Nov 07 2005

Secrets of Success (Survival) in Today’s Economy

Published by at 5:27 pm under Uncategorized

People always DO what they DID thinking it will continue to work.However this philosophy only works when nothing changes. Outsourcing is a change, down sizing is a change, change is change.  Success in this business is the ability to adapt.  If not, your business fails. I talked with a molder who proudly shows me rows of machines ejecting parts, a snazzy inspection department and a buzzing front office.  Two years later the guy is out of business.  Why? There are several reasons, all of which are avoidable. Look at see if you are guilty of any of these.  If you are, you might have time to implement changes.

PLANNING – Even large corporations are guilty of this one:  They only choose to look as far as the end of the month or the end of the next quarter.  This is why you literally get the phone call in the middle of the night from the customer declaring you’ve been put on a net-90. He’s really saying his cash flow is tapped out and this is the only way he can survive.

Pull out your appointment calendar.  Schedule a meeting every month for a couple hours.  Bring in the heads of every department. Make four plans.  How will you show sustained or increased profits for this month, this next quarter, the next six months, and the next year?  Don’t use “CorpSpeak”: (“We’ll continue to pursue our multifaceted options of zero based budgeting and excellence in quality as defined by our supply chain expertise”.)  It’s mumbo jumbo.  Set clear, definable, and measurable objectives using plain language.  Make a plan on how you are going to achieve them and who is responsible as the Leader of the Project.  Every month or more often, review the progress, make adjustments and/or set additional goals.

Remember meetings are to report results and gain consensus.  They are not for you or anyone else to preach Divine Revelation.  Use e-mail memos etc. to get the busy work done before the meeting.  Leaders are Doers. They’re not in love with PERT charts or spread sheets, these are only tools.  Leaders only use them when necessary.  If your meetings get clogged with charts and graphs, they’re not productive any more.

IMAGE – Would you do business with you?  When someone calls does a pleasant voice answer:  “Heat and Beat Manufacturing.  This is Jill. How can I assist you?”  While depressingly efficient, it borders on rude or lazy behavior to call and be greeted by a pleasant female electronic voice condemning the caller to a directory by name, extension, or department. As human beings we are ‘herd’ animals.  We enjoy the companionship of other people.  Simply having a live body on the other end of the telephone is a distinct marketing advantage.  I worked with one shop who hired a receptionist whose previous job was working as a DJ on the midnight shift at an Easy Listening FM radio station.  Every time you called she greeted you with a smooth velvety but polite voice.  While positively shameless marketing on the shop’s side, both men and women who called in thought this was an order of magnitude better than the electronic Voice Tree as a marketing image device.

Sit down on the opposite side of your desk.  Look critically at the office.  Is your desk stacked with papers in disarray?  Are the walls covered with pictures of you and your fishing trophies or the Little League/Soccer team your company sponsored? While it is your office, don’t make it look like a shrine to your ego.

Look at the front office restrooms – are they clean and neat or do they compare to something you might find in a roadhouse bar.  Go to the shop floor – how clean is it?  Sweeping floors, vacuuming carpets, dusting window sills all give a positive image to your company.  Oil puddles on the floor, cat litter around all the machines, poor maintenance and dirt everywhere show others your general lack of caring.

TAKE CARE OF THE PEOPLE WHO TAKE CARE OF YOU – We do business more and more using e-mails, faxes, and other electronic devices.  While more efficient, it is also more impersonal.  Go out and visit your customers. Ask them face-to-face their concerns and how you might assist them.

Customers like to be taken care of.  Make sure there is one person assigned to one project.  This person speaks for your company in every way.  This avoids the confusion of He-said-She-said.  Make sure your customer has also assigned one person to talk with your person  While this will usually be a buyer all too often folks in your company will be overwhelmed with an engineer, designer, inspector as well as a buyer giving conflicting orders.

In many cases the folks in the factory are almost viewed with disdain by the front office (‘the Little People’). These are the people who make all the profit for your company.Every small business owner will tell you new employees are very expensive because they cause the most scrap.  But, have these same owners ever told you how much they put into training their people so they don’t make scrap?  Good people are hard to find and retain; so it is your mission to do everything possible to recruit and keep those who contribute to your bottom line:

Use the THREE R’s with your employees – Respect, Recognition, and Reward.  The Three R’s are a given and not an entitlement  Make sure everyone understands your policy of abuse. “Playing” the system will only get the player a ticket out the door.Everything in the Three R’¢s goes both ways.

Respect – If a gal says she needs time off because she needs to take her kid to a doctor, she will anyway so don’t make a big deal out of it. Do you have something formal to train everyone in their job besides ‘follow Bob around for a few day’s. When you are asked a question, do you listen?  On a daily basis do you say ‘good morning’ or ‘hello’to everyone working in the plant?  Do you know everybody’s name and can connect it to a face?  If not, why not?

