How can American manufacturers compete successfully in the 21st century? The answer might depend on whether your company is a “Defender” or a “Prospector” organization.
According to Michael P. Collins, president of MPC Management, a manufacturing consulting company, and the author of the book, “Saving American Manufacturing,” Saving American Manufacturing
Defender companies are internally focused and Prospector companies are externally focused, and that's the answer.
Defender companies are internally focused and Prospector companies are externally focused, and that's the answer.“Defender organizations are locked into internally focused strategies such as cost-cutting and process improvement. They are concerned with operating in the most efficient way, and are quick to adapt lean manufacturing techniques and add ERP/MRP systems to their workflow, but the management structure tends to be very bureaucratic, very slow and very inflexible,” said Collins.
To compete in today’s global economy, manufacturers must become Prospector organizations, focused externally on finding new markets and new customers, and developing new products and new services. Prospector companies are fast, flexible, flat organizations that are geared to respond to their customers at various levels within the company.
“The problem with a lot of manufacturers now is that they are ‘leaned’ out,” Collins explained. “The ultimate goal in lean manufacturing is not just cost reduction, but to eventually provide more manufacturing capacity, so you can have more sales and grow.”
But if you don’t have a parallel plan to grow and find new customers, when you finally do reach your ultimate lean capacity levels, you won’t have the corresponding sales and orders.
“It doesn’t make any difference how much you spend on internal strategies, if you aren’t organized on the external points of finding new markets and new customers, you won’t grow your business,” said Collins.
So what can U.S. manufacturers do to compete successfully in the 21st century? Collins has several suggestions including providing the best value for your products rather than just competing on price, and seeking out new customers and new markets.
“For most manufacturers, competing on price is not sustainable,” noted Collins, “there is always going to be somebody, somewhere in the world who can make a product cheaper than you can. Where manufacturers in the U.S. can compete successfully is on value-added services.”
Collins believes that a product should be presented not “just as a product,” but as a total package with appropriate warranties, preventative maintenance contracts, educational and training offerings, and any other services that will make the product more attractive to the customer, over and above the price point.
“Those customers who have ‘leaned’ themselves out and reengineered their businesses, they don’t have the same number of people doing the inside work,” Collins said. “These businesses have a lot fewer people doing a lot more work. The things they used to do internally, like training, preventative maintenance and education, they now rely on vendors for these functions.”
If a manufacturer can adapt to these changes, if they can find out what their customers really need and can fill those roles, they stand a good chance of finding and keeping satisfied customers. After all, a foreign manufacturer can sell a product here, but they probably cannot provide “all the rest of the stuff, the value-added services,” noted Collins.
And how can manufacturers make more sales? In Collins’ experience, he has found that “for most manufacturers, sales channels are a ‘black art.’ "
“Everything has changed, customers have changed, markets have changed, and manufacturers are trying to play catch-up,” remarked Collins. “What worked 25 years ago doesn’t work now at all.”
Many manufacturing companies don’t have an outside sales force and this is one area where changes can be made. Collins suggests hiring one or two outside sales people to prospect for customers, or use factory sales people or independent sales reps to find new customers. Check with your distribution channels, which are already calling on a diverse group of customers, and use them to find new business.
“Have a mixture of sales channels, so you have ‘more feet on the street,’ ” Collins said. “Revamp how you sell your products, use different sales techniques, and most importantly, start doing this right away.”
Another area where Collins feels manufacturers make a mistake is in not diversifying their customer base. A lot of manufacturers have what Collins calls “MVCs” – Most-Valued Customers – large-volume customers that sometimes are a major portion of the manufacturer’s sales base.
“This can really be a problem, because many manufacturers do not want to move away from these large-volume customers, but holding onto them could be the end of your company, if those customers leave the market,” cautions Collins. “It makes much more sense to diversify your product line and your customer base, there is more security in selling to a variety of market niches.”
As for the future of manufacturing in the U.S., Collins predicts lots of growth opportunities both in new and traditional industries.
“There are going to be new industries, created by new technologies such as nano manufacturing, biomedical devices, robotics, special metals and composites, and supercomputing, and every one of these will create a lot of market niches,” said Collins.
And there are growth possibilities in traditional industries, too, such as food, paper and chemicals. Although in these industries, while the original product might not change much, there are always changes being made to packaging or production line machinery.
“If a manufacturer gets close enough to a customer to understand what changes they are making, such as an increase in production capacity or new packaging for a product, the manufacturer can become a partner with the customer and design for these changes,” explained Collins. “That manufacturer has now opened up a new business opportunity by being innovative, and making themselves valuable to the customer.”
It all comes down to finding new sales channels and new markets, and continuing to be innovative, noted Collins.
“What foreign manufacturers have successfully taken away from us is small parts – small goods that you can ship a lot of in a container,” Collins said. “But what they can’t do are the complicated, industrial goods which are a two-trillion-dollar market in the U.S. We are in a much better place to innovate with specialization and customization right here in the U.S., and it would be difficult for foreign manufacturers to develop these techniques.
“We have market proximity, we are closer to our customers than our foreign competitors; we can spend time with our customers and find out what their needs are,” Collins continued. “We really have a big advantage.”