Don't dumpster dive for sales. Develop your pricing and quote with confidence to obtain sales that result in profitability, Laurie Harbour advises metalformers. PHOTO courtesy TRUMPF.
From an economic perspective, metalformers can expect there to be bumps in the road in 2023, according to Laurie Harbour, president and CEO of Harbour Results Inc., a well-known consulting group to the industry.
The expected bumps in the road make it “even more important that your business is resilient so that you can manage the ongoing complexities,” Harbour advises.
Her team at Harbour Results has identified what best-in-class companies can do to “exude flexibility and agility, match supply and demand the best they can, perform and make money in various business conditions.” In her latest “Love Letter to Manufacturers” she provides advice on 10 areas that metalforming company leaders should focus their attention:
- Assess your business annually: Conduct regular review of everything – operations, strategy, sales process, financials/balance sheet and culture. Utilize a third party like a business colleague, consultant, board member or cross function team of your people. Then be honest with yourself and your team about the results and how to address them.
- Listen to your data: Work with an analyst to find the story your data is telling and then prioritize what to work on to drive performance. Look at your best month(s) – what were the conditions, what did you do during this time?
- Go, see, and act: Walk your shop floor and talk to team members about what they see and address daily. Then call or visit your customers to understand how your product integrates with theirs. Take all this info and create short-, mid-, and long-term actions, using some of your structured business tools.
- Don’t dumpster dive for sales: Are your sales aligned with the type of work you do well, or do you sell anything to anyone? Know your business and target audiences. Develop your pricing and quote with confidence to obtain sales that result in profitability.
- Remember bigger isn’t always better: Material price increases have tricked some companies into thinking they were bigger. The growth can hide issues, so look at production hours and units rather than dollar amounts.
- Be flexible: Top performers succeed in a variety of business climates. You need to be prepared to deal with changes – labor, increased costs, etc. – so your business is optimized for various conditions.
- Run perfect every time: Reduce variation as much as possible by going back to the basics. Create a culture of continuous improvement. For every new product launch: Quote it to set a baseline; Launch it and compare to the quote to drive improvement; Look at it six months later and compare to the quote; Then do it all over again with the bottom performers.
- Attract and retain talent: This is NOT solely an HR issue. You need to create a shop environment and culture that makes people want to stay once hired. Today’s workers want something different, so the old ways of hiring and keeping people are no longer valid. Clean up your facility and make it a showcase people would be proud to work in.
- Focus on technology: Create a technology roadmap that covers multiple facets – automation, software, process, quality and human capital. Educate yourself on technologies and look what is needed when work is awarded. When you invest, do it smartly, making sure you have optimized your current equipment to full utilization before buying new.
- Remember, cash is king: Cash is the most critical metric for any business – if you don’t manage it well, it will catch up to you. Top performers operate with a 13-week cash flow to understand what the future holds for their business. It’s not just for troubled companies – everyone should have someone that watches cash daily.
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So, with ongoing tough global economics what do you need to plan for in 2023 and beyond? Harbour advises knowing your market intel by studying launches and building your sales forecast based on your core competencies. In addition she says metalforming company executives need to:
- Understand customer needs and plan for it while also staying focused on their own team and their growth. Also they need to understand their customers’ health.
- Focus on lead time reduction by focusing on gaps and driving improvement.
- Build flexibility to drive resiliency and hunker down financially – be smart, focus on cash and quality of earnings.
“There are a lot of factors – globally and regionally – occurring simultaneously, making it even more critical to continuously monitor the health of the industry and customers to better understand how it all impacts your bottom line. Companies can weather the storm and manufacturing will rebound with strength,” Harbour says.
Long term Harbour sees strong growth for the industry once next year’s expected turbulence is behind us. The results from Harbour IQ’s in-depth study on the current state of the automotive vendor tooling industry indicates automotive vendor tooling spend in North America will increase year-over-year at a rate of 13.4%, resulting in $8.3B in spending in 2025. That’s a significant increase from the 2022 estimated spend of $5.7B.
Several key factors are driving up the tooling spend growth, according to the Harbour Results analysis:
“First, despite a drop in North American vehicle demand from 15.8M to 13.7M units, most automakers are experiencing record levels of profit per vehicle sold. This strong performance is funding investment in technology and new vehicles. From 2023-2029 the number of vehicle nameplates in the region will grow 18% from 210 to 249. Additionally, battery electric vehicle nameplates grow from 20% of the mix in 2023 to 46% of the mix in 2029. New nameplates generate new vehicle launches, which require more tools. Furthermore, the Detroit Three automakers, who source most of their tools in this region, are planning to source tooling for all new full-sized pickup trucks and SUVs in 2024/2025 and 2026, which significantly increases the tooling demand. The Harbour IQ study shows that the discrete number of tools will increase by 14% CAGR from 2022 to 2025 driving more demand for tooling with all of the new models.”
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