Manufacturing companies are focusing on scrubbing waste out of operations and honing processes as they aim to control what they can in an uncertain economic environment.
Speaking on a bevy of earnings conference calls, CEOs and CFOs at manufacturing companies have indicated the following:
Supply chains are improving.
Inflation remains a concern and it's more difficult to pass on costs.
Many firms see an uncertain economy in the first half of 2023 with improvement in the second half.
Operating efficiency and lean operating models will be critical to preserve margins and fund transformation efforts.
Executives said that they are already tackling those to-do lists and harvest savings.
Celonis Media covers the process economy and the impact of process mining and execution management across industries. This article is based on publicly available information and doesn't reflect whether Celonis technology was used or whether the company is a customer.
Here's a tour of how manufacturing firms are making operations more efficient.
Ford CEO Jim Farley said the company generated record cash flow, but left $2 billion of profit on the table due to rising costs and continued supply chain issues. Farley said:
"We've committed company-wide to implement a lean operating system that will scrub billions of dollars of waste out of our company. And we are shining the light on every inch of our legacy business with knowledge that we must do better every day. This has been humbling for both me and our team. That said, I've never been more convinced about our plan."
John Lawler, CFO of Ford, said there are opportunities to make product development and engineering more efficient. "If you look at our product development system and in our engineering, think about $1 of input and what you get out of that $1 of input is probably about 25% to 30% inefficient. We should be either getting more products through the pipeline or our cost should be significantly lower," said Lawler.
Regarding the supply chain, Lawler said the company is spending at least $1 billion in freight premiums on chips and other supplies. And manufacturing is another area that can be more efficient, he said.
CEO Marc Bitzer said he was confident that Whirlpool can manage through an uncertain economy since it has done so before. He said:
"Looking ahead into 2023, we do expect the tail end of this negative macro cycle to be felt during the first few months of the year. We foresee macro headwinds to slowly turn into tailwinds as the year progresses. Given this volatility, we remain relentlessly focused on the business levers which we can control."
Bitzer said the company is focused on "flawless execution" in its supply chain and delivering savings between $800 million and $900 million in 2023.
Corning CEO Wendell Weeks said the company is seeing "recession level demand in markets that constitute about half of our sales." "Cars, televisions, smartphones, laptops and tablets are all well below what we estimate as the normal range," he said.
Weeks noted that Corning is focused on getting its productivity ratios in line with historical levels without impacting its ability to supply customers, capture future growth and manage inventory.
Howard Ungerleider, Dow CFO, said the company sees slower economic growth in most regions globally.
"We are proactively responding to the current economic environment with a playbook of targeted actions to deliver $1 billion in cost savings," he said. "We will continue to increase productivity with end-to-end process improvements now that our digital foundation is in place."
3M CEO Mike Roman said the company is focused on delivering results amid slowing economic growth, inflation and supply chain disruption.
"With supply chain stabilizing, we are focused on improving manufacturing operations and driving working capital. These are our most significant opportunities to improve margins and cash flow," said Roman.
Monish Patolawala, Chief Financial & Transformation Officer, said:
"We will remain nimble and take appropriate actions as we respond to changing market dynamics. And we will continue to invest in growth, productivity and sustainability to ensure the long-term success of our enterprise. At the end of the day, we don't control the markets, but what we definitely control is our own actions."
Related: McKinsey: These 8 characteristics of resilient supply chains can give your business a competitive advantage | Execution management, process excellence key to outrunning inflation, supply chain woes says Celonis co-CEO