Hadley Associates, Inc - Business Consultants
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Finding What You Have To Work On
Drew Hill, Principal - Hadley Associates, Inc.

Most manufacturers are confident and focused on what they do day-to-day. Generally speaking, they excel in understanding their product and manufacturing capabilities. It is not uncommon, however, to observe they are so focused that they are isolated. This article is meant to "push-the-envelope" and shares a very simple way of getting a reality check. In the process, you will learn "what you have to work on" to improve.

A Reality Check Experience

Several years ago, a manufacturer held a strategic planning review. The $15mm, family-owned business was the dominate leader in their market segment. If you defined the market to include all channels-of-distribution, they were the leader, but not by a wide margin.

The previous year, a fire destroyed their primary plant causing them to rethink their manufacturing strategy. They ended up consolidating operations from three plants into one. This was an important strategic move that a disaster forced them to make. With the newfound cash flow, they acquired a competitor who was well positioned in an emerging channel-of-distribution.

After six-months of integrating operations, the company had learned some eye-opening revelations:

  • The acquired company's quality was much better than their product's
  • The competitor's short line was positioned as a strength with mass retailers
  • Order fill-rate and on-time delivers were significantly better
  • Business processes were streamlined and much simpler because of size
  • Profitability was higher than perceived because of the manufacturing model
  • Customers' perception of category management was superior

The manufacturing lesson-learned was compelling. To their surprise, being the market leader did not mean they were the best. The smaller competitor had learned ways of surviving among the dominating companies by doing simple things very well. They were forced to think of clever ways of accomplishing results without spending money.

The reality was that the acquired operation was much better than the parent company had expected, or even imagined. This was not easy to accept. In fact, because of pride, it took them some time to come to this conclusion. The good news is that they saw the reality, accepted it and integrated the best practices. This became a good acquisition, well beyond buying entry into a new business segment.

A Method to Develop Benchmarks

You do not have to acquire a company to learn the right lessons. An excellent reality check can come from a market-based performance review. By doing it over a number of years, you can even observe patterns of change.

What are appropriate questions to ask? Each industry will be slightly different, but an excellent start is with these broad categories

  • Customer buying factors: i.e.: Selection, support, relationship, consistency
  • Physical product attributes: i.e.: Product features, specifications, customer benefit
  • Business program features: i.e.: Discount structure, terms of payment, field support
  • Operating business practices: i.e.: Order processing, fill rate, handling product claims
  • Customer support activities: i.e.: Timely responses, attention, aftermarket service

Besides the categories, you want respondents to rate factors on some scale (i.e.: 1-to-10) to establish their relative importance. There are several benchmarks suggested:

  • How important is the factor to the customer?
  • Who is perceived to be the best (name) in this area?
  • How does your company rate on the topics?

To be more effective, the question should be specific enough that it leads to corrective action, if needed, or understanding as to what you do extremely well. You may even want customer feedback on specific products. Some detail topics are:

Product Attributes Business Practices Customer Support

Color or size selection
Dimension integrity
Protective packaging

Competitive pricing
Quality of fit-and-finish
Ease of product use

Ease of order entry
Placing special orders Receiving shipment of time

Orders shipped complete Correct invoicing
Processing credits

Handling product claims Scheduling field service
Service parts availability

Engineering drawings Application knowledge
Failure analysis data

There should be space for write-in remarks. Experience suggests written comments, while few in number, will often provide a clue to identifying and solving problems.

There are several other thoughts. In formatting the questionnaire, place the "written attributes" in the center of the page, "importance of the buying factor" ratings on the left and "vendor's" rating on the right. You should leave room to write-in the name of the "best supplier" on the extreme right side. Also provide space for the respondent's name, company, position and address so they can receive a thank you gift for participating.

Additional Insight

Information that is collected and not analyzed is useless. It is essential that the feedback be analyzed from a variety of perspectives. A multi-year time series is essential. So are sorted ratings by major, shared and former/declining customers. The sorting possibilities are endless, but you need to figure them out before sending the questionnaire out.

Manufacturers use performance ratings in creative ways. The first use is to understand company strengths and areas needing improvement; the raw ratings will tell you this. You should never anticipate a perfect rating; if you do, you have "stacked the deck" and will learn very little.

Presenting "customer buying factors" in order of importance, followed by your rating, is essential. This will help you determine where to put improvement effort. For example, if "meeting promised date" rates 9.2 in customer importance (10.0 being the most important) and your rating is 6.8, you have work to do. This factor is a more important than "correct and timely invoicing" with a customer rating of 6.8 score and your rating of 5.7.

By comparing your rating with "best in class", you learn whom to benchmark. You could even discover you are "best in class", but still are not satisfying customers. Analyzing the data will pinpoint one or two issues of compelling importance. By targeting competitors who are relatively weak in important areas, you improve your ability to gain satisfied customers and market position.

Several Success Stories

Hadley Associates experienced a situation where a manufacturer did not understand a multi-location customer's ratings. They invited ten representatives to a discussion session. Managers were asked to define the factors, provide examples, discuss what other suppliers were doing and offer suggestions. The exercise was life changing. The manufacturer finally understood the feedback and responded immediately. Sales improved rapidly thereafter.

In another situation, a manufacturer benchmarked the market leader. They then had to decide how to position themselves. The data pinpointed "must be" performance standards to be considered a viable vendor. From there, by using emerging quoting, product specifying and order entry technologies, the smaller manufacturer was able to "leap-frog" the major supplier. Without market-based performance standards, they would have developed "me too" features that would not have been a point of differentiation.

Finally, a manufacturer decided to added questions on current and future purchase patterns. Interestingly enough, they were able to correlate sales opportunities with declining customer satisfaction ratings among specific competitors. The results were given to the sales and marketing team; the customer feedback led to a bold sales campaign to grow sales.

Concluding Thoughts

The best way to "find out what you have to work on" is to ask. What you need to address may have nothing to do with your performance, but rather someone else's. The data will help you quantify and prioritize the effort. Today when product differences can be slight, measuring and improving non-product attributes can be crucial to success.

Experience has shown that market ratings and rankings will benefit every part of your business, from sales, manufacturing, distribution and administrative functions. It will make you a better company and better partner to your customers.

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Hadley Associates is a consulting firm located in Birdsboro, PA that focuses on strategic business management, industrial market development and facilitating management change. Drew Hill is a certified focus group leader and management consultant. He can be contacted at 610 370 1991 (www.hadleyassociates.com)

 


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