Get Primed To Win
Did you know that since 1990, the U.S. manufacturing sector has lost approximately 11% of its real value added due to increasing costs and eroding output prices? Here is how to get Primed to Win by avoiding these cuts.
Did you know that since 1990, the U.S. manufacturing sector has lost approximately 11% of its real value-added due to increasing costs and eroding output prices?
The most common and significant weakness in manufacturing businesses is their weak competitive position.
Solely focusing on operational efficiency is shortsighted and cannot offset the long-term costs of competitive weakness. To illustrate, a comparison of the producer price and consumer price indices shows how easily manufacturers capitulate and endure lower prices over extended periods while retail and commodity businesses are significantly more resillient. Even industrial commodities—the inputs to manufacturers—are more resilient than manufacturers and seem to have stronger bargaining power.
Two forces drive the competitive weakness I'm referring to.
First, most manufacturers, while meticulously optimizing machine and labor efficiency and other variable costs, neglect their operating model. They lose control of their fixed costs and working capital intensity. Fixed costs are one of the achilles’ heel, because it must be covered, so they cause supply inelasticity, which, in turn, erodes bargaining power. The other heel is the working capital intensity, which exponentially erodes the self-financed growth rate.
Second, the industrial structure contributes to competitive weakness. Most manufacturers are caught between a few huge customers (Amazon, Home Depot, Walmart, etc.) and a few huge suppliers (Arcelor, BASF, Bayer, etc.). Amid these giants, there are usually at least tens of manufacturers competing for the same contracts.
Unless the operating model and competitive position are optimized, there is no chance of winning in such an uphill battle. I published a white paper called “Primed to Win” on LinkedIn. It will broaden your perspective and focus on the strategic levers that matter most.
Please check the Winspyre page on Linkedin.
