Expert Roundtable: Efficiency Reform Improves China's Manufacturing Competitiveness

In recent years, with the rising cost of labor and land and other factors, slowing economic growth and low profit levels, China's manufacturing industry is shifting from a growth model that pursues scale in the past to a growth model that improves efficiency .

In order to improve efficiency, China's manufacturing industry must face the issue of transformation and upgrading: how to improve the manufacturing efficiency of Chinese manufacturing enterprises? What are the challenges facing manufacturing companies? What are the pain points? To this end, this round of experts invited two industry experts to analyze and interpret.

Current Situation and Challenges

CEConline: According to your observation, at present, what is the efficiency of China's manufacturing industry in the global manufacturing industry? What are the main reasons for the gap with developed economies?

Chen Zhaofeng: From the perspective of manufacturing efficiency, I think the manufacturing industry should be divided into three main links in the value chain, including upstream R&D and design links, midstream supply chain management and industrial production links , as well as downstream brand marketing and product sales links.

From a global perspective, the efficiency of Chinese manufacturing in these three value chains is at different levels. First, Minister Miao of the Ministry of Industry and Information Technology also said that the global manufacturing industry is divided into four echelons, and China is in the third echelon. why? The main reason is that our research and development technology has less investment in many fields, so we have less core technology and patents. Made in China gives you more the impression of "OEM", that is, the manufacturing industry in the middle and low end. Of course, China also has high-end manufacturing, depending on which industry it is, such as telecommunications 5G technology.

From the point of view of the efficiency of manufacturing and supply chain management, PwC has conducted a global survey. We believe that the efficiency of Chinese manufacturing in this link is at a medium level globally, but it is at the same level as the world's most efficient. Compared with the leading manufacturing industry, there is still a certain gap. In some areas, the overall efficiency of Chinese manufacturing is at an upper-middle level. Because some industrial categories in China have relatively complete upstream and downstream supply chain clusters, relatively speaking, the overall efficiency will be relatively high.

In terms of downstream brands and channels, we are actually leading the world in terms of e-commerce channels, but in terms of product brands, or some channel management of BtoB, we are still compared to leading countries There is a certain gap. The brand value made in China has not yet been reflected, and it is more dependent on the assistance of some channel providers.

Xu Haiping: The gap between my country and developed economies is mainly reflected in three aspects:

First, my country's industrial base is weak. Although we have made a lot of progress in the past 40 years of reform and opening up, compared with the century-old industrial development history of Western developed economies, we still have insufficient accumulation, and more rely on demographic dividends and "market for technology" to develop.

Secondly, the investment in scientific research is relatively small. Compared with European and American countries, my country's R&D expenditure is still relatively low in GDP. Although there are world-class companies like Huawei, they are still in the minority, and more companies are in a technologically backward position.

Third, the emphasis on vocational education is low. Vocational education is highly valued in developed economies, especially Germany, where the spirit of craftsmanship is highly regarded, and is even considered an important factor in promoting economic growth, and there is an education system that combines advanced theory and practice. In contrast, our society places great importance on academic qualifications and underestimates one's skills, and it is even more helpless to enter vocational education.

CEConline: How should Chinese manufacturing companies improve efficiency? Is it feasible to learn from the experience of advanced economies?

Xu Haiping: In my opinion, Chinese enterprises must improve efficiency by strengthening scientific research and technological breakthroughs. Summarizing the successful experience of developed economies, there are three aspects worth learning:

First, the strong manufacturing technology innovation capability. Although my country's aerospace, rail transportation, and oil refining technologies are mainly based on independent innovation, there is still a big gap between the level and foreign countries, and large-scale scientific research instruments and large-scale medical equipment mainly rely on the purchase of foreign products.

Second, a solid manufacturing technology foundation. Relatively speaking, the basic manufacturing equipment of a manufacturing power is very solid, which drives the development of related automation and informatization applications. However, there is still a gap in our country. Key basic technologies such as instrumentation and RV reducer restrict the development of the manufacturing industry.

Third, a mature manufacturing technology innovation system. The technological innovation systems of developed countries such as the United States and Germany are quite mature, but in China, for the vast majority of enterprises, the technological development capabilities are weak, they have not yet become the main body of technological innovation, and they lack a capable and relatively stable force to engage in the industry. The research and development of common technologies and the intermediary service system of science and technology are not yet perfect and have not played their full role.

Improvement of Production Efficiency

CEConline: How should China's manufacturing industry use intelligent manufacturing to transform and upgrade equipment to improve efficiency? Are there any areas or challenges to be aware of?

Chen Zhaofeng: According to my observation, in the past, many factories in China produced products first, and then went to find buyers. Slowly, we see that more and more factories start to "determine production based on sales", that is, according to the sales situation, and then decide on purchasing and production. From "determining sales based on production" to "determining production based on sales", it can be seen that many Chinese enterprises have begun to try to transform. This model of production based on sales can be combined with what is now called "flexible manufacturing", which requires factories not only to have efficient use of production equipment, but also to have the ability to customize production.

