What Successful Suppliers Do
With the crisis in today's manufacturing environment, companies are constantly asking what they can do to separate themselves from the competition. So we set out to understand what companies are doing to differentiate themselves. What we found was not all companies are struggling, and many have implemented strategies to survive and thrive. Probably the most critical thing we found was the way that companies focused on their customers. Now you are thinking, "Of course you have to be focused on the customer to survive". But surprisingly our research found the majority of companies were inwardly focused rather than customer focused.
The best companies have invested in aggressive marketing to get their brand and experience to the market and they regularly meet with current and new customers with experienced sales engineers and marketing team members. These companies are selling their capabilities and typically focus less on purchasing. They put all their energy into selling product development or to the engineering teams of their customers. This is how they show their innovation and cost savings ideas. Once the sale is complete, they turn it over to an engineering team that works side-by-side with the customer following a very methodical process with check lists and tools to allow them to cover all necessary details from purchase order, to design, to receipt of payment. This process puts engineers in front of the customer regularly to ensure that the customer is managed effectively by the supplier. In many cases, we saw companies use those same engineers to manage the entire launch process through start of production and beyond. This worked well, but there were breakdowns in communication at times because of workload and the difficulty that often exists between engineering groups and manufacturing shop floors.
One small injection molding company that we visited supports many industries and they took a slightly different approach. The company is Plastic Components Inc. (PCI; www.plasticcomponents.com
; Germantown, WI). At one time the company had just one sales engineer and a plastics engineer. This worked for awhile, but as the company's business grew, they realized that they were losing touch with their customers. So to entirely refocus the organization, president/owner Tom Duffey, who specializes in sales and marketing, completely reinvented his marketing strategy to grow the customer base beyond Wisconsin. He hired a team of engineers to manage customers and tooling. The last piece was the addition of two launch coordinators who are responsible for the customer interface and the linkage between engineering, manufacturing, and the customer. PCI invested heavily in people for engineering, marketing and launch, and they did it so that they could have multiple touch points with the customer on a regular basis. Now when they are provided an opportunity, they give the customer a "value proposition" in lieu of a simple quotation, including a preliminary part design review and mold flow analysis. "Our objective is to make the engineering review, tool development and program launch sequence a comfortable process for our customers and a true competitive advantage for PCI" says Duffey. This approach has certainly paid off for PCI as they were just recently named 2008 Processor of the Year by Plastics News.
Like PCI, many other companies have decided that it's critical to invest heavily in up-front engineering and customer satisfaction to differentiate them from their competition. And more importantly, they are able to better manage their customers and often times become mentors to them.
A major Tier One automotive company says their success with companies like Ford and Chrysler is based on the organizational stability of their sales and engineering teams. They have put people in roles and not moved them for 10 or more years. The task of these people is to learn their customers inside and out, from the details of engineering at the customer to the terms and conditions of doing business with them. Development of experts at the supplier with a customer focus has allowed them to form relationships with major domestic OEMs that most suppliers do not have because they typically move people throughout their organizations more quickly and have had a substantial amount of turnover in recent years. Yet the company in question has had better payment structures, more profitability and better terms and conditions.
One major stumbling block to the success of this type of strategy is with companies that are still driving price rather than focusing on cost reduction. Those companies that value price typically do not allow suppliers to work directly with engineering prior to programs. They don't involve suppliers early enough in the design and development and the result is usually a poor launch, hidden costs and an adversarial relationship between suppliers and customers.
Engineering and technical capability are among the single largest differentiators in any manufacturing company in the future. Those that invest appropriately in people, training and technical programs will be the ones that survive the shake out.