World class masters

by Stuart Penson

The mood in manufacturing here is slightly self-congratulatory, after a panel of experts ranked a German factory as the best in the world.

The usual angst over high costs and taxes and declining inward investment is taking a back seat to some encouraging conclusions about the relative position of German manufacturing.

Based on efficiency throughout the production chain and ability to meet customers’ needs, Faure Sitztechnik, a car seat maker near Hannover, is the world’s top factory, says a panel of experts assembled by Insead, the Paris management school.

`World class again’ is how one observer greeted this latest triumph, which is attributed to Faure’s perfect supply chain, high productivity, 100% reliability of delivery, and first-class quality.

Of the panel’s top 20 list of factories, five are in the US, six in Japan, and seven in Germany.

`There are obviously problems (for German manufacturing),’ said Peter Milling, the German member of the panel. `But the top firms are showing they can produce profitably despite high wages and taxes.’ Above all, they are achieving enormous increases in productivity, said Milling, a professor of economics and industry at the University of Mannheim.

Experts here are telling manufacturers to refocus. The `made in Germany’ label of quality is not enough these days to ensure a full order book. Companies must learn how to produce customer-specific goods to tight deadlines – without increased production costs.

`Managing very varied production without causing an explosion in costs is a very complex process that only a few companies have mastered,’ said one analyst in Frankfurt. `I see chances here for German manufacturers.’

German companies have another strength, added Milling. The use of highly automated production lines means the labour component of production costs is getting smaller. This is why such a big proportion of Europe’s mobile phones are made in Germany, despite the country’s relatively high labour costs.

But industry shouldn’t get carried away. High costs and taxation remain a hindrance. And there’s another area in which companies have a long way to go: service.

One factor stunting the development of better after sales service is inflexible working hours, said Milling. `Service means being available around the clock, seven days a week. This sort of flexibility just isn’t there for many companies.’