How can manufacturing companies better manage their vendor relationships?
Another thing companies are doing to adapt is diversifying their vendors. Companies must diversify their vendors because in an economic downturn there is an increased possibility these companies may close or shut down production. They need to have other means of getting materials for production so they have more than one source for supply.
Oftentimes, they have a backup vendor anyway, or maybe a second source of supply. But they need to expand those sources of supply.
Most companies know what products they need and know of a number of suppliers; but they just work with one or two. During these times, they really need to increase the number of companies they work with or have the ability to work with. They should have them in the on-deck circle, so to speak.
How can the use of technology create a competitive advantage for companies?
A competitive advantage can be gained by constantly and continuously investing in technology. Technology will allow companies to fight competition from foreign companies by using more automated production operations, including robotics and computer control systems that can help produce high-volume products with lower labor costs.
The investment in technology should not only be in the plant with the machines, but in the education of the employees to run these machines. Technology will also allow companies to reduce energy costs by using newer and more efficient machinery.
How can a company justify a technology investment with a substantial initial cost?
This is particularly an issue with companies that are answering to a number of stakeholders, private companies with nonworking investors, where they are more concerned about the short-term return and profits. However, the management team that is on the ground every day is more able to see the benefit of a more long-term strategy. In management meetings, those executives need to take a forward-looking approach because, in the near term, they are spending dollars and not getting that immediate return. But over the long haul, they are going to save on labor costs, utility costs and time. Management buy-in is needed to look to the future and not just focus on the near-term.
They really need it to be part of their overall technology strategic plan. It shouldn’t be a piecemeal program. Like any business or strategic plan, it needs to be well thought out for the long term with certain goals and milestones throughout the process.
What is the most important lesson that can be learned from the manufacturing industry?
The most important lesson that can be learned from manufacturing is that companies cannot sit still. They must constantly be looking to improve.
Never be complacent. The processes may be tried and true and may work now, but the industry can always change, processes may become inefficient, so they may need to be improved upon.
Michael Trabert, CPA, CVA, is a partner at Skoda Minotti. Reach him at (440) 449-6800 or [email protected].
