Top 5 Signs You Need a Manufacturing Turnaround Strategy
Business Recovery for manufacturers is simply identifying the issues a company is facing that is negatively impacting their business, creating a strategic plan and implementing projects to expand markets, strengthen operations, improve sales, increase profitability, and regain global competitiveness.
What would you say to a manufacturer who thinks they’re “just in a slump” and doesn’t realize they’re in decline?
Let’s be very clear here. You are in business to stay in business by making profits – year over year. That’s the foundation, the mission and the primary goal of every business. If you are facing declines in profits, your business is declining. It’s failing. You are not in a slump. You have a choice here: 1. Take action. Or, 2. Wait and see if things turn around on their own.
By thinking that you’re “just in a slump” you are unconsciously choosing to wait and see what happens and you are not protecting the business at its very core – your profit center.
Why do many companies wait too long to ask for help, and what’s the risk of doing that?
There are many reasons why companies wait too long to ask for help. Too many to discuss. The real issue is the risk of waiting. These risks include continued and prolonged financial declines. Prolonged financial strain eventually leads to discussions regarding business recovery, or restructuring, bankruptcy and/or closure. Where in the process of a company’s downward turn do I recommend a company to ask for help? That’s easy. As soon as financial declines are realized. You want to be proactive in business operations and securing the financial future of your business. You want to financially turn around your company as soon as it starts to decline. If your sales this year are below your sales figures from two years ago, you now need a business recovery plan.
1. Sales Keep Falling—And You Don’t Know Why
When you talk to a manufacturer with declining sales, what are some of the original causes you help uncover?
When working with a manufacturer to build their business recovery plan, a complete diagnostic review of the company as well as their industry is completed. Examining both internal and external forces that are causing their decline in sales is a necessary part of the business recovery process. This is where we identify the root causes that are impacting the manufacturer directly. Some of the root causes that are internally driven are within the technology, marketing and production areas. Externally driven root causes are often changes in industry and global trade impacts.
How often is import competition a “hidden” factor in those declining sales?
For as long as America has been trading with foreign countries, import competition has been a factor that can and will cause declines in sales.
In 1974, the United States government passed the Trade Act legislation, as amended. This legislation was created to help U.S. manufacturers navigate the negative impacts from foreign trade.
Whether we realize it or not, we are a global manufacturing market place and we are always competing with manufacturers overseas. Advancements in technologies, eCommerce, and in industry continue to make it easier for customers to purchase goods from anywhere around the globe almost instantly.
Thinking that import competition is a “hidden” factor in the U.S. marketplace is leaving many U.S. manufacturers behind. It’s time for U.S. manufacturers to embrace the global market place and strive to be industry leaders.
What’s your advice for companies who keep hoping sales will “bounce back” on their own?
Often I need to have difficult discussions with my client-firms. This is one of those areas. Companies that want to wait and hope that sales will ‘bounce back’ are choosing to stay in a place that will allow the industry and market place to decide the company’s fate and future.
The choice is either to be in control of your company’s future and financial position or allow the industry to be in charge. Either be an industry leader or be left behind.
My advice is clear. If your company is experiencing a decline in sales, it’s time to take action and improve your company’s position in the market place.
2. Losing Bids to More Inferior Overseas Competitors
What’s going through a manufacturer’s mind when they keep losing bids purely on price?
Typical thoughts are: How can I compete with lower pricing? Will I continue to lose bids just on pricing? How can my business survive a price competition war?
How can a turnaround strategy help reposition their value, not just fight on cost?
A turnaround strategy or business recovery plan will identify specific target areas for improvement. Industry experts then implement projects that will not only assist in the recovery efforts but will strengthen operations, increase sales and profitability while gaining global market share and competitiveness.
Can you share a story where a firm was able to compete more effectively after shifting strategy?
MATAAC had a client-firm that made wire mesh bagel baskets. This business was getting crushed by imports from China, significantly losing market share and sales year over year. Upon review of the business, market and industry a business recovery plan was created that moved the company to create a steel wire metal shelving.
When this firm entered the TAAF program it was facing over 53.70% sales decline on this product line and lost over 33.18% of its workforce hours.
Upon completing the TAAF program, Sales had increased by $2.17 million, a 65.51% increase. Employment grew by 10.14% and operating profits grew by 95.10%
3. Technology and Systems Are Outdated
What kinds of outdated systems (ERP, accounting, websites) do you frequently see in struggling firms?
My work at MATAAC is to help manufacturers that are struggling. They have been losing market share, sales, operating profits and employees. So, when asked what kinds of outdated systems do we see in struggling firms the answer is all of them.
If you aren’t staying current with your systems, some other company is working smarter, faster and more efficiently than you are working. They are out competing you without having to try. Your outdated systems are slowing you down, causing you to work harder and burning precious time and resources. They are moving you out of the game and you are being left behind.
Why do these old tools become a bigger liability during a downturn?
Please allow me to use a football analogy here to show how old tools become a bigger liability during a downturn.
