How Manufacturers Can Survive This Market

Mark,

As I am sure you are well aware that it is not a simple answer. I am currently enjoying an indefinite furrlow while my company seeks out investors or until suppliers are willing to reduce there sale prices by about 35%-60%. The lower the price for raw and semi-raw materials the easier it will be for us to not only make a small profit but also be able to pass some of the savings on to our customer thus hopefully stimulate purchases. So are you willing to drop your margins?

But in the end we all will fill out wharehouses with inventory if no one (the consumer........ you, me, parents, sisters.....you get the idea) buys the final goods.

From my viewpoint investors need to stop pulling money out of companies first, then (God I hate to say this) the goverment needs to put controls on stocks that prevents massive swings in stock values. Next is to revamp the banking system and the rules it runs on to prevent preditory lending practices yet still allow companies and individuals to be able to borrow money when needed.

From this point companies need to work towards sustainability and be happy with 2%-5% annual growth based on real production and not the 15%-30%+ artificialy inflated stock prices. The phrase "Money for nothing" comes to mind and as we are seeing yet again (yes this cycle has happened before) this type of financial system is not sustainable.

Just my simple two cents.

Richard,

From a simple $ and sense perspective yes we are passing on all reductions and working with customers to get orders- margin lowering yes. Been there done that. We feel that we must do what ever to spark interest all the way down to the end consumer. I pray that your situation personally will improve quickly.

Agreed there are no simple answers- I just have to believe there is a way to interconnect the supply chain better to bring us out of this situation. I do not plan on the government solving the problems. I won't wait for that. I don't have the answers and am looking for others to help me figure a way to unite and take this back.

Mark.

I ran a steel mill.

Now I'm with a trade association for machining companies.

Do you buy higher sulfur (0.020 wt% minimum Sulfur) skelp to make your welded tubing? if so, m guys can be more productive get faster cycle times, make a profit, and their customers and their customers will benefits.

My guess is your Spec boys want to avoid seams and welding difficulties, and so have spec'd 0.015 max sulfur. maybe even 0.010 max. My guys call that tool proof.

We don't need political answers to engineering problems.

Frankly, we don't want you to lower your margin, we want you to be there for us the next time we want steel we can machine. JUst charge us a fair price by wringing the waste out of your process. And we'll do the same for ours.

Any body that thinks that gov't controls is the answer must have forgotten the successes of the soviets..

You asked a fair commercial engineering question on an engineering forum.

I THINK it deserves a fair engineering process focused commercial answer.

I'm sure that there are a dozen other equally good opportunities, out there.

I gave you an easy one based on my expertise.

milo

Beer.

Mark,

That is an interesting and complicated question with some inherent societal problems. To take a page out of lean manufacturing principles, we need to find the root cause of the problem and address that instead of slapping "band-aids" on the symptoms. Being that the root cause is in the financial market and out of our direct control, solving the problem as a group of manufacturers and suppliers doesn't seem practical. The best we might hope to accomplish is to weather the storm and minimize our losses until the financial institutions and government straighten out the economy.

Therein lies the question, how can a group of independent manufacturers and suppliers come together in such a way as to minimize everyone's losses in a capitalistic society? We can probably agree that this is going to require the sharing of information that can be used to calculate changes, such as "who is supplying whom with what materials at what price." This information is not usually shard for a reason, it can be used to outmaneuver the competition and "steal" the market. So to form this community would take an inordinate amount of trust between competitors. And as much as I would like to believe that everyone would act honorably, money has a tendency to corrupt well intentioned agreements. It would take a non-invested third party to accumulate and store the sensitive information, analyze it, and suggest changes that the community should implement for the betterment of all parties (i.e. a socialist government). Let me know when the revolution starts!

I like your idea of a supporting network of companies that go out of their way and cut profits to help their fellows, but realistically it would only take one company abusing the system to wipe everyone else out. Perhaps acquiring companies to form vertical monopolies (Standard Oil style) would allow such collaboration, but I'm not sure what the consequences would be for the individual companies involved.

I'm interested to see other people's opinions and ideas on this subject.