Recognition – Do you send gifts, cards etc. to your employees when they have a birthday, when one of their children graduates, flowers when a relative dies, or a gift certificate when they have a baby? Do you personally and sometimes publicly congratulate a worker for a superior contribution to your company? Can your sponsor a Cub Scout pack, Brownie troop, Soccer or T-ball team?  Why not? This is an excellent home town advertising ploy.

Reward – Don’t look at payroll as an expense. Look at it as both an investment AND a percentage of the Cost of Goods Sold.  As part of your plan, tell everyone an increase in their paychecks is a direct function of this percentage.  Lowering the percentage of payroll to the cost of goods sold creates extra profit.  Half of the savings go to the employees, half go to the company.  Tell everyone the increase in pay only stays if the percentage stays.  If the trend reverses itself, everyone loses the excess cash. NEVER save bonuses for the holidays.  Give bonuses out immediately.  The shorter the time between the action and the result the higher reinforcement value. If you don’t do these things for your employees you now have a glimmer of why your turnover rate is so high.  Try to run your shop of a 15 shift basis.  While 24/7 looks tempting, critically analyze what profits you gain by routinely doing this.  In many cases there are none. After an exceptionally good month have you ever had a Barbecue (weather permitting) on Saturday with brats and soft drinks for every employee and member of their family just to say ‘thanks!’¢? Why not?

Part of the Three R’¢s is also Loyalty.  Foster a spirit of belonging.  Distribute short sleeved knit shirts with your company logo to everyone, usually two per employee with replacements annually.  This is actually a money saver: (1) Call your workman’s comp carrier and since you’ve mandated short sleeves you want a reduction on the rates of personal injury  (2) There are still folks who’ll come to work wearing blatantly offensive T-shirts. Whether political, sexist, religious, racist or anything else it is inappropriate for a working environment. A company shirt will avoid a discrimination/harassment lawsuit.

COMMUNICATION – This is also part of IMAGE.

Internal communication.  Hold weekly meetings that don’t interfere with people working  i.e. before AND after the day shift.  Tell everyone the plans you’ve made, how they are progressing and how business is doing.  Ask for honest and open suggestions and feedback; then shut up and listen. There are actually more experts on the floor than you’d imagine.since these folks can make or break you, take heed to what they say.

External Communication

1. A vital part of marketing is to distinguish yourself from your competition.  In your planning meeting or the meeting with the workers challenge them to come up with 50 words or less that accurately distinguishes your company from everybody else. What do you do that nobody else can without using CorpSpeak?
2. Have a web page, a good one that is easily used.  Look at the web pages of your competition. Some are one page disasters.  Have one of your kids or a neighbor look at it and give an honest opinion if, based on the web site alone, he’d want to do business with you. On the home page put in bold letters your 50 word description that makes you unique. Offer free quoting (for your electronic file, complete with all customer information). Have individual pages for each department, downloadable mold specifications or design checklists.   It is these little ‘gifts’ that keep your corporate name in people’s minds. Have a ‘contact us page that will automatically forward e-mails. Have a phone/e-mail directory of department heads.  The Internet is visual.  Put as many color pictures as you can in each page. Always keep your web page current.

Newsletters- Hard copy newsletters are very expensive. Going through the post office will usually cost about a dollar per newsletter.  But, electronic mail it is essentially free.  Put all your customers on the mailing list. On your website have a place where people can ‘opt in’ to subscribe to your newsletter. There are several federal statutes about SPAM and PHISHING. Being cited as a spammer or phisher the ISP’s can ban anything you try to e-mail.  Once you are on a SPAM ‘blacklist’ it is almost impossible to get off.  Therefore simply buying mailing lists, as you can do when you mass snail-mail, could have major consequences in the Internet. This also applies to Mass Faxing.

Monthly or Bi monthly publish your newsletter.  Make sure each time you acquire a new piece of machinery it is described/praised in the newsletter and how it will improve productivity to you and lower costs to your customers.  With each newsletter give a little ‘trick’ you use to improve productivity. If you say putting a high heat conductive insert in a hot spot in a mold will shorten cycle time, even though this is common knowledge in the molding industry, because you said it you are perceived as the expert.  Explain why filled materials are abrasive making the softer metals like aluminum a poor choice for mold cavities.  You’ll look like a genius

Trade Ads – This is an industry that is notorious for NOT advertising.  Many take out business card sized ads. Look at your own business card. Does it excite you enough to call your own company?  What do you think an ad of this card would do for your potential customers? Nope.  Don’t waste your money.

Advertise to your customers – If you are selling grinders or molding machines the right place to advertise is a plastics trade magazine.  It is the wrong place, however, to solicit new business as a plastics manufacturer.  Next time you are on an airplane go through the in-flight magazine. There is a molder that advertises there.  Why?  Who do you think flies on airplanes ‘customers (Duh!). Become a dinner speaker at a trade organization that doesn’t specialize in plastics.  Speak or have a booth at a convention of designers, or a trade show – if you make medical products, have a booth at a medical products show.  If you’re there and everyone else in this market segment isn’t – who do you think is going to look like the expert?

