An Effective Company Strategy Drives Success by Laurie Harbour
Looking forward to 2018 many analysts predict it to be a strong year for the metal forming industry. It is however, critically important that shops have a sound business strategy to fully capitalize on the good times, while preparing for the challenges that may be ahead.
All too often, we find that a shop thinks they have a business strategy, but really it is just a set of goals such as sales targets or productivity numbers and no path or guidance on how to achieve these targets. Most sales people tell us as that they don’t really have a clear perspective on ownership's strategy. A good place to start is with setting a sound company strategy and to do this a shop must look at the data it already collects. To develop an effective strategy, it is important for leadership to understand the current state of the business and dig into the operational data.
• What customers or products deliver the highest level of profitability?
• Are we more profitable producing one product vs. another?
• Is there a unique process that is driving increased business?
• What industries are driving business to the shop?
• What are our shop’s core competencies and what makes us different than the competitors?
It is critical that a company establish a set of operational and sales data points that can be utilized to set the business strategy. Once the data has been reviewed then shop leadership can compile a well thought out strategy that will deliver the revenue and profitability results required to grow and invest in the business.
Once the business strategy is set, then the sales process can be established. And, similarly, it’s important to look at the data to develop an effective sales strategy.
RFQ hit-rate data. Shops should do an analysis of the company’s current hit-rate data from requests for quotes (RFQs) across customers, jobs, type of work, and so on. This could provide insight to help drive strategy. A hit-rate analysis simply examines the number of quotes submitted per customer, number of quotes won per customer, total value of quotes submitted and total value of the business won.
This analysis can show from which customers a company wins the most business and those from which it rarely or never wins business. The shop then can determine if its business is appropriately diversified among customers and/or industries. This data, along with the company’s overall business strategy, will arm a shop with the information needed to identify its own unique set of sales opportunities and challenges, which will serve as the foundation for building an effective sales process.
It’s important to note, that this data can also be used to determine the quote volumes necessary for a company to achieve its revenue goals. In other words, by understanding the RFQ hit rate and the average revenue per quote won, a company can identify the number of quotes per month needed to meet certain revenue targets. Also, by monitoring quote volumes, a business will be able to more accurately predict future capacity and align operations to customer demand. This is among the first steps in aligning business, sales and operations, which if you remember is the key to managing through the highs and lows.
Market data. In addition to reviewing quote data, companies need to gather and look at general data from the markets they supply. This market data can come from multiple sources, such as industry conferences or market intelligence companies such as LMC Automotive, and can include information on predicted timing of product launches and future trends. Such data can help companies identify future quote opportunities, as well as how to predict a quote and build timelines. In the automotive industry, for example, stampers can use information about future vehicle launches, including models and production timing, to identify potential projects and determine when that project might be put out for bid. It’s important to truly understand the market to which a business is selling its products or services.
Customer communication. Interacting with customers is another critical activity that needs to be included in a shop’s sales process. This might seem obvious, but all too frequently companies do not take advantage of the opportunity to exchange information with customers, better understand their needs and ask for additional business.
Shops need to make it a practice to visit their customers’ operations as frequently as possible (twice a year, minimum). While on site, they should speak with people throughout various departments to understand any challenges or uncover new business opportunities. During such a visit, the shop might stumble upon business that it wouldn’t otherwise know about.
We have heard over and over again from Original Equipment Manufacturers (OEMs) and Tier 1 suppliers across multiple industries that building strong relationships is the key to securing additional business. By better understanding a customer’s wants, needs and priorities, shops can identify and deliver increased value by providing innovative new processes, improved design, and expertise and knowledge.
Connecting the Dots
By collecting and analyzing the operational data as well as performance data such as revenue per full-time equivalent employee, planned to actual hours and capacity and allowing it to help drive the business and sales strategies, shops will be able to link their business, sales and operations enabling them to make better business decisions. Activities like demand planning, production scheduling and capacity planning become easier to do and when shared across teams help make strategic decisions that drive the business forward.
Where to Start
If you are struggling to determine where to start, PMA’s Strategic Assessment Program (SAP) provides the perfect tool to examine your company’s current state and benchmark performance against peer companies. Establishing a benchmark and clearly understanding what your company does well and opportunities for improvement will better position your shop to refine and/or develop your 2018 business and sales strategy.
For more information on SAP or to schedule you assessment please complete this form.
Laurie Harbour is president and CEO of Harbour Results Inc., an operational and strategic advisory company.
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