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.
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?
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.
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.
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.
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.
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.
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.
