If you’re a manufacturing company with over 500 employees, you’re not the middle. If you’re a single man shop with local customers only, you’re probably not the middle either. But if you’re somewhere in between, then you’re one of many that makeup the supply chain backbone that feeds the large OEMs. Collectively you represent more than twice the global employment of big name manufacturers. This bulging mid-section of the manufacturing world is what has been dubbed the missing middle.
“Being in the middle”, as the phrase suggests, comes with its own set of unique challenges and pressures. There is a gap between what is expected from this group of manufacturers and what they’re capable of delivering. They’ve become overlooked and under-resourced.
The Manufacturing Institute website says, “The United States funds and conducts extensive basic research and possesses the manufacturing base to commercialize products, but lacks the development, engineering, and prototyping assets that enables ideas to move from mind to market.”
Changing R&D Responsibility – pushing innovation downward
Big manufacturers used to lead innovation. They were idea generators, research and developers (R&D) and leaders of change. In the early 1980’s big companies contributed vast amounts to R&D investments. Today, their contribution appears paltry by comparison. “In the past 30 years, R&D investment in the larger companies has plummeted — from 72 percent of total in 1981 to 40 percent in 2007” cites Jon Riley & Matt Sakey of National Center for Manufacturing Sciences (NCMS) in a joint report by Digital Manufacturing Report and NCMS.
So where did innovation go? The middle.
More and more mid-size manufacturers have taken on the responsibility that big OEMs used to own. “Developmentally, 60 percent of R&D investment comes from the missing middle — up more than 40 percent since 1983” say Riley and Sakey. That’s a huge shift of time, resources and investment, and one that only the most fiscally sound manufacturers are poised to support. As many mid-size manufacturers are struggling with their new ‘innovation’ job description, they’re still contending with other more day-to-day economic pressures in order to survive.
Economic Challenges – first to get hit, last to recover
The missing middle of manufacturing is getting uncomfortably squeezed from all sides. Over and above shifting innovation responsibilities, a faltering economy has added even more pressure.
“Small to midsize manufacturers are often hurt early during economic downturn because they tend to have limited resilience: limited cash reserves and access to credit, few customers, and limited product portfolios and inventory. For the same reasons, small to midsize manufacturers also take longer to recover” says Joe Barkai, Analyst and Practice Director for Product Lifecycle Strategies for IDC Manufacturing Insights.
Is Technology the Answer?
Technology shines like a bright spot in a dismal sky. It can help midsize manufacturers find sure footing in an otherwise rocky middle landscape. NCMS’s Riley and Sakey believe that digital manufacturing – a computer based system of integrated manufacturing, modeling & simulation is the path to success. “Those companies that do not leverage this technology [digital manufacturing] will take longer to design more at greater cost and with less guarantee of success.” From Enigma’s perspective, we agree but on a much broader scale. Any integration of technology that improves an OEM’s manufacture, service and support leads to healthy competitive advantage.
As a software developer of an electronic parts catalog (EPC), Enigma has seen the impact first-hand, of technology on our own ‘middle’ OEM customers. As the demands of midsize manufacturing become more stringent, the power of software to maximize operational efficiency as well as aftermarket parts, service and repair becomes a fundamental imperative. InService EPC is a textbook case of how midsize OEMs can leverage their existing product, parts and service information to improve aftermarket efficiency and profits.
Enigma InService EPC has proven itself across industries. We’ve helped construction equipment manufacturers like DitchWitch and Bobcat as well as medical equipment manufacturers Toshiba America Medical Systems and public transportation like Dallas Area Rapid Transit (DART) leverage their parts and service content and integrate with in-house business systems to reduce cost and improve customer support.
We believe InService EPC is the best first step for the “missing middle” to apply technology because it uses information that already exists to enhance the most profitable part of a company’s business—the aftermarket. By extracting new value from existing resources, the missing middle will make room for more innovation and accelerate response to ongoing customer demands.