You would have to be holed up in a gulag in Siberia not to see and be concerned with the state of the economy and its impact throughout the supply chain, from consumers through manufacturers and raw-material suppliers.
Challenges came from every corner of the economy, from the stock market, to the banking and auto industry bailouts, to investment schemes uncovered, to the prospects of retail store closings and higher unemployment.
In my last column, I alluded to the importance of a manufacturing strategy and how that drives what you do, both in the long term and the short term. Given these very difficult economic times, a manufacturing strategy is especially important now. The column made the following five points:
1. Provide manufacturing capabilities not available internally
2. Enhance innovation capability for new product development
3. Control product and capital costs
4. Provide manufacturing capability in developing markets
5. Provide additional manufacturing capacity when needed
I’d like to add onto those thoughts in this issue. Having been responsible for developing and implementing an outsourcing and contract manufacturing strategy for my company, I often was disappointed with contract manufacturers’ lack of strategic thinking and vision for the future. Beyond providing a packaging or manufacturing service, they were unable to demonstrate what unique skills or expertise they brought to the customer.
Given the economic situation facing businesses today, a comprehensive strategic business plan that addresses your business growth plans, as a consumer packaged goods (CPG) company, is more critical than ever. Identify your growth objectives in detail. Understand the threats and opportunities you need to address.
From a contract manufacturer’s perspective, I would focus on what services and opportunities you provide for potential CPG clients. Customers are interested in where you are taking your company, how you intend to get there, and what you bring to their party. Build objectives that support your business plan in the following five areas, understanding both the inherent threats and the opportunities.
1. Finances: Articulate a comprehensive cost-control program that addresses productivity improvement, manufacturing flexibility, overhead and fixed-labor expenses, and raw-materials and finished-goods inventory control.
2. Quality: Be able to articulate and demonstrate a solid quality process that deals with products, processes, and organization.
3. Customer service: Be ready to answer this question: How will you provide a customer-service benefit? Consider providing local or regional manufacturing capability that will reduce lead time, enable lower inventories, and introduce a new market-penetration opportunity.
4. Innovation: What product development and innovation capabilities do you possess? How can these qualities deliver value to your existing and potential customer base?
5. Organization: What special skills does your organization possess, and what does it need to develop? What plans and actions will make your organization stronger and more competitive?
The current economic decline is the single biggest challenge we all face. Strategic business planning—identifying goals for your company and supporting the effort to achieve them with comprehensive objectives and action plans—is critical. Business planning alone won’t guarantee survival, but it does enhance the odds of success. Knowing where you are, where you want and need to be, the challenges you face, and the actions you need to execute are clearly steps in the right direction to prospering in today’s challenging economic climate.