Jonathan Thatcher, CSCP | September/October 2012 | 22 | 5
Strategies for small manufacturers as they set out toward success
Reader B.E. writes, “We are just starting out at a small manufacturing company and want to create a dynamic new brand. What strategies and information should we evaluate?”
The small business remains a powerful driver of economies and provides employment for millions. The freedom to be your own boss is one of the appeals of smaller companies; however, as with any business, large or small, the customer is the ultimate boss. This means strong market research and a well-planned business strategy are necessities. It also means that it’s important to see the organization as both a customer and a supplier.
One well-known manufacturing strategy is best summed up as “buy commodities, but sell brands.” Branding helps overcome competitive traps. It can be challenging for new businesses to triumph over entrenched competitors, particularly in producing and selling commodities. Buying commodities and adding value to them can create opportunities for developing a successful brand. This can lead to strategic competitive advantages, making life more difficult for competitors—and easier for customers to create preferences.
For inspiration, you might study all you can about a company that’s a known success at converting commodities into powerful brands. Research may reveal the organization has several weak points: in senior management, business strategy or execution, operations, sales and marketing, or finance, for example. The problem is that performing this type of analysis is a bit like starting a book from the middle.
A more effective method is to go back to the beginning of the company’s history. You likely will see how the commitment of management developed into a sound strategy that was well executed. Then, you may discover how favorable market conditions and customer preferences aligned with the company’s activities. The next chapter in the company’s history might involve it seizing opportunities, as well as consistent performance and growing demand from an increasingly loyal customer base. Finally, a mature company focuses on the supply chain, business unit performance, and increasing its advantages over competitors.
Some research suggests that many small manufacturers operate below capacity, believing that capacity creates room for growth. Rather, they should seek to find the right capacity balance. Consider a strategy that prefers lean, scalable operations over high fixed costs and excess capacity. Be prepared to be flexible and agile in the early days. As you become more successful, supply chain customers will serve as a realistic guide for determining optimal capacity.
Supply chain and operations management professionals can bring a distinct advantage to the organization in knowing the value of supply chains, providing the ability to produce in good times as well as bad. They also can build strong relationships with supply chain partners that create joint opportunities. When you begin to see your company as a supplier, you can gain insights into success at every point in the supply chain. If you had the ability to get a completely honest self-assessment from your own suppliers, you would probably hear them say that they leverage their strengths as best they can, but they struggle to overcome weaknesses. This is true of nearly any business. Honestly assess your own assets and limitations, supplementing with careful market research to create a business plan and accompanying strategy in order to achieve the best results.
Finally, take advantage of small business resources in your area, such as local and national governments, chambers of commerce, and small business associations. These groups often provide free resources to assist small manufacturing start-ups. Likewise, look to social media to provide a fresh, direct, and current perspective to launching a small business.
Jonathan Thatcher, CSCP, is director of research for the APICS professional development division. He may be contacted at email@example.com.