September 5, 2016 / best practices, continuous improvement, Cost Management, industry news, LIT, ROI, strategic planning, supplier relationships
The manufacturing industry is experiencing a roller coaster market, making it difficult for metal service centers to know when to grow or scale production. As reported in here in IndustryWeek, the Institute for Supply Management’s index recently registered the steepest manufacturing drop since January 2014. The August index dropped to 49.4, marking the first contraction for U.S. manufacturing in six months. New orders in August also declined 7.8% compared to July—the first drop since December 2015—according to the August 2016 Manufacturing ISM Report on Business.
In addition, data from the Metal Service Center Institute (MSCI) shows that U.S. service center steel shipments in July declined by 15.2% compared to July 2015, while shipments of aluminum decreased by 14.8%. In response to lagging shipments, steel and aluminum inventories also decreased in July by 14.5% and 1.3%, respectively, from July a year ago.
The uncertain outlook is causing industrial manufacturers to adjust and carefully manage costs. According to a recent survey by PricewaterhouseCoopers (PwC), only 35% of industrial manufacturers were optimistic about the U.S. economy in the year ahead, down from 69% last year. Despite the slowdown, however, manufacturers continue to invest in growth opportunities, with 80% of respondents planning to increase operational spending and 52% planning on new product or service introductions this year.
Despite current market challenges, many companies are finding that a moderate market can be an ideal time to revisit their growth strategy. In fact, as reported here, research from McKinsey & Company found that transitions between growth phases often predict a company’s success or failure. “Companies that are growing at a slow or normal clip have more time to consider their options and make wise decisions,” the article states. “Rapid growth may be desirable, but slow and steady does indeed seem to win the race.”
The fact is that while business growth may seem impossible right now, there are still simple ways to keep your company headed in the right direction. An article from ThomasNet provides three simple steps manufacturers can take to help them grow their business:
- Choose a goal. You can’t grow your business without knowing what you want and need to grow. Will you grow by gaining new customers or doing more business with current customers? Do you want to expand into new product segments? Decide what the best opportunity is for your business and focus there.
- Build your credit. Deciding to partner with a company—either on the supplier or customer side—requires due diligence. If a potential customer ran a business credit report for your business, what would it show? Tracking and regularly checking your credit file will help ensure your company’s image is attractive to future business partners and creates credibility. This will also enable you to easily pay increased or unexpected expenses as you grow such as additional payroll for new employees, or loans for new equipment or warehouse space.
- Spread the word. Once you’ve decided to grow, let people know and get the word out. Add a listing to online business directories and build your online presence to drum up new orders.
This is also a good time to lean on your supply chain. As cited in the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization, a report from Tompkins Supply Chain Consortium found that 80% of supply chain professionals report the supply chain is an enabler of business strategy. In addition, a majority of companies felt the supply chain is a source of business value and a competitive advantage, leading the Consortium to conclude that “the importance of an integrated supply chain and overall business strategy cannot be ignored.” Identify your strategic suppliers, position them to add value, and see where they can help you grow your business.
While there is a lot to consider when deciding whether or not to expand your business, employing a few basic strategies can help put you on a path to steady growth, even if it is slow moving. As many service centers are finding, today’s market conditions offer a unique opportunity for companies to re-evaluate and improve, not only to survive current market conditions but also to position themselves for growth when the demand rebounds.
Are you thinking about growing your metal service center? What strategies are you employing?