North American manufacturing is enjoying one of its best rallies in years as Asia struggles to earn more business. Before long, American and Canadian producers could find themselves shipping assembled goods overseas.
According to a recent assessment by HSBC, China’s factory activity measured 49.4 versus the consensus estimate of 49.7 in May. The country’s official figures showed a reading of 50.8, the highest total since December. A score of 50 or above signals growth.
Canada’s factories are performing better, if a bit off their peak. The latest figures compiled in the RBC Canadian Manufacturers Purchasing Managers’ Index pegged Canadian factory activity at 52.2 in May, a fourth-month low and well off both April’s total (52.9) and the historical average (53.3), Reuters reports.
In the U.S., The Institute of Supply Management’s index of U.S. manufacturing activity rose to 55.4 last month, up from 54.9 in April and 53.7 in March. It’s fair to say American factories are on a tear. If the rally continues, it’ll be as much from overseas customers ordering from North American factories as domestic business.
Is your floor ready for the potential onslaught? Here are five ways to prepare:
1. Clarify your capabilities and specialties. Be extra clear about what sorts of work your factory can and will do when seeking to win foreign clients. Also note where you excel using case studies that demonstrate your factory’s record of outperformance. You’ll be more likely to find partners who match up well enough with your capabilities, resulting in meaningful work for your team and bigger profits for the powers that be.
2. Develop local relationships. Nothing sells better than meeting a client face to face. Enhance your ability to sell to foreign customers by hiring in-country sales and production staff. Let them be your advance team, scouting your counterparts, their facilities, and their reputation in the local community. Get a full picture of who you’ll be doing business with before signing on the dotted line.
3. Measure incidentals, relentlessly. Don’t underestimate the added cost of handling a foreign client. Paperwork costs staff time while delays can kill profits via unexpectedly high shipping costs. Agree to a trial period upfront in which you and your client will agree to measure the incidentals involved with the relationship. Do the added costs balance out? Can you maintain a high standard of productivity and still meet the client’s needs for timely delivery of finished goods? Is the client happy to pay your invoices? Track all the numbers and be honest about where expectations and reality aren’t matching up.
4. Consider what you’re missing. As good as it must feel to be approached by a potentially lucrative foreign client, especially after several demoralizing years of outsourcing, don’t sign blindly. Would winning the business put undue pressure on your team? Enough that you’d be forced to forfeit some local accounts? Be sure this is a relationship you and your team can profit from.
5. Reward total portfolio performance. Taking on new business—especially complex business from a foreign client—means demanding more of your team. Don’t overemphasize the newer deals. Instead, develop a system of incentives and rewards based on total performance. After all, no one wins if foreign client orders rise while profitability sinks.
As foreign factories wane, North American facilities may be called upon to fill the gap. Prepare by clarifying your factory’s capabilities and specialties, developing in-country relationships, and measuring incidentals. Also be sure to consider what you might miss as you pursue global growth, and develop incentives based on total portfolio performance. You’ll be better positioned to cash in on the trend while it lasts.
John Mills is executive vice president of Business Development at Rideau Recognition Solutions, a global leader in employee rewards and recognition programs designed to motivate and increase engagement and productivity across the workforce.