Nowadays, enterprises need to master refined management, and do customized small batch and multi-style flexible production according to the needs of different customer segments. This requires enterprises to improve the management of the entire supply chain, from customer demand to factory procurement, and then to the production link, to form an end-to-end management system. At the same time, this market demand will lead to more and more production models of small batches and multiple categories, especially in the downstream industry chain. Products need to be priced and sold according to different qualities and specifications, rather than the extensive "one size fits all" in the past. manage.

First, enterprises need to rely on digital means. Going a step further, companies can use IoT technology in every link and connect them, from raw materials to semi-finished products to the entire production facility, including finished products, inventory, and logistics. Data can be used to do some digital applications of smart supply chain and smart manufacturing.

Secondly, the integrated planning of procurement, production and logistics and distribution can be better done. With this end-to-end intelligent integrated planning, your supply chain management and manufacturing efficiency can be further improved. Of course, this is only the initial stage, and the higher level is the intelligence of products and services.

Xu Haiping: Intelligent manufacturing is the future trend. The United States' "National Strategic Plan for Advanced Manufacturing", Germany's "Industry 4.0 Plan" and Japan's "Manufacturing White Paper", China's Manufacturing 2025, which are national strategies. The mode of intelligent manufacturing can be divided into three stages:

The first stage is the integration of intelligent manufacturing systems. First of all, it is necessary to carry out intelligent transformation of the single equipment, and on this basis, integrate it with the combination of software and communication technology to form an overall linkage and system integration.

The integrated parts can work organically and harmoniously with each other to give full play to the overall benefit and achieve the purpose of overall optimization. This is the integration and deep integration of advanced manufacturing technology, information technology and intelligent technology. It has the functions of identification and error prevention, flexible production, all-round monitoring, collection and analysis of key process parameters, and production information management.

The second stage is called smart factory. Based on the integration of intelligent manufacturing systems at the basic stage, and embedded with advanced information technology in other management systems (mainly including PLM, CRM, SCM, etc.) The closed loop of the terminal realizes the intelligent factory of information interconnection, rapid response and collaborative operation.

The third stage is called smart industry. Based on its own smart factory model, copy and apply it to upstream suppliers and downstream customers in the industrial chain, and use advanced information technologies such as 5G and cloud platforms to open up smart factories in the entire industry to achieve seamless connection and linkage of the entire industrial chain. Build a smart industry.

At present, my country is at the beginning of the first stage of intelligent manufacturing system integration. The first stage is the transformation of hardware. Through intelligent transformation, efficient and fast production can be achieved, production and operating costs can be reduced, and overall efficiency has been improved. .

Of course, the transformation of intelligent manufacturing cannot be done blindly. There are still some points that need to be paid attention to:

First of all, we must evaluate our own production system, and where is suitable for intelligent transformation, after all, intelligent There are also some blind spots, and it is not necessarily the best solution for all modes and processes to use intelligence;

Second, intelligence is a means, and its purpose is to reduce costs, increase efficiency and improve quality, which is lean The pursuit of production, so I understand that intelligence should be a means and manifestation of lean production, so I think that before doing intelligence, we should do a good job in all aspects of the company's production technology and procedures, quality control, production costs, etc. A lean optimization, intelligentization based on the lean concept is the essence.

The evolution of the management system

World managers: Although the pace of "machine substitution" is accelerating, the management thinking of Chinese manufacturing enterprises also needs to be upgraded and iterated. What kind of corporate culture do you think is conducive to improving efficiency? How should companies build this corporate culture?

Chen Zhaofeng: First of all, we must establish a refined management culture and a culture of continuous improvement. In the process of transformation and upgrading and improving efficiency, it is necessary to find problems, diagnose problems, and improve problems. Through long-term real-time monitoring of the implementation of solutions to these problems, a closed loop of continuous improvement that can be controlled by the enterprise itself is formed. Enterprises must have the ability of refined management and continuous improvement in order to better improve manufacturing efficiency.

The second step is to carry out intelligent and digital innovation. Businesses can digitally transform from the design of their products. In the past, many product designs were made as prototypes, but now many products can be designed through software, and a digital model can be established to simulate customized products or different functions. From R&D

design end to production end, from raw materials to production process, to inventory, finished product distribution, and intelligent logistics, all of these actually require systematic digital transformation and use Internet technology to connect them.

Xu Haiping: I think execution is the key, and building a corporate culture of execution will help improve efficiency. The construction of this culture can be seen from three aspects.

First of all, interpretation and publicity. The company's various strategies need to be correctly interpreted and guided, the purpose and value of the strategy need to be deeply analyzed, and it needs to be continuously strengthened to go from the awareness level to the behavior level, and only the culture that goes deep into the behavior level can be transformed into execution. The policies and strategies that employees understand will be effectively implemented.

Secondly, set a model and tell a story. The power of example is infinite. Establishing typical characters and packaging typical events is a breakthrough in the effective implementation of the strategy system, and it is also the key work of cultural construction. Huawei is very good at building in this regard. Ren Zhengfei is a person who is good at borrowing classics, telling real events into stories, and telling corporate culture. people.

