Industry Week recently ran a lengthy article on how the manufacturer’s world has changed forever which purported to provide advice on how manufacturers could learn from other’s successes and mistakes and gain a greater share of customer preference, the key to success in today’s everyone-is-an-expert marketplace.
The article had seven tips, which were good, but generic and just as applicable to retailers and distributors as they are to manufacturers. The reality is that the key to success for a manufacturer is efficiency. An efficient manufacturer has a high rate of production, produces minimal waste, maintains high quality, and is very cost efficient — to the point where its total cost per unit is lower than that of its competitor. That’s the ultimate key to survival in this economy — being more competitive than your competitors.
Thinking like today’s buyer is for the designer.
Getting rid of the dead wood is implied.
Anticipating change is a fact of life.
Determination is a timeless key to success.
Urgency is the normal state of affairs today.
Inspiration is the sign of every true leader.
Alignment is the first step to getting efficient, but …
until a manufacturer is efficient, it’s chances of survival are slim. So just get efficient.
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A recent article in Industry Week summarized five things manufacturers should be able to do with S&OP data that were quite good. So good, in fact, that this post is going to summarize them before adding two more things that manufacturers should be able to do with S&OP data.
- Minimize Surprises
An effective S&OP process that focuses on collecting and understanding demand data from internal stakeholders and trade partners is essential if you want to minimize surprises such as a delayed shipment, insufficient supply, or raw material shortage.
- Optimally Manage Inventories
Having the right amount of product, at the right time, in the right place is key to increasing margins, cash to order cycles, and customer satisfaction, among other benefits.
- Improve Margins
Improving margins is often an area that’s under-emphasized in an S&OP process, and yet [it] is ultimately the most important factor in the health of a company. Making sure the relevant S&OP data, such as average product unit cost, inventory levels, logistics costs, anticipated margins, customer satisfaction rates, etc. is shared across marketing, finance, supply chain and the executive suite is critical because input and shared data amongst all functional groups is what drives margin improvements.
- Improve Customer Satisfaction Rates
Improved customer satisfaction gives you the ability to build stickiness with customers, which leads to profitable relationships. Knowing what your customers need, when they need it, and delivering on that need in a timely fashion is key to increased customer satisfaction — and good visibility will allow you to do just that.
- Better Resource Utilization
Each part of the S&OP process should leverage the data as fuel for the decision making process as this allows for fact-based resource allocation which enables significantly greater resource utilization.
These are great starting points, but don’t stop there when you can also use S&OP data to:
- Decrease Costs
Once you have an effective handle on demand across all product lines, you can use that knowledge to negotiate the best prices on parts against true volume levels. No more lowball estimates to be safe or missed rebates due to overly aggressive estimates.
- Effectively Prioritize NPD
Once you have an effective handle on sales across product lines, you can determine which types of products sell the best, and which products in the pipeline are the most likely to be successful. Focussing on these products should allow the company to most effectively utilize its resources.
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