Publications
DDIN Library
SUCCESS AND PROFITABILITY
- Details
- Written by Robert Larson
A basic truth in any business is competing to provide their best products and services at reasonable prices to their customers. We all strive to have a competitive advantage over our competition so that our companies can be successful and profitable. How can we insure our success? In this article I hope to explore some strategies and ideas that can assist you in developing a plan for success in the near and distant future.
Question??? - What do you really sell?
Often in my worldwide travels, I ask diemakers a rather simple question "What do you sell?" The reason for asking this question is to discover if a diemaker thinks beyond the basics of just manufacturing cutting die tooling to the much broader arena of total value-added services to his or her customers.
The response I often receive is "We sell steel rule dies" or some other type of die. At that point I respond "No, more important, you sell service, know-how, training, your expertise and a complete knowledge or understanding of your customers diecutting operations". You are a valued asset to your customer’s business to help them to maximize their productivity and profitability.
Any diemaker can produce and sell accurate and quality cutting dies. Not every diemaker understands the necessity of providing complete tooling systems that will improve the productivity of a customer's diecutting operations.
Your only true value to your customer is assisting him in his efforts to increase his productivity and his profits.
That is what makes one diemaker or any vendor more valuable to his customers than another vendor. I can truly say that only 1 in 100 diemakers understand this concept and can say that they no longer primarily produce cutting dies tooling, but offer their customers profitability.
Global Competition
Today we live and do business in a global village. Products are produced in many different locations and sold in many far away locations. Many companies today produce their products in distant low cost countries. For example the United States, experienced a great out sourceing of manufacturing in the 70's and 80's. Local suppliers in those distant countries for those offshore produced products generally produce the packaging or soon relied on local sources of supply for their materials and tooling.
Let me tell you a true story of my past diemaking experiences. At one time, my company produced cutting dies for the shoe industry. One of my prime customers was Florsheim out of Chicago. Florsheim men’s shoes made on the USA were a basic product in the footwear industry. In the 1990’s I was presenting one of my Diecutting Symposium programs in Japan. I met a gentleman from Malaysia who was a diemaker. He invited my wife and I to visit his factory in Kuala Lumpor.
When I visited is factory I was amazed to see that he produced steel rule dies and clicker dies. One of his prime customers was Florshim based in Chicago. That right, one of my old customers! He manufactured the dies in Kuala Lumpur and shipped the dies to factories in neighboring India. Most of his workers came from Bangladesh because they accepted lower wages. His workers all lived in his factory dormitory sleeping on sleeping mats on the floor.
Today, to be successful and profitable, manufacturers have to set up shops where their customers do business. Up to this point I think that few diemakers have following their customers to new manufacturing locations. In general, few diemakers have established their operations to service their customers. Oh yes, some large diemaking companies have established operations in distant counties but generally they are the exception to the rule.
Diemakers and diecutters in many countries are competing to get their share of business that at one time were located within their national border’s. Few European and North American diemakers set up manufacturing facilities in those areas where products are being manufactured and packaged.
Importance of Internet Commerce
The availability of information and the search for new suppliers and resources on the Internet is a reality that can no longer be overlooked or dismissed by any company. Marketing your company on the World Wide Web of the Internet is just as important as your printed brochure, your participation in trade shows or your salesman making a sales call. Your effective presence on the Internet linked to other industry-focused websites is an essential method of reaching out to present and potential customers around the world. You message should be in English as well as your native language.
Another story. I know of a local diemaking company who almost totally relies on his websites to market his products. Today he receives orders and ships orders to distant locations. The days of the personal sales call, expensive four color brochures and trade shows are history.
The key to success on the Internet is providing your company message that differentiates your company from your competition. Why should a potential customer from Thailand, for example, use a Japanese vendor vs. a vendor from Europe or North America? The customer wants to order from a reputable supplier. Shouldn't he do business with your company vs. some other company in the Global Village?
Strategies to consider for success in the future:
Maintain your competitive position in the marketplace - Think of business as an economic warfare game with your competitor trying to increase his sales and profits by taking business away from your company. To keep your present customers and convince new customers to switch their business to your company, you have to keep several steps ahead of your competition. How do you do this? Let's look at the following points.
• Maximize productivity in your company
You must insure that each person in your company functions to
their maximum productivity. Provide each individual with the
tools, systems and training that enable them to work at their fullest
potential. It is not our intentions to turn people into mindless robots,
we want them to be creative members of a very productive team of
players on a winning team. People are your greatest assets. Use
their skills and abilities to their greatest advantage to your
company.
• Be Pro-Active not Re-Active to customers needs
Know your customers needs and their expectations. To be an effective supplier of any product of service, it is essential that you be pro-active and show your customer that you know his business along with his operational problems and that can provide economical solutions to his problems. You want to become an integral part of his business team.
• Empower people to do their best and be creative
People are your greatest asset. You can have the fanciest new
equipment and systems, but if you do not have motivated trained
people to operate that equipment you are losing a great edge in
productivity. Each employee should feel that they are an important
part of a winning team. It often can be very hard for managers to
let go of control and let people be creative and empowered to make
suggestions and make their own decisions, but believe me, it
works and it can have a powerful positive influence on your
companies profitability and productivity.