-Trevor

Tighten your belts.Go for cost saving techniques like Kaizen, quality control to avoid rejections, reduce material handling cost, Energy Audits to save energy etc.

I do the outsourcing for manufactured parts for my company.

We manufacture machinery.

I have several vendors that I work with regularly and have a good relationship with.

We have work going and are keep people busy but currently we don't have any money coming in and don't expect any for a couple months so I have to really watch my spending with suppliers. We also had to give 20% discounts for our machines in order to get contracts signed.

I sent out notification to my vendors that we are experiencing some financial hardship and if for awhile can they work with us and give me their best price.

I tell them that we can't stay in operation right now paying last years prices. After all the price of metal is cheaper then it was last year. Most of the vendors are willing to work with me. We are a major source of revenue in my area for the local machine shops.

I think what is important is to keep a relationship with a few vendors so they know your company and your needs. Generally they will work with you.

I like this forum and the people participating. Sometimes when you pose a question it can go in a different direction then you would have thought.

I know there will always be individuals and companies with poor ethics. I also believe in focusing first with your present suppliers. My being with a company that has been around a long time we are seeing customers, suppliers and competitors in situations they aren't use to being in.

Originally stable customers unable to get lines of credit, the tier one companies shutting down all the smaller companies below it just to preserve liquidity. Competitors of ours shutting down for days and weeks; too much inventory at higher costs.

The road I was trying to travel down was what vehicle to use to communicate. I believe orders that are out (and there still is work out there) moves at a faster pace and numbers given are all over the place.

I believe there will be many shifts out there- lines dropped by major OEMs will be picked up by other companies. New suppliers to fill in for suppliers who will go out of business or eliminate lines. Or a supplier will appear to be the last one standing with a product after others have exited and start charging far more and really push lead-times out. How do we connect the people who know how make the parts, how do suppliers like myself find the shifts as fast as they will go. Do we bring back the old board days- I would like it to be more private than that.

As I said, I'm with a trade association.

I've been helping my "garden" deal with the changing weather tin the steel business over the past 6 years. Before that, I sold them directly.

Trade associations can be important gate keepers.

We have an on line listserve where folks ask for advice and recieve it.

That includes supply issues.

You want to get your message out, Get it on your customers desk tops- by joining the trade associations that they belong to, and post when you can assist.

Hundreds of times more powerful than marketing spend.

milo

The original question was "How can the community of manufacturers and suppliers help each other to pull us out. There were some good suggestions, which I thought need repeating: • Find the root cause of the problem and address that instead of slapping "band-aids" on the symptoms. • Sharing of information • Go for cost saving techniques like Kaizen, quality control to avoid rejections, reduce material handling cost, Energy Audits to save energy etc • Trade associations can be important gatekeepers and have an on line list serve for advice. There is a tendency to ignore the use of INTELLECTUAL CAPITAL in the form of experience and knowledge available with those who have seen better and bad times. These are the consulting engineers who have retained their technical skills and did not sacrifice them to become multi millionaires by pursuing MBA and going up the golden ladder. The US American manufacturing should tap this homegrown intellectual capital to find better ways of manufacturing. They can also be the gatekeepers of knowledge, experience and more importantly discreet information. Ram K. Iyengar, Ph.D. technovationsintl@gmail.com

Has anyone here ever considered cutting marketing costs by focusing on marketing online?

I run an internet marketing agency and I've talked to a few manufacturers that have really boomed their sales by marketing online. It's much cheaper and the population of buyers that are online looking for products is only growing every year.

Obviously I'm biased in favor of internet marketing, but the results some companies have seen are real. Here's proof.

And when you break down exactly what a marketing campaign consists of, it's really pretty simple.

This year-old company grew by $1 mil each year, and they credit their success to marketing their business online. Here are the steps they used.

Any reason why you wouldn't try this with your company?

For any brand ,It is significant to have a remarkable online marketing strategies with them so as to get more online visibility .If you have any magnificent product but no one is there to check out your product then what is the use .Along with product quality, It is also important to promote it in an effective way .Most of the manufacturing companies prefer to get professional help for branding their products .