Top 10 Survival Tips for Manufacturers

Dec. 8, 2011
Under intense cost pressures, quality is at risk at many manufacturers. These 10 tips can help you survive the competitive challenges ahead.

With rising cost pressures and intense global competition, the very survival of many manufacturers is still at stake three years after the financial meltdown of 2008. Many companies haven't completely recovered. The pressures to innovate and lower costs are immense.

Unfortunately, manufacturing quality has suffered in the process. In fact, quality is one of the key areas that companies must address to improve their chances for success, as you can see in the following 10 survival tips aimed at helping you navigate through your next round of challenges.

1. Maintain your focus. Make a decision about the kind of company you are and stick with it. Over the past decade, flush with infusions of new capital, many manufacturers moved in too many directions at once. They were in poor shape when the crisis hit in 2008 and 2009, while the smart ones kept their eye on the ball and used loans and investment money wisely to develop their core businesses. As a result, they emerged the strongest from the downturn.

2. Reinvent your products regularly. Suppliers who sharply differentiate their products fare the best. Their success may relate as much to their mindset as to the money they invest in new technology. In other words, a little creativity and outside-the-box thinking can go a long way. A few years ago, who would have thought that the technology used in a rearview mirror could surpass the sophistication of a car's headlamps?

3. Maximize your productivity and increase your speed through enhanced product and process design. Lean manufacturing focuses on production and its associated costs from a component's conception. Your manufacturing and product design teams should communicate and work closely together from the outset. A production-friendly component can go a long way toward holding down labor costs and production time. Solicit design ideas via crowdsourcing and apply manufacturing techniques to compress production time. As the economy improves, there will be immense pressure to ramp up production without sending labor costs skyward and lean manufacturing can help solve this problem.

4. Pay attention to your supply chain. You must know about any risks, financial or otherwise, that threaten your suppliers. You don't want to be surprised by a supplier that suddenly disappears. Think of the headaches and costs involved in replacing them on a moment's notice. Are your suppliers focusing on quality, research and development -- not just the component's price? Are you considering the global cost footprint when sourcing parts? If not, chances are good you will pay more in the end.

5. Offshoring vs Onshoring. You must know the total cost of products. Due to the poor quality of parts, often sourced from low-cost countries, your employees may have to inspect a shipping container full of components piece by piece to identify those that can be repaired or must be scrapped. Logistics is also an issue that must be accounted for when determining the total cost of a product. Long voyages from Asia wreak havoc on just-in-time delivery because they require maintaining parts inventories rather than sequencing them into production. To help determine the total cost of ownership, a new, complimentary software tool compares the costs of manufacturing parts and tools in 17 countries based on 29 factors. It is being offered by The Reshore Initiative on its website.

6. Improve quality. There are still too many manufacturers delivering components with high defect rates. Successful companies gain a competitive advantage by whittling these down. In some cases, the current defect rate is at 50 parts per millions, when 2 or 3 parts per million is achievable. Companies should have detailed action plans to improve the quality of the components they produce; their Six Sigma teams should make it a priority.

Companies need to improve their first-time through-rates to reduce scrap and rework. While first-time through-rates of 90% are common, that's unacceptable. Get something made right the first time and you'll increase your productivity and reduce costs significantly. Root cause analyses identify the source(s) of the problem(s) and are far less costly than paying for ongoing defects and repairs. Improving a 90% first-time through-rate to 97% is very doable.

7. Diversify your customer base. This may involve segmenting your industry or going outside it. Over the last decade, a number of top suppliers in the auto industry have succeeded at entering new markets, whether it was a non-U.S. supplier hooking up with a Detroit automaker or a U.S. supplier with an Asian or German transplant. Some also diversified successfully outside the auto industry. A product for Detroit's Big Three could have applications in military vehicles, heavy equipment or in aviation. Pursue the lines of business that are within your core competency.

8. Embrace globalization. Acquisitions, consolidations and diversification can help suppliers achieve economies of scale. It will prove difficult for many firms to compete without them. With overcapacity rampant in many industries, competition will be cutthroat for many components -- even the highly sophisticated ones. But if firms consolidate, they may be able to achieve the critical mass they need to succeed. Private equity firms can play an important role in bringing companies together in larger, stronger configurations.

9. Invest in your employees. Suppliers who paid higher wages and made bigger investments in training and equipment came through the downturn better than those who didn't, according to a recent study by Case Western Reserve University. They also experienced 11% less sales loss than the firms that were least inclined to do so, the study found. Employee empowerment is a good thing.

10. Facilitate total productive maintenance. While this concept has been around for decades, some manufacturers are still not training machine operators to perform many of the day-to-day tasks of simple maintenance and fault-finding. If operators understand the machinery and identify potential problems, they can correct them before they affect production -- reducing both downtime and production costs.

Finally, there is a common thread that weaves each of these tips together like a quilt: a never-say-die, take-no-prisoners attitude toward your business. The best performers today don't know the meaning of the word defeat. After all is said and done, it could be the one factor that makes all the difference.

Guy Morgan is managing director & global operations advisory group lead for BBK Southfield , and CEO, Performance Improvement LLC. He has more than 30 years of experience in plant management and operational improvement processes. His areas of specialty include program launch, lean manufacturing, and interim management in various realms of manufacturing.

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