Assessing Competitiveness

The reality is that machined parts are becoming commodities these days, and what defines competition for manufacturers has changed.

I’ve had the privilege to speak often to groups of supply-side manufacturers through the years. To start off many of these presentations, I will hold up a machined part and ask the audience, “How many of you can make this part?” Without exception, just about everyone raises his or her hand. My rhetorical response is then, “Do you think you’re not commoditized?”

The reality is that machined parts are becoming commodities these days, and what defines competition for manufacturers has changed. What were once considered specialized capabilities performed by a select few are now more plentiful and easily found by your customers. The Internet, globalization, relatively cheap and plentiful technology, and emerging markets have made it so.

Understanding and adapting to these evolving dynamics are now at the core of what makes manufacturers competitive and successful for the long haul. To assess your competitive posture, ask yourself (and your company) these questions:

What do you do? Think of a pyramid. At the base of the pyramid are many competitors, all fighting for low-margin, high-volume and low-tolerance work. As you move up the pyramid, there are fewer competitors vying for higher-margin, higher-tolerance work with complex geometries and more sophisticated customers. One key to refining your competitive position may be to move up into a less competitive market by adopting new processes or capabilities.

Services beyond the part are also imperative to differentiating you from your competition. How embedded are you in your customers’ design processes? Are you prepared to communicate effectively, efficiently and regularly with them? Are your services—delivery, packaging, project data/feedback—as specialized as your processes?

Who are your customers? Are they progressive in ways compatible with your business’ goals? Do they appreciate quality? Do they appreciate what you do or what you want to do? Contrary to what you may think, customers like this do exist. Identify the types of customers you want, and develop strategies to engage and work with them.

What are you saying? Promoting your business means saying the right thing to the right person at the right time. These days, your Web presence—your site, MFG.com and other profiles, listings, links, and directories—is a prime channel for your prospects to research manufacturing resources. When they find you, what do they see? Construct your online message to convey your value as a dependable partner, a solutions provider and a high-functioning manufacturer.

Who are your suppliers? Negotiate with your current suppliers for materials, equipment, services, tooling and supplies. Research alternative sources. There’s no telling what you’ll find. Lowering internal costs can be hugely beneficial to your bottom line and can make you more competitive externally.
Being competitive doesn’t necessarily mean doing what you’re doing better than you did. Today, it likely means adopting new and different values to get more than you did.