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Michael Collins, President, MPC Consulting |
This is the third part of a multi-part article. The first part is "Manufacturer's Biggest Challenge? More Revenue." The second is “Do You Have a Competitive Advantage?" The fourth part is coming soon.
It’s lack of organization not motivation that is causing sales bottlenecks at manufacturing organizations.
Traditionally small-and-midsized companies use the model of a Defender Organization which operates well under stable market demand as there are few competitors and customers rely on loyal suppliers.
The model relies too much on one market or a few large customers. The organization makes money when its heavy investments in capital equipment and technologies are totally utilized. It has little or no defense for a stagnant or declining market (or the loss of a large customer) and does not have the people or systems to locate and exploit new markets.
The organization, by definition, is generally inflexible, slow to react, and requires a lot of overhead to operate. Unfortunately, in these types of organizations, the priority of important things to do always favors the internal, tangible, and process-based things; rather than the external, intangible, and customer-based things.
An example is a typical job shop that depends on known customers sending them requests for quotes. Sales is at best a part-time job and there is seldom a sales manager or organization who are out calling on customers, finding out what is going on in the market, or looking for new market opportunities.
Now it’s a different world: new competitors, changing markets, more demanding customers, and erratic margins. Manufacturers are going to have to adopt a program of diversification to survive. This requires a system to monitor customers, competitors and markets.
Another problem in the current organizational structure is its inability to provide faster decisions for customers. This is due to the fact that these organizations are often shaped like pyramids with the decision makers at the top and all of the workers at the wide part of the pyramid foundation. Decision-making is slow because decisions must travel up and down the hierarchy, and top managers are too far away to understand the real problems.
Defenders Organizations also tend to rely on functional organization structures, which have centralized departments such as purchasing, accounting, human resources to achieve economies of scale. Overhead departments are often physically separated from the sales and production departments, which can result in built-in obstacles and barriers to communication that slow order processing. Overhead departments often become little empires with agendas very different from the rest of the company and they function more like outside contractors then parts of the company
Customers are constantly demanding shorter lead times, and faster responses to phone calls, quotations, service requests, parts sales, and every communication that has to do with products and services. Shorter lead times are difficult to achieve in the traditional functional manufacturing organization because the very structure of the Defender Organization slows down the production process.
If growth in sales and diversification is the new mission of the manufacturing company American manufacturers need to adopt a new type of organization — the Prospector Organization — to be able to grow in the future.
