There's another serious problem. Investments in automation - products, systems, software, installation, training and maintenance - typically take at least a couple of years to pay back. But the accelerating technological treadmill makes some systems obsolete in less than two years, never achieving break-even.

For some manufacturing operations, these problems are mollified through outsourcing to turnkey suppliers. This means no longer having to carry the technical, financial and administrative burdens of capital and resources dedicated to conventional production.

Re-deploy labor

The future manufacturing operation will not be just a "factory," but rather a completely integrated business enterprise using the methods of Operational Excellence (OE). This is a discipline of leadership, teamwork and problem solving that achieves continuous improvement through empowering all employees and optimizing all activities in the business process.

Toyota has turned this into a strategic weapon, based in part on quality improvement methods made famous in the manufacturing world - just-in-time, kaizen, one-piece flow and similar disciplines. Beyond just improving product quality and manufacturing efficiency, OE is also about standards improvements and change management for each and every part of the enterprise. Metrics and monitoring of key process indicators have pivotal importance in all activities.

OE is a holistic approach to realizing efficiencies in all parts of a business, adding value at every step - from innovation, to design and development, to testing, manufacturing, logistics and services - and removing waste and improving effectiveness in process.

In a fast-moving business environment, innovation and change are essential ingredients. Innovation is most effective when it focuses on the core value of the product, rather than just product proliferation. Further, beyond optimizing the development process, mastering the process of new product introductions becomes an integral part of manufacturing innovation - reducing the impact of engineering changes and ramp-up costs.

Innovation is clearly affected by outsourcing. There must be a clear and well-understood strategy, including implications for outsourcing of manufacturing, engineering and any other functions.

To ensure that each activity adds real value, there should be an internal customer providing feedback, evaluation and recommendations to improve the outcome. By creating this type of downstream involvement, assessment of value added can be immediate and changes can be implemented quickly.

To succeed, top management must have an intimate understanding of the human side of change management - alignment of the company's culture, values, people and behaviors that bring desired results on a continuing basis. Plans themselves do not capture value; value is realized only through the sustained, collective actions of all the employees who are responsible for designing, executing and operating with the changed environment.

Change may appear externally to be about changing jobs, places, products. But actually, it occurs first inside people's heads. Excellence can only be achieved by understanding and shaping this invisible element with a goal to make manufacturing the vital heart of a high-value manufacturing enterprise.