Third, leaders take the lead in creating an atmosphere. Leaders take the lead in creating an atmosphere for a long time, with unremitting advocacy and persistence. Once most people in the organization recognize and practice the core values of corporate culture, a cultural atmosphere will gradually be formed, which will eventually lead to the transformation of group awareness and values, and make the execution culture a kind of Habit.

In addition, in addition to execution, it is also necessary to grasp the wisdom of the masses, and through the establishment of an incentive mechanism, open up opinions, brainstorm ideas, and improve bit by bit.

CEConline: What kind of organizational model do you think is conducive to improving efficiency? How should manufacturing companies create this organizational model?

Chen Zhaofeng: PwC's research shows that the digital transformation and upgrading of leading enterprises have innovations in many fields in intelligent applications, which requires enterprises to have a supporting innovation culture atmosphere, management system and organizational model . We have seen that many companies will set up digital innovation departments, with dedicated digital innovation, intelligence, and intelligent manufacturing related personnel and teams. By fully empowering these people, the company allows them to lead the digital transformation of the company.

This change is usually done by doing some pilot projects first, and after success, to build the confidence of enterprises in digital investment and transformation, as well as the expectation of return on investment. After there are some good success stories, this model can be replicated, and then promoted on a larger scale to guide the enterprise step by step.

Xu Haiping: First of all, an enterprise is like the human body, the organizational framework is the skeleton, and the function of the organization is the organ; the process is the blood vessels that link and open up the functions of all the organs; the system is the immune system of the human body. And limit the rights and obligations of each organ, and in this way form a complete, organic, healthy functioning human body. Therefore, the organizational model and the system are inseparable and cannot be considered separately.

There are many organizational models, such as linear, divisional, matrix, and amoeba. Because each company has a different size and business type, the matching organizations are also different. This is very different. Therefore, there is no absolutely good organization, only more suitable ones.

Similarly, institutions are the norms and requirements for things, including the collection and release of rights. Too loose can lead to corruption and risk, but too tight can lead to lost business opportunities in a rapidly changing market. Specific things should also be discussed in detail, not generalized.

CEConline: In the process of implementing management methods to improve efficiency, a series of reforms and adjustments need to be carried out. What problems should be paid attention to? What obstacles will there be to overcome? What do you suggest about its countermeasures?

Chen Zhaofeng: For manufacturing enterprises, it is necessary to achieve both "top-down" promotion and "bottom-up" pull execution. First of all, in the process of reform, it should be promoted from "top-down", that is to say, the top managers in the enterprise, CEOs and other senior managers need to attach great importance, because this is an important part of the future development of the enterprise. However, the final execution still needs to rely on the grassroots, so the corporate culture of refined management and continuous improvement needs to be carried out consistently.

At the same time, enterprises need to formulate corresponding incentive mechanisms to make employees more motivated to participate in the reform. First, let a small number of people be the leaders of the change, and then slowly drive the atmosphere of the entire organization, and finally fully mobilize Employee participation in the reform.

The most important thing is that in the process of enterprise transformation, there must be some successful cases first, so that everyone can realize the benefits of reform, and then there will be more motivation for reform. Let everyone know that this will not only improve efficiency and profits, but also strengthen the competitiveness of the company and the cohesion of the team. Moreover, in the corporate culture atmosphere of continuous innovation, employees will also be motivated and feel that their growth is matched with the long-term development of the company.

This is a systematic project in management. Therefore, as a consulting agency, PwC will have a relevant set of methodologies and tools when helping enterprises to reform. Enterprises avoid detours and guide them to do better transformation practices. In addition to relying on external forces such as professional consulting agencies, companies can also seek partners in the industry to form a complete innovation and reform ecosystem. After all, companies cannot do everything. For example, there are many technical means now, such as AI, blockchain or Internet of Things technology. If companies go to "trial and error" one by one, the cost will inevitably be high. Therefore, it is a more efficient way to seek some different partners in the ecosystem to help improve quality and efficiency.

Xu Haiping: Reform is painful. Combined with the experience of similar projects, I think it can be said from four aspects:

1. Firm belief. Reform is a collective action, only the leader can lead the way, so the key to success or failure depends on the leader. Therefore, as a leader, we must strengthen our beliefs, withstand all interference and pressure, and cannot give up halfway.

2. Do a good job of publicity. People are generally resistant to changing the environment they have adapted to. Therefore, before the reform, we must do a good job of publicity and clarify the benefits and significance of the reform, so that employees can have a deep understanding and eliminate the resistance. Moreover, the propaganda of reform should have a solemn sense of ritual to show the determination of reform.

3. Establish a safeguard mechanism. Reform will inevitably harm the interests of some people or make some people feel uncomfortable, and there may be opposition forces, so we must plan the guarantee mechanism in advance. Just like Shang Yang's reform, a reward and punishment mechanism was established, and benchmarks were set up for those who supported and opposed to each other to reward and inform, so as to ensure the smooth progress of the reform.

4. Be patient and calm. After all, it takes at least 21 days to develop a habit, and a systematic project such as reform requires more time to adapt. During the adaptation process, the effect is gradually demonstrated, and more and more talents will support it. Reforms can take effect sooner or later, so keep your composure and give the reform a transitional time. Sooner or later, you will see results.