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Feeling the squeeze? In today’s economy, most small and mid-size manufacturers are. Markets are volatile, competition is fierce and increasingly global, and customers are narrowing their supplier base to those who can meet unique requirements.
These shifts can actually benefit smaller industrial companies – if they can reliably adapt and respond. Many small and medium businesses have long been more nimble to respond. What’s different is that many larger customers are now outsourcing more pieces of their operation, and they want responsive, reliable business partners to take on broader responsibilities.
Companies of every size are learning to compete as supply chains, not just as individual companies. It requires dependability, good communications, low cost structures and extreme flexibility to adapt to change. In many cases, small and medium sized manufacturers are already more flexible and cost-effective than others, based on tight coordination among all departments.
Still, most managers in smaller industrial enterprises are not fully comfortable competing in this fastmoving, connected market. Taking existing advantages to the next level will mean moving to an on demand manufacturing model. Like most business transformations, moving to on demand business involves organizational, process and IT aspects.
Becoming an on demand business requires re-thinking the organization and its processes so they are responsive, focused, variable and resilient in ways very few businesses have been to date. In owning your niche, you must be ready to respond – even in the face of unplanned events and unexpected demand patterns.
The IT infrastructure that supports an on demand manufacturer also breaks new ground. It must be open to share data with others in each supply chain – and not just in daily batches, but as changes occur. Systems must be cost-effective to implement and own. Further, IT must be ready to change, expand and contract as your business does. On demand systems must also be totally reliable and secure.
The migration to on demand manufacturing is already occurring. You can watch the transformation and be left in a tight spot, or you can work to become an on-demand manufacturer. Small and mid-sized companies have a golden opportunity to act quickly and keep – or gain – a competitive advantage. Small and medium manufacturers are feeling squeezed by a host of current market realities. Globalization has opened up competition, so local customers may look to suppliers in areas with low labor costs. The Internet makes these new competitors easy to find, and their prices and terms increasingly transparent. To succeed, companies are providing innovative services, products, and bundled offerings.
At the same time, new regulations and specialized customer demands are increasing costs. Every customer seems to want unique services and communications formats. Each ship-to location may also have special regulations that require extra care in documentation and handling. Small and mid-size manufacturers have little voice in this; to serve these customers and regions, compliance is mandatory.
Perhaps most noticeable in the new decade is the impact of other outside forces that make for unpredictable changes. The economic downturn of the early 2000s has been devastating for some companies. Terrorism, utility outages and transportation strikes have affected many manufacturing plants and their suppliers. The jarring reality of these events has imprinted a sense of uncertainty on most companies.
Opportunity from Adversity
These business shifts are daunting, but can actually benefit small and medium manufacturing companies – if they can adapt and respond reliably. Historically smaller companies have been able to respond more quickly than larger ones. Now, this advantage of agility must translate beyond everyone pulling together to fulfill rush orders. Smaller companies must also quickly adopt new technologies, comply with new regulations and address entirely new market needs.
For example, as major companies increasingly move to specialize and offload any activities that they do not feel are a core competence, smaller manufacturers can often take on those operations. The result: a broader set of products and services that may also attract new customers.
Similarly, when a key customer sets a new condition of doing business, it can become a premium service to other buyers. New regulations can also improve business processes. Being forced do something new – either for a customer or a regulatory agency – may afford the opportunity to generate further revenue or reduce costs across your business.
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