27. Lessons learned for management
For the plant manager
Transform your plant into a networking lead plant
Tap into skills and know-how
Innovate, innovate, innovate
Build your network position before downsizing hits you
For the general manager
Transform your set of plants into an international plant network
With a balanced portfolio of plants:
Server plants for new markets
Off-shore plants for cost advantage
Lead plants for creation and transfer of know-how
Manage chains, rather than plants
Build partnerships with suppliers and customers
Outsource the commodities, focus home plants on the challenging tasks that require skills and know-how

28. Lessons learned for Flanders
Innovation is important but not sufficient for a sustainable future of manufacturing in Flanders.
Stimulate and support our plants in their transformation towards true network players, that act as sources of know-how for the other plants
This will make them critical for the future of the company.
Entrepreneurship and internationalization are key
Stimulate our companies to transform towards true multinational players.
This entrepreneurship will create a new role for our home plants in the international supply chain.
However, this takes time...
No time to waste !

29. For more information:

30. References
Changing Landscape of Global Supply Chains, Kasra Ferdows, presentation for FDC, Vlerick Leuven Gent Management School, Sept 16, 2009
How to optimize knowledge sharing in a factory network, Arnoud De Meyer & Ann Vereecke, McKinsey Quarterly, Sept 2009
Network relations in multinational manufacturing companies’, Ann Vereecke, FDC research report, July 2007 (ISBN )