What is in this article?:
Manufacturing and operations can unlock significant latent value by developing the capabilities that support a company’s strategic value proposition. Winning companies already are starting to tap into that value.
A wave of change in business strategy is quietly transforming U.S. manufacturing. Just a few years after the deepest recession in a generation forced many companies to slash costs and outsource production, the focus in many companies has shifted back to growth. For manufacturers, this means finding ways to ramp up production in an environment where every dollar counts.
Growth doesn’t come easy in a sluggish economy. It is especially difficult in a time of major change in purchasing patterns, driven by technology, consumer demand and the retail industry. Consumers have learned to expect variety in products increasingly tailored to them – creating tremendous complexity for traditional supply chains and for operations in general. Every company, even those which haven’t invested heavily in R&D in the past, is feeling the pressure for novelty.
In addition, much of the current wave of business growth is moving away from traditional channels. For example, groceries are increasingly sold now in outlets that would have seemed like peculiar homes for them a few years ago: dollar stores, club chains and drug retailers. Simple healthcare is dispensed through clinics operated by pharmacy chains. Consumer electronics and apparel are sold in manufacturers’ own outlets, while shoppers are increasingly accustomed to buying everything, up to and including automobiles and real estate, through the Internet.
In this environment, manufacturers looking to capture a larger share of a slowly expanding pie can no longer count on their existing branding or merchandising tactics. They need to distinguish themselves by adopting a more strategic approach. This means changing supply chain functions from order-taking cost centers into drivers of profit and competitive differentiation. Moreover, with many companies eliminating the COO position, the door is open for operations executives to play a larger role in shaping corporate strategy.
The details will vary from one company to the next, but some aspects of manufacturing strategy will be the same for all. Since competitive pressures are higher, there needs to be a continuous eye toward innovation and speed. To keep pace with the proliferation of channels and shifting customer preferences, manufacturers need to make more deliberate choices about the right array of products, the best way to shorten lead times, and the most effective means to cut production costs while making goods that better attract customers. In short, manufacturers need supply chains that are “fit for purpose,” i.e., oriented to the particular way that the company creates value through its products.
This means that the supply chain must be capable of producing distinctive goods, ideally in a way that no one else can copy, and that is instantly recognizable as part of the company’s identity. At the same time, the supply chain must be flexible enough to manage increasing complexity and to shift rapidly, when necessary, to meet changing customer demands.
This challenge represents an unprecedented opportunity for the executives who lead the manufacturing organization. They can align their production capabilities with the company’s broader strategy, redesigning the overall supply chain architecture to reach distinct market segments with products tailored for them. With a better understanding of their capabilities, the value that the market places on their products and the implications for their asset base, they can help develop a supply chain and manufacturing footprint that distinguishes their company from competitors.