A Path to Resiliency
This is article is part of a series of monthly articles produced by Harbour Results for PMA’s MetalForming Business Edge e-newsletter. Click here to view the full collection of articles.
Managing Bumps in the Road
It’s been an interesting three years for the manufacturing industry. In 2020, we had COVID. Together we learned what to do and what not to do. Despite starts and stops, ups and downs, the metalforming industry persevered. Then, in 2021, we had a year of unprecedented high demand for durable goods, driving major supply chain challenges – primarily raw material and people shortages.
This year we also had to manage our businesses through challenges – different challenges, but those that still impact the North American manufacturing industry. From an economic perspective, we can expect there to be bumps in the road in 2023 as well. So, it is even more important that your business is resilient so you can manage the ongoing complexities.
Our team at Harbour Results has looked across manufacturing to identify what the best in class are doing to be a top performer and exude flexibility and agility, match supply and demand the best they can, perform and make money in various business conditions.
Here are the 10 areas we feel leaders need to focus on.
Assess your business annually. Conduct regular reviews of everything – operations, strategy, sales process, financials/balance sheet and culture. Utilize a third party like a business colleague, consultant, board member or a cross function team of your people. Then be honest with yourself and your team about the results and how to address them.
Listen to your data. Work with an analyst to find the story your data is telling and then prioritize what to work on to drive performance. Look at your best month(s) – what were the conditions, what did you do during this time?
Go see and act. Walk your shop floor and talk to team members about what they see and address daily. Then call or visit your customers to understand how your product integrates with theirs. Take all this info and create short-, mid-, and long-term actions, using some of your structured business tools.
Don’t dumpster dive for sales. Are your sales aligned with the type of work you do well, or do you sell anything to anyone? Know your business and target audiences. Develop your pricing and quote with confidence to get sales that result in profitability.
Remember, bigger isn’t always better. Material price increases the last two years have tricked some companies into thinking they were bigger. The growth can hide issues, so look at production hours and units rather than dollar amounts.
Be flexible. Top performers succeed in a variety of business climates. You need to be prepared to deal with changes – labor, increased costs, etc. – so your business is optimized for various conditions.
Run perfect every time. Reduce variation as much as possible by going back to the basics. Create a culture of continuous improvement. For every new product launch:
Quote it to set a baseline
Launch it and compare to the quote to drive improvement
Look at it six months later and compare to the quote
Then do it all over again with the bottom performers
Attract, retain talent. Let’s be clear, this is NOT solely an HR issue. You need to create a shop environment and culture that makes people want to stay once hired. Today and future workers want something different, so the old ways of hiring and keeping people are no longer valid. Clean up your facility and make it a showcase people would be proud to work in.
Focus on technology. Create a technology roadmap that covers multiple facets – automation, software, process, quality, and human capital. Educate yourself on technologies and look what is needed when work is awarded. When you invest, do it smartly, making sure you have optimized your current equipment to full utilization before buying new.
Remember, cash is king. Cash is the most critical metric for any business – if you don’t manage it well, it will catch up to you. Top performers operate with a 13-week cash flow to understand what the future holds for their business. It’s not just for troubled companies – everyone should have someone that watches cash daily.
So, with ongoing tough global economics what do you need to plan for in 2023 and beyond?
Know your market intel by studying launches and building your sales forecast based on your core competencies.
Understand what your customer needs and plan for it while also staying focused on your team and their growth. Also understand your customers health.
Focus on lead time reduction by focusing on your gaps and driving improvement.
Build your flexibility to drive resiliency and hunker down financially – be smart, focus on cash and quality of earnings.
There are a lot of factors – globally and regionally – occurring simultaneously, making it even more critical to continuously monitor the health of the industry and your customers to better understand how it all impacts your bottom line. Companies can weather the storm over the next 18 months and manufacturing will rebound with strength.