• Develop a niche market policy
Are you trying to sell your products and services into a general
market with many competitors or have you developed an
excellence in a specialized niche marketplaces? It is best to
discover those special markets that you can focus your business
energies. Learn everything there I to know about that market and
service it to the best of your abilities.
• Price products to their value not to the competition
A common trap we all tend to fall into is to price our products a little
below our competition. A key to pricing success is a thorough
knowledge of your production and selling costs, plus a reasonable
profit margin. Then you can price your products to be competitive.
Some of the most successful companies in our industry establish
their own prices for products and services and do not follow their
competition.
• Understand new processes for cutting & trimming materials
Always seek out new processes for serving your customers needs
more effectively. Bring these new concepts to the marketplace as
an innovator. You must always we one jump ahead of your
competition in new technologies such as Digital Diecutting using a
knife, laser or waterjet, new technologies in cutting blade
manufacturing, new processes to improve cutting blade
performance, or new equipment to increase productivity in the
workplace.
Re-engineering the workplace:
In every manufacturing environment, it is essential that management constantly seek out ways of re-inventing their manufacturing processes to reduce labor costs while improving the productivity of each worker. Re-engineering in the workplace is more than bringing in new fancy pieces of equipment. It is also understanding how to motivate people to do their best when interfacing with new systems and ideas.
The importance of people & productivity
As I have already mentioned, your greatest assets are not equipment, but the people who make the equipment work. Training is an essential business expense that pays great dividends. Unfortunately, many owners and managers do not understand how expending funds, time and energy in training can have great returns from their training investment. Your company can have a definite competitive advantage by having the best educated and motivated work force.
4 Important areas of knowledge:
• Know your customer's business Become an expert in your customers
manufacturing process, especially his diecutting, embossing or foil
stamping operations.
• Know your customer's expectations Learn what your customer needs
from your company and then present him with solutions.
• Know your competition's capabilities Discover your competitions
strong and weak points. Use his weak points to your advantage.
Develop solutions that are better than his strong points.
• Totally understand your manufacturing and sales costs Conducting
business without knowing your costs down to the last cent is like driving
a car blindfolded.
Pricing your product - A universal problem
How to price your products and services is a universal problem for every vendor. Does your company follow the lead of other companies in the industry? Does you company price your products a little under your competition? Does your company set your own price levels? Do you fully understand your product and sales costs, plus your desired profit margins to know how flexible you can be in competitive situations?
Many diemakers worldwide comment that they can not raise prices in today's competitive marketplace. In many cases cutting die tooling today sell for less than they did 10 years ago. The only alternative is to produce your products more efficiently at lower costs to maintain a reasonable profit margin. We have many diemaking companies that do make a good profit on their sales. They have obviously learned how to control costs and convince customers to pay a reasonable price for their products.
Make your company the most valuable asset to your customer:
• Understand your customer's production process
• Anticipate your customer's needs
• Provide value-added services
• Be a total product & services supplier
• Provide training to your customer
• Develop Personal & Professional Relationships
• Be a solutions provider
The True Business Partnership
Many companies talk about developing suppliers who will become their partners in business. In reality these "Business Partnerships" often are a companies strategy in getting the lowest prices from a supplier. For example, you can be our partner by giving us a 10 or 15% discount. This in my opinion this is not a two way equal partnership.
Instead, a supplier must develop a true partnership in their customers eyes by demonstrating to the customer how your company can become an integral part of a company's efforts in increasing productivity and adding to a companies profits. Then the issue of the pricing of your products and services becomes a less focused item and your value-added services become the major elements of your "partnership" relationship.
This is the real challenge of any supplier. Many successful supplier companies have discovered how to do this. Most have not in the marketplace. The question is "Do you have the ability or know-how to develop such a partnership relationship with your customers?" Maybe some of the strategies I have mentioned can assist your company in becoming the most successful and profitable suppliers in the marketplace. Your ultimate goal should be to position your company so that your customer wants to do business with your company. He is willing to pay you a fair price because you have proven to him that you are an integral part of his operations to make his company as profitable as possible.
The bottom line is that by integrating your operations with the interests of your customer, you both profit from the relationship. You are a vital element in their operations to make a good profit.
Yes, the key word is profit. Your customers profit is your profit. You no longer just sell him cutting die tooling. You are providing him with the knowledge to improve his productivity, to improve his operations and reduce costs in his operations. You become his consultant, solutions provider and in the process your company skills become an integral part of his operations. If you can attain this level of integration with your customer, you will always be several steps ahead of your competition. Your only real competition will be a competitor that who had learned that he no longer just sells cutting die tooling, but also has become that consultant, business partner, innovator and that valuable asset needed to make a customer more productive and profitable.
There are cutting die tooling providers in the marketplace who have elecated themselves to this new way of doing business. The question is, can your company play in the same league to be winners in the future?
Robert Larson President, Larson WorldWide, Inc.