Tag Archives: Finance

From Erico Matias Tavares of Sinclair & Co. at linkedin.com:

A few weeks ago we penned an article on Open Source Ecology, an exciting new manufacturing concept developed by Dr. Marcin Jakubowski and his colleagues. Given its potential to create a multitude of self-reliant jobs and bring about a true manufacturing renaissance in much of the developed world, we thought that it would generate a lot of interest.

But boy were we wrong. Out of all the 77 articles that we have published since 2014 it got the lowest readings… EVER!

Now, we don’t consider ourselves to be any literary geniuses (nor we publish for “hits”), but we could never imagine that a title containing the word “manufacturing” could be so off-putting. We assume that for many of our dear readers, who for the most part live in Western countries, manufacturing is just an afterthought. The future and all the cool stuff is in services right?

Well, if this is the reason, we really need to think about how we approach manufacturing.

This is a personal topic for us. We started our career at General Electric (GE), at the time under the leadership of the legendary Jack Welch. As part of his broader risk management strategy, he bestowed an important oversight role on the finance function. Accordingly even us glorified “bean counters” were required to develop a deep understanding of our business, and particularly so in the manufacturing divisions. We even had to become conversant in Six Sigma, the art of business process improvement.

While we were busy trying to figure out the nuts and bolts of our job (literally), something else was happening at GE: Welch was transforming the company from a manufacturing giant into a services oriented powerhouse.

The core manufacturing divisions began moving into higher-margin aftersales (like maintenance contracts). More significantly, the financial services subsidiary leveraged the group’s top notch credit rating to fund an aggressive growth strategy, quickly becoming the primary source of earnings growth for the consolidated company. Consumer finance, lease providers and a plethora of other financial services companies were being acquired all over the world at breakneck speed.

Meanwhile, entire manufacturing facilities were being shut down in the US, earning the dynamic CEO the nickname “Neutron Jack” (everybody was gone when he came around, only the buildings remained).

GE turned out to be a leading indicator for the entire US economy. The same forces of globalization that were propelling Welch’s financial results were exposing other American manufacturers to cutthroat competition from emerging markets. As a consequence, they had to move upscale or offshore, or go out of business altogether.

To continue reading: Why Manufacturing Matters