Strategic Planning

By Tim Connor, Rodeo! Performance Group, Inc.

Concerned, nervous, panicky, discouraged; any of these terms could be used to describe the feelings of American manufacturing companies when considering their offshore competition. But being competitive involves a LOT more than just cutting prices, and there are actually several areas where U.S. companies can look to compete. This is the second and final article to examine these areas.

IN PART 1 of this two part article, we looked at Quality of the Product and Friendliness of the Service. In Part 2 we will consider alignment to particular requirements, responsiveness to needs, ability to deliver to schedule, and cost to the purchaser. Let’s get started.

Alignment to Requirements

Abig part of competitiveness is found in the alignment of the product to the customer’s requirements – if it does what it’s supposed to do, customers will consider buying it. This was discussed back in Quality of the Product, but it also means that you, as the producer, have to consider needs that the customer has in keeping his/her own costs down. You did that, of course, when you set up initial sales with the client, but it should be done on an ongoing basis, too.

Responsiveness to Needs

Do you know what your customer is dealing with, and what new challenges are being faced by that company? Worthington Steel, based out of Columbus, Ohio actually makes it a point to send front line staff out periodically to client facilities to see how the product is being used. What good is that? It allows Worthington to make small changes in either construction or delivery that mean a big difference to the client. And often it’s ONLY the front line staff who can identify these types of requirements – sometimes the client doesn’t even know the opportunity is there. Staff can recognize this, and bring the ideas back to your plant where changes can make your product even more valuable to the client. What’s the outcome? Let’s look: Worthington is a leading diversified metal processing company with $3 billion in sales, and 8,000 employees in 63 facilities. You can review their results at www.worthingtonindustries.com.

Ask yourself: “What can I do to get my staff involved in improving our responsiveness to customer needs?

Ability to Deliver to Schedule

Believe it or not, this is the area where an American company has the best opportunity to compete with offshore. Here’s why. When production is moved to another country, the lead time on getting that product back here to the U.S. moves to an average of 8 to 10 weeks. That’s 2 ½ months, most of which is transportation and loading time. And here’s the kicker – all of that new product has to be inspected. Now that may not sound like a big deal, but if your client is bringing a shipload of new product in (which is often necessary to keep transportation costs manageable), the inspection time alone is a very significant investment in time and manpower. And what happens if something is wrong? THEN there have to be plans and facilities in place for either shipping it back OR for fixing the problem back to spec. Can you honestly say there isn’t opportunity here for you to provide a much more competitive product? American companies should be able to very significantly reduce lead times; and errors in manufacturing can be much more quickly rectified when they do occur.

Cost to the Purchaser

This is the second area of great opportunity for you, the producer, because it has to do with your cost of production – something that is mostly within your control. Now you will holler that you can’t control the cost of supplies and labor. But the fact is that you CAN control the cost of production, and there is very often ample opportunity for improvement here. Have you used the four process mapping approaches? Do you know where in your line the value and non-value steps are? Have you applied the Lean principles relative to the Five Ss, Preventative Maintenance, and Predictive Maintenance. Most business owners have at least put these last three in place, but often a systematic review of processes has not been done – and there is a lot of opportunity in process mapping! Edwards Deming felt that as many as 70% of process steps are waste steps, and identifying and eliminating them can drastically reduce your cost of producing a product. This is a prime area for investment in outside help, because the return on investment potential is so high. Look into it, you will not be sorry.

In Summary…

There are six areas where a domestic company can improve its competitiveness with offshore. They are:

1. Improving the quality of the product
2. Improving the friendliness of the service
3. Securing better alignment to customer requirements
4. Enhancing responsiveness to customer needs
5. Providing better delivery to schedule
6. And reducing cost to the purchaser through six-sigma type applications.