U.S. manufacturing – Competing in a Value Driven World

This is a Guest blog Post by Dr. Eric Reidenbach, the Director of the Six Sigma Marketing Institute. I think Dr. Reidenbach’s thoughts are right on target. We keep basing Continuous Improvement efforts in areas that are making little difference to the bottom line. Most manufacturers constraints are in the marketplace and till we address and solve the issue of demand, improvement in operations mean very little.

Dr. Reidenbach’s Message:

Production is driven by consumption. Manufacturers will not add new shifts or open new plants unless there is consumption – demand. It really is that simple. No amount of targeted tax breaks, free trade zones, industrial policy, lean initiatives will create the demand necessary to drive production and employment. These are factors that operate on the production side of the equation, not the consumption side.

What will drive production is giving buyers a compelling reason to buy. That compelling reason to buy is value – superior value. Value is the interaction of quality and price. High quality products and services offered at a competitive and fair price are the drivers of value. Every undergraduate econ student that is paying attention in class knows that value is the lubricant that facilitates exchanges. The buyer seeks high quality at a fair price (value) while the producer seeks payment (value).

Recessions are often referred to as conditions of excess inventory that requiring an adjustment. The buyer is telling manufacturers that the value offered in the proposed exchange is not sufficient to complete the exchange. Until the producer understands value and its catalyzing effect, exchanges will be stultified.

There is a growing emphasis on retraining our manufacturing sector. Until this retraining includes education regarding the identification, creation and delivery of value, we will be doing the same thing over and over but expecting different results. NAM (National Association of Manufacturing), state manufacturing associations, AME (Association of manufacturing Excellence) all have a role to play here.

Most manufacturers tend to be product focused. They believe that quality and value are a function of the product and product features. They ignore all of the other elements of the value delivery system such as product support, parts availability, technical support, and distribution – all of the elements that make it “easy to do business with”. This is what I call “value myopia” and it severely limits and restricts a manufacturer’s capacity to penetrate markets, domestic and global. They need to refocus on value – become value focused.

Manufacturers are also consumers. They purchase goods and services in their daily lives as well as their business lives. Do they buy automobiles solely on the basis of product features (blue tooth, gps, xm radio) or do they factor into their decision elements such as dealer service, repairs (timeliness of repairs, quality of repairs), availability to get the right parts, the ability to talk with someone at the dealership who knows, someone who tells them the truth, someone who does not talk down to a woman, warranty, cleanliness of the dealership, etc.

My bet is that they do. If they don’t they have to deal with their wives who are often saddled with the job of taking the car to the dealership for service and repairs. Why is it that while they recognize these elements as part of the value package, they don’t take this lesson back to their own operations? Is it because they are so focused on their definitions of quality and value? These are too often words that are abstractions that, in reality, have no meaning when they are divorced from the markets they serve. Quality and value, absent their linkage to the market become nothing more that “conformance” to specs that if the manufacturer is lucky correspond to actual buyer demands.

Many manufacturers are products of engineering programs. I did a search of a number of prominent engineering programs and found no mention of customers, value or markets. I did find a lot about typical engineering subjects such as calculus, trig, aerodynamics, etc. – things you would expect to see in engineering programs. However, the world has changed significantly since many engineering curricula were developed. Buyers are smarter and competition is greater and stronger. The question is – Will U.S. manufacturers have what it takes to compete in this new world? Will they become the superior value providers that dominate global markets? They won’t unless something changes.

Related Information:
Best in Market eBook
Six Sigma Marketing Institute has just released (for a limited time at no cost) a Customer Value Assessment Program which can obtained at http://DrivingMarketShare.com. The program enables an organization to evaluate their organization based on Customer Identification, Customer Value, Customer Acquisition, Customer Retention and Customer Monitoring. This assessment will expose your weaknesses and strengths in each of the 5 Cs of Driving Market Share.