Back in the 70s, 80s and early 90s, contract manufacturing was everywhere in the U.S. as a staple of the economy. During the last 20 years, many contract manufacturers have gone out of business; unlike that which we have seen before.
This forces the question: Why? Is it due to the market downturns? Is it caused by extensive foreign pressure by countries such as China, India and Mexico? Could it be due to changes in the market place? Perhaps it is simply the result of a lack of change to respond to customers and market needs.
Notice the slight changes
There is a saying: How do you boil a frog? If you drop a frog into boiling water, it jumps out. But if that same frog is placed into room temperature water and slowly heated … Well, you get the picture.
The point is that organizations frequently deal with the immediate response to situations rather than developing a plan to adjust to slight market changes over the long term. It’s just like steering a canoe. You counter steer before it is needed because if you try to steer after you see it is needed, you are to late. The key is being able to see the slight changes before they occur.
What does this mean? For contract manufacturers, you need to be able to see very small changes in the markets you serve. Simply listen to your customers; they will tell you what the needs and changes are. These can be changes such as faster delivery, stocking solutions, supplier reductions or reduction of personnel. Do not fear these needs, Instead, learn to change to provide a solution to the need.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin
Listen more and talk less
The next step is to learn your competitors’ weaknesses. Keep in mind that these weaknesses could be originating from a single company or an entire country.
If you listen you will learn so remember to listen more and talk less. When you begin to listen, you will learn where you can excel or grow past your competitors.
“I cannot compete with the prices from foreign sources.”
Offshore suppliers can supply very competitive products; but there are challenges such as quantities, transportation, lead times, communication, etc. Recently, we worked with a customer that was sourcing offshore and they had troubles with delivery and inventory. They were forced to bring in much higher quantities than they needed while also not having good communication from the supplier.
This provided clear tools that allowed us to separate ourselves from the current situation this particular customer faced. After developing a plan to deliver the proper quantities with a JIT (just-in-time-delivery) program and using continuous status updates, the customer was able to see cost savings in the overall total even though the unit price was higher.
If you are competing on price alone, you will become a statistic and you have already lost. Peel back the onion and look at the full picture. Understand that you will not win every project but you need to use your time wisely to select the best applications. Always listen to what your customers are saying because in the end they write your paycheck.
Be a creative thinker
The key to today’s contract manufacturing is listening and being flexible to your customers needs. In most cases, the needs are not that different from what you currently do or what you can do. Being rigid with policies and processes will cause you to lose business because sales will just walk out the door. Those that will succeed will be those that are flexible, communicate extremely well and place the customer first.
Find ways to make things work for the customer and then determine how you can make it work in your system of production. You also need to understand that not every request can be met. However having an open mind and looking for solutions – rather than being rigid to old principles – is going to be key for U.S. manufacturers in the future.
The next time you have an opportunity, take a serious review of how you can answer these questions below.
- Is this something we can produce?
- Is this something that makes sense to produce and will this be profitable?
- What are the industry standards for this product?
- What is the customer currently getting from a service and product solution perspective?
- What are the challenges that the customer has and how can we possibly make the experience easier for them?
- Learn the customer’s process; how do they order, ship, stock, what quantities used and ordered, inspection, manufacturing or assembly techniques, receiving process, etc. Step back and be creative.
- Examine your manufacturing process and look for synergies. How can you improve your process to match up with the customer needs or how can you offer a benefit to the customer if there is not a clear need expressed by the customer?
- Be flexible by providing unique solutions and not cookie cutter solutions. Everyone wants a solution that is unique to their specific needs. No one cares what you do for someone else. Remember that one customer is what matters and the next customer is another set of needs.
- Provide a clear solution that will help the customer in a measurable means.
- Provide high levels of communication. This is key to the success of any business in this day and age. We have more methods of communication then ever before so use them to your advantage. In today’s manufacturing climate, oftentimes the failure in a business relationship comes back to effective communication do not take this lightly.