STRATEGIC ALLIANCES – More and more customers want ‘one stop shopping’. They want a painted, molded, and assembled product delivered in a saleable master carton.  This means as a molder you’ve turned into a general contractor. Find paint houses, electronic (for example) houses, and assembly houses you can work with.  In your newsletters and press releases tell the world you have connections with these people and have now expanded your ability to produce. With permission, of course, point out a shining example of this.  Going one step further, publish an interview a buyer on why he does business with you.

LEARN THE NUMBERS – If you have to, take a Small Business Administration course on understanding the financial documents given to you by your accountant. Since computers now track everything on the production floor; each morning hold a What Happened? meeting  When I did this, the computer was programmed to only print out those jobs that were over standard and how much money we lost.  The topic of the meeting would be to understand the cause of the excessive cost and then remove the cause.  Naturally the high money losers were top priority.  When we started this program we averaged about twenty Oops reports daily.  Everything from running out of material, to long set ups, to high scrap, etc.  In eight weeks we were down to less than three a week.  Soon the meetings were canceled because techs and supervisors immediately removed the cause of the problem before the computer would rat them out.Constantly tell everybody: “It’s OK to make NEW mistakes but don’t repeat the old ones’.  Doing this alone will improve your profits.

LEARN TO SAY “NO” – I’ve heard this story dozens of times: Folks bid the job, are the lowest bidder, then the buyer says they can have the job if they take ‘just a little bit more’ off. Virtually everyone lowers the price more.  Actually since you were the lowest bidder there’s no reason to hand off any more profit.

1. Say “No” to Reverse Auctions or Multiple Bids.  Make sure your proposal says something such as “Best Possible and Final Bid”.  The more you negotiate the more you’ll have to put on the table with a high likelihood of losing it. That’s your best bid.Take it or leave it.
2. Say “No” to blackmail or give backs.  This usually comes with the threat of pulling the business and giving it to someone cheaper.  This is a blind and unsubstantiated threat. If they are going to pull the job they’ll do it whether you succumb to this silliness or not.  If you are fed up with a customer playing games with you, you have the right to fire them.  Simply give adequate notice that as of some date you will cease to produce for them and expect all accounts to be settled before the tooling is released. Only fire a customer when you”ve already secured business to fill the hole you’ll create.
3. Say “No” to being bullied. Write your purchase order referring to a policy manual that shows how you do business.  This is like a prenuptial agreement:  How to get in and how to get out before the marriage. Never use your customer’s purchase order as the legal document unless it refers to your policy manual.Make sure you both have a copy and you have a copy of the signature page of your customer acknowledging the receipt of your policy manual.  In this manner if material prices go up, with the appropriate equation you can pass through this increase immediately.It also leaves you with a policy when the product is no longer salable but you have raw materials or finished goods in your JIT warehouse, you can bill the customer for those goods that weren’t returnable.Without this procedure being put in place beforehand, you’ll have little recourse to recover your losses later.
4. “No” also means training your customer:  Some CpK’s on top of very tight specifications are completely unreasonable, unachievable and a constant invitation to a reject.  Many dimensions are unmeasurable when it comes to finding variation and doing statistical analysis.  There are SPI standards you and your customer can purchase that clearly define surface finishes, cosmetic standards and tolerances. A Shiny surface, free from visual manufacturing defects held to + .0001 tolerance” is impossible. But there are those people in the estimating business who have seen specifications like this. Keep in mind the customer isn’t always right.

& & & & & &

Staying in business shouldn’t be a fight.  The above rules are simple to follow.  In essence you are setting standards and holding both yourself and others accountable to them.  If your customers won’t accept your Policy Manual, demand givebacks, or assess you with Tasks or scheduled mandatory price reductions; you are being led down the road to a business failure.  As you are going bankrupt, these customers will simply pick up their tools and find some other sucker that they’ll eventually also put out of business.

Thinning the herd is appropriate.  The amount of time you spend servicing an account should be directly proportional to the amount of profit it does or will generate.  Thin out those customers who take a lot of your time but don’t produce a lot of your profit. Make sure your sales and marketing people are always trying to overload the shop so that you can get rid of marginal jobs.

Don’ fall for fads. Remember Zero Defects, TQC, The One Minute Manager, Kan-Ban, Push-Me Pull-me, The 30 Second Employee, Coaching and now Supply Chain Management?  Who knows what it will be next year?  The basics are enduring:  treat all people fairly, distance yourself as much as possible from people abusing you, focus on reasonable goals, train constantly, and don’t get greedy.  This is almost always a formula for success.

Think about it.

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