Strategies to Survive and Thrive During the Slowdown

Despite the challenges of the current economic slowdown, there are some things manufacturers can do right now to boost the bottom line - and build a stronger future once the recovery begins.

We've talked to some of the experts at WMEP, our customers, and tapped a few of our alliance partners to get their ideas. Some of these strategies offer an almost immediate payback, others require more time. Whatever the case, these strategies can help you reduce costs, rev up your performance, attract new customers and most importantly - strengthen your bottom line.

1. Attack waste "gold mines"
Often the first step in lean manufacturing, value stream mapping identifies waste "gold mines" in your manufacturing processes. A value stream map is a visual representation of all the activities required to bring a product line from raw materials into the hands of the customer. By mapping the flow of material and information, a company can quickly see where costs can be reduced and improvements can be made.

"Value stream mapping answers the question: What can I do to improve the flow of this product in a way that meets and exceeds customer needs," says Jerry Thiltgen, a Madison-based manufacturing specialist.

The process leads to changes that reduce lead times; reduce work in process and scrap/rework; and improve quality.

2. Streamline office and administrative tasks
It may seem invisible, but there's a lot of waste lurking in your office and administrative processes. Waste and duplication can consume 50% to 90% of the cycle time from order entry to product shipment.

Value added flow analysis (VAFA) is a tool that can help you save money and avoid duplication and delays. It can be applied to order entry, accounts payable/receivable and shipping processes.

"Eliminating unnecessary steps, improving the process flow and streamlining these processes can dramatically reduce throughput time," says Brenda Kujawski, WMEP's lean coordinator. "There's a huge opportunity for improvement when a company focuses on the non-production, administrative processes that exist in every manufacturing operation."

Benefits of this approach include: reduced cycle time, improved on-time delivery and increased responsiveness to changing customer demand.

3. Find "hidden" cash in your operations
The first question business owners ask Cynthia Heenan, CPA and WMEP lean accounting expert, is "where's the cash" So with the help of an Excel-based tool, Heenan can show them where the cash is - and options on how to better manage their operating cash cycle.

Heenan's approach focuses on three major cash areas: the timing of payables and receivables; the cost of goods sold and operating expenses; and the selling price. It's a simple process that gives business owners an immediate understanding of where the cash is tied up in the operating cash cycle. The tool also creates "what if" scenarios to illustrate the effects of cash flow in and out of the business, the number of days cash is in the operations process and working capital requirements.

By improving cash flows, business owners can reduce the need to borrow on their line of credit - and save money on interest charges.

4. Embrace the tools of lean manufacturing
Many experts believe lean manufacturing is the only way to survive in today's economy - good times or bad. Even though lean generally is viewed as a long-term growth strategy, many lean techniques produce quick results.

Case in point: A recent set-up reduction project resulted in savings of up to $200,000 a year for a Wisconsin manufacturer, said Brian Fairbrother, a WMEP manufacturing specialist. Fairbrother helped the company adopt quick changeover techniques that led to an increase of more than 20 hours of machine capacity a day. The project took only six weeks to complete. Additional savings have been realized from the project through reduced scrap, better tooling maintenance and a better batch-to batch consistency. Maintenance and production staffs have a better appreciation of the changeover and production processes.

Other companies have reported impressive short-term results with cellular manufacturing in terms of attracting new business and greatly improving productivity.

5. Add value to your product or services
Expand business with your current customers by finding ways to bundle service and product in ways that add more value. A good example of this can be found at Richfield-based Kald Tool and Die Corp. The company, which manufactures injection molds used in a variety of industries, is growing its business with what it calls "engineering-driven sales."

"We conduct an internal engineering review during the RFQ stage, before we even know if we are to be awarded the job", says CEO Paul Siodlarz,"and suggest avenues to a
customer that may save them money."

This level of service gives Kald a competitive advantage and helps build long-term relationships with customers.

The bottom line: know your customers and monitor their needs. Constantly reevaluate those needs and find ways to better serve them. It's a winning strategy in any business climate.

6. Generate new customer prospects
If there is one thing that is constant in business it's change. And that means the customers you have today are not necessarily the customers you'll have tomorrow. Finding sales leads that turn into new customers is every business's challenge. One good resource is the Wisconsin Innovation Service Center (WISC).

"Our lead generation programs are geared to the needs of small manufacturers," says Milissa Rick of WISC, one of WMEP's alliance partners. For example, a manufacturer with less than 20 employees and less than $2 million in sales can receive 50 pre-qualified leads and a list of 500 prospect customers. Leads are categorized by SIC code or geographic location, and it's up to the company to do the personal selling.

7. Consider strategic acquisitions
There may be acquisitions out there that would help your company strengthen its competitive position.

"The companies that take advantage of these opportunities are the ones that will be successful 10 to 15 years from now," says Christopher Zuzick, principal of Brookfield-based Vrakas/Blum Mergers and Acquisitions. Buying another company often makes more sense than spending thousands of dollars on developing a new product. It also helps keep jobs and dollars in Wisconsin by avoiding the prospect of plant closure.

Acquisition isn't just an option for Fortune 500 companies, it can work for Wisconsin firms as well - as long as your firm is on solid financial footing. "What banks are looking for are strong entrepreneurs with a plan and a vision ... if they believe in the owner, and the industry, they will go out of their way to support them financially," Zuzick said.

8. Look for export opportunities
Examine the prospects for new markets for your product here and overseas. Despite the global economic slowdown, Wisconsin's Department of Commerce reports that exports rose 3.26 percent the first six months of 2001. Sales to China are up 85.1 percent for the first half of 2001.

Keep in mind that 92 percent of exporting companies are small manufacturers with fewer than 500 employees, according to the National Association of Manufacturers (NAM).

You can learn more about export opportunities from the Wisconsin Department of Commerce at 1-608-267-0587. Also, the Wisconsin Innovation Service Center (WISC)
specializes in new product assessments and market expansion.

For more information on strategies to improve your business contact WMEP at 1-877-800-2085.

© Copyright 2003 by WMEP.org

WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices includinglean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.