Brandt On Leadership -- It's A Matter Of Matter

Dec. 21, 2004
See your company in a new light by considering your 'real world' inventory.

It's long been clear that manufacturing companies need to operate in new ways if they are to thrive -- or even survive. Exactly what we're supposed to become, however, is still a matter of confusion. Which leads me to wonder if we're framing the question -- what should a manufacturing company be? -- in the right way. If maybe even the words we use -- manufacturing versus service, old economy versus new economy -- limit our vision of what our firms might become. What if, for example, we stop trying to label our firms by industry or sector and instead focus on what we do: The ownership, improvement and management and sale of a temporary, physical inventory. With this definition in mind, we might classify companies according to the type of inventory they own and manage -- virtual versus physical. In this model, the physical inventory companies -- let's call them "Real World" -- include not just manufacturers, but distributors, wholesalers and retailers. Other firms -- let's call them "Unreal World" -- would include anyone who owns and manages virtual inventories. These inventories may be virtual due to their inherent nature (e.g., information or software at law firms or IT companies), because the firm has no legal ownership of the inventory (e.g., shipping companies that process inventory but have no balance sheet liability for it). Why does this inventory distinction matter? Because owning and managing a physical inventory is harder and more complex than a virtual inventory. Atoms are difficult and contrary things, especially when they sit on your balance sheet. For example, if you make a mistake in ordering at a manufacturing company, you can't simply hit the "delete" key and start over; the inventory just sits there, reminding you daily of your stupidity. Then, too, satisfying customer need isn't as easy as preparing a report or an opinion; those atoms have to be manipulated, packaged, shipped and installed. In short, a physical-inventory company has to do everything a virtual-inventory company does -- but with the complication of physical size and weight and the debt to finance and house that bulk. OK, some might ask, but how can the words we use -- physical inventory owner/managers versus manufacturers -- make a difference in management and performance? Because our concept of what we are -- as individuals, as an organization -- matters so desperately to how we innovate and improve and, ultimately, to what we become. If we believe we are merely makers of product, we will spend our days struggling only with cheaper/faster/better and never think beyond the walls of our commodity manufacturing prison. If, however, we can see ourselves as part of a broader flow of physical inventory from source to customer (and associated customer value), our horizons broaden as to what we might do to improve the entire process -- and our margins. Our questions about the future change from "How do we survive?" to "How might we better connect with our end customers?" Instead of fretting about industry shipment forecasts, we begin to muse about which physical inventory operations (source, make, assemble, ship, sell, etc.), for instance, are we best at -- and how can we leverage that expertise in other markets. In short, we begin to see ourselves not as part of a struggling industrial sector, but as players in a much broader, more vibrant economy. How do you conceive your company? More importantly, where will that self-conception take you tomorrow? John R. Brandt, formerly editor-in-chief of IndustryWeek, is CEO of the Manufacturing Performance Institute, a research and consulting firm based in Shaker Heights, Ohio.

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