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Five Strategies for Surviving the Recession
Today’s deep and extended economic downturn will challenge profits, business models, and the viability of partners throughout the supply chain. But it shouldn’t mean an end to strategic initiatives, argues John Burke, Oracle group vice president. Here are his five tactics for improving manufacturing operations and the lean supply chains that fuel them in the months ahead.
1. Low cost isn’t everything. In today’s competitive marketplace with products commoditizing, the ability to offer end users low-cost products is important, but price alone isn’t enough to win business. “More and more manufacturers are differentiating themselves by offering bundled service contracts with their products,” Burke says. A service agreement with well-defined uptime and availability guarantees (SLAs) are compelling for customers interested in reducing financial risks. It’s also good news for manufacturers that can collect ongoing service revenues after the sale is completed.
2. Look beyond manufacturing costs when evaluating a new supplier. Consider the total “landed costs” of components, including everything from the procurement of raw materials to post-sale repairs (for details, see related story, “How to Avoid Low-Cost, Low-Value Suppliers”).
3. Understand performance levels throughout the entire supply chain. Manufacturers today need up-to-the-minute information about lead times, quality, design costs, procurement expenses, and service histories for each of the products in their catalogs, Burke says. They should use the current downturn to evaluate how efficiently they’re gathering this multitier information and if necessary add a dashboard-based analytics application that can extract and centralize data from disparate sources.
4. Redouble efforts to adopt Lean practices. The paybacks that Oracle customers routinely see after going lean include double-digit reductions in overall direct product costs with similarly significant improvements in labor productivity and declines in inventory, Burke says.
5. Prepare for Web 2.0. New collaboration and social-networking technologies, such as instant messages, blogs, and wikis, facilitate instant access to expertise and insights that exist inside and outside the enterprise. Soliciting input from partners, suppliers, and end users can help manufacturers reduce costs and stay competitive during the downturn, and identify future business opportunities, according to Burke. Action item: learn how to use social networks for product-design inspiration, to improve customer loyalty, to increase product quality, and to drive down manufacturing costs.
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