Imagine that your football team (your company) is competing against my football team (my company). Your company is down 14 to 0 at half time. This represents your sales losses currently. You have lost several players in the first half due to injuries on the field. This represents the loss of employees.
You now have to try to come back during the second half. This represents your comeback after the down turn. The problem is that my team has been playing with all of the latest technologically advanced gear available to date. Your company, however, has been playing with football helmets, uniforms and gear from 10 or 20 years ago.
I use this analogy to demonstrate that if you are not up to date on current technology, industry advancements, and operating tools then you are not competing on the same level as your competitors. During a downturn, it will be more difficult to recover in industry when your competitors can work smarter, faster and more efficiently because they are utilizing the most current technology and tools.
Now imagine, that during half time, your team was provided the latest technology, gear and secret plays like the Philadelphia Eagle’s Brotherly Shove or Philly Special. Now you’re back in the game and have some special plays unique to you and your team – That’s the benefit of a recovery plan.
How does MATAAC help companies fund the tech upgrades they need for long-term recovery?
MATAAC cost-shares in the project implementation phase. For companies that have received approval for a $150,000 business recovery plan, MATAAC cost-shares up to 50% or $75,000 of those costs. For companies that receive approval for $30,000 business recovery plans or less, MATAAC cost shares up to 75% or $22,500 of project implementation costs.
4. Best Customers Are Starting to Leave
What usually drives long-time customers to stop buying?
Price, Price, Price or rather Costs, Costs, Costs.
Every business transaction has a cost that hits the bottom line with a consumer. Everyone thinks “What will this cost me?” or “Is this worth the price?”
Other factors can play into the buying decision, however, costs are a current and major concern in the industry right now.
How can a turnaround plan help companies both retain existing accounts and enter new markets?
A turnaround plan can help turn the focus on the value of your products, not just their costs. More importantly, a review of the market, market trends, and products may identify new markets or new product offerings.
What kinds of customer or market diversification projects have you helped fund?
MATAAC has helped fund customer or market diversification projects such as: Market research and analysis, Sales strategies, Advertising, Promotional development, export development, customer analysis, product line evaluations, and website development, just to name a few.
5. Constantly Putting Out Fires
How do you know when a manufacturer is stuck in “firefighting” mode?
A manufacturer is either proactive by strategically planning and implementing a forward focused operational plan, or reacting by allowing outside or external forces to impact the business.
If a business is in a reactive state and then begins dropping one issue to deal with another more pressing issue, that manufacturer is now in “firefighting mode.”
What’s the emotional toll or leadership fatigue you see when companies are constantly reacting?
The emotional toll or leadership fatigue you witness when companies are in a constant reactive mode of operation can be answered in one word: burnout.
In addition, when a company is constantly operating in a reactive or “firefighting” mode, their employees suffer burnout as well.
This mode of operation creates an environment where stress, frustrations, counterproductivity, and burnout occur easily. This will have a negative impact upon management, employees, production and customer service and ultimately, sales and profitability.
How does shifting to a proactive, planned recovery process change the game?
Having a proactive, planned recovery process allows a manufacturer to target areas of weakness strategically, implement projects to improve operations, boost sales and productivity and help to create a winning strategy. This moves a manufacturer out of being in a reactive state and creates an environment where the manufacturer is in control of its business operations.
Final Thoughts
What’s one thing manufacturers need to hear if they’ve checked one or more of these “Top 5 Signs”?
If a manufacturer has realized that they need a turnaround strategy or business recovery plan, the hard part is over. Identifying the need for a turnaround strategy is the first step in moving your company from its current position to writing its future success story.
What’s your favorite success story of a company that went from stuck to thriving through a turnaround plan with MATAAC?
One of my favorite success stories is a metal stamping manufacturer who came to MATAAC with a $750,000 operating loss. They implemented a new website with e-Commerce and additional sales support projects. This allowed them to improve operating profits to $18 million (2,444.90% increase), increase employees by 76 new positions (a 30.90% growth) and sales increased over 54.81% to over $89 million dollars.
What makes MATAAC uniquely positioned to support this kind of strategic transformation?
We help manufacturers by: identifying the issues their company is facing, build their business recovery plan, and help them to implement projects that will support their growth and global competitiveness.
What makes us uniquely positioned to support this kind of strategic transformation is that MATAAC is a federally funded cost-share program. Through the TAAF program, firms receive technical assistance in project implementation by industry experts and MATAAC shares in the costs of those projects.
How MATAAC Serves Mid-Atlantic Manufacturers
For over five decades, MATAAC (MidAtlantic Trade Adjustment Assistance Center) has been helping turnaround manufacturers. Tackling trade challenges, regain competitiveness, and boost profitability. MATAAC provides solutions to manufacturers located in Delaware, Maryland, Pennsylvania, Virginia, West Virginia, and Washington D.C. MATAAC has been chartered by the Economic Development Administration of the U.S. Department of Commerce with responsibility for the management of Trade Adjustment Assistance for Firms (TAAF) program. The TAAF program is a crucial resource that supports businesses in navigating global market shifts.