I recently had an opportunity to read Industry Week’s list of the 50 best performing, publicly traded ‘manufacturing’ companies. I was disappointed to see that, of the 50, there were few that would be viewed as manufacturers by most people.
11 of the 50 best manufacturers, according to IW, are actually oil, minerals or chemical companies. Deluxe, the folks who probably printed your personal checks, along with Harte-Hanks, the people who print up the fliers that are inserted into your newspapers or left hanging on your doorknob, made the list, along with another printing company. There are another 20 companies that make food, beverages (you might be interested to know that Budweiser is a product of one of the 50 best manufacturers in the land), clothing, software or manipulate information in one way or another.
They are all fine companies – as demonstrated by the fact that they made the list. The criteria used by IW consisted of revenue growth, profit margins, inventory and asset turnover ratios, return on assets and return on equity. These companies all pegged those numbers quite well.
But only 16 of the top 50 are companies that cut or shape metal, mold plastic, stuff circuit boards and assemble anything. The few of them that made the list – Dell, Harley-Davidson, Winnebago and others are very well managed manufacturers that, for the most part, still do most of their manufacturing in the U.S.
I’m not quite sure what to make of this. Are there really that few good old fashioned, publicly traded manufacturing companies performing well? Or maybe the list is an indictment of IW’s ignorance of the difference between an oil company and a manufacturer. Maybe they think that anyone who puts out a tangible product is a manufacturer. I suspect, however, that the answer to my first question is "Yes" – there are fewer and fewer publicly traded, excellent manufacturing companies. IW has to stretch the criteria to find 50 excellent manufacturers to the point of absurdity.
For years the manufacturing community has pointed out that the pressure to provide Wall Street with short term results is a long term deterrent to manufacturing capability. I am afraid that what IW is pointing out is that the complaint has merit. It certainly seems as though it is easier to find a legitimate lean manufacturing success story among privately held businesses than among those that are beholden to Wall Street.
If my suspicion is correct, it is too bad for the investing public. They will have killed the goose that lays the golden eggs with their voracious appetite for immediate returns; and soon all of the good manufacturing investments will be private – beyond the reach of Wall Street.
Bill Everett says
I have to take issue with your definition of “manufacturer”. I work for one of the largest foods companies in the world, at a plant that makes chocolate candies. Not manufacturing? We sure have a helluva lot of huge assembly and processing machines, combining raw materials and even subassemblies. To top it off, we have to almost disassemble the entire factory every night for cleaning… miles and miles of stainless steel pipe… then rebuild it and test it before first shift starts the next morning. Adds a whole new dimension to 5S, Lean, TPM, etc. We manage efficiencies, waste, compete with domestic and international manufacturers… just like your narrow definition of “manufacturer.” Implementing TPS has become required in order for our survival. In fact, I would hazard a bet that our manufacturing is considerably more complex, and even higher dollar in my huge plant, than over 90% of the traditional “manufacturers” in the state of Michigan. Especially more difficult and complex than simply squeezing plastic resin. A couple years ago I visited a corrugate converting (box making) facility… similarly suprisingly complex. They had huge problem with high mix low volume. Circuit boards?? Just solder some components on a board. Computers? Just slap some foreign-made components together. Those sound simple to me.
Please don’t get me wrong. I’ve read your other posts and your articles on Superfactory, and they are excellent and insightful. In fact, I pass them around to most of the managers at our factory. But we are a little sensitive to the misperception that foods isn’t “real” manufacturing… we bump into that all the time.
Bill
Bill Waddell says
I certainly meant meant no offense to the other companies listed or the nature of their business. I can assure you that my grades in every science at every level of my education were so dismal that the sort of work you do borders on wizardry to me. The point I was attempting to make – apparently not too eloquently – was not intended to lessen the sort of manufacturing that you do. It was intended to point out the near disappearance of the assemblers and machining companies on IW’s and just about every other list of excellent manufacturers.
Of course, now that you have fired a blast at the electronics folks, we can both expect to be in the line of their fire.