5 Steps to Scaling Your Business When Your Competition Stumbles
Opportunities to grab significant market share can arise unexpectedly. Are you prepared to ramp up production and seize the moment?
While a sudden increase in volume is a good problem to have, it leads to many more questions than just “Can we build more?” Among the questions you need to think through are:
- How good are my manufacturing processes?
- Is my product documentation complete enough to keep a rapidly evolving situation under control?
- Are my suppliers able to keep up with my expanding needs?
- Can my services organization support the growing customer base?
Whether you are taking advantage of an immediate opportunity or making well considered changes, giving advance thought to the potential upstream and downstream impacts of an increase in volume lets you develop effective answers to questions such as these. You can’t think of every scenario, but knowing what questions to ask yourself, identifying your strengths and weaknesses, and fixing what you can will help you prepare for a smooth ramp-up.
In today’s demanding market environment, those companies who are best prepared to react to sudden market openings will have the best chance for success. This whitepaper walks you through your products, processes, supply chain and business to help you determine how well you’re positioned to grab market share. It also provides tips and best practice advice so that you can develop your own unique plan to scale to take advantage of market opportunities.
5 Steps to Scaling Your Business When Your Competition Stumbles
Imagine that a major competitor suddenly goes out of business. Are you really ready to grab its share of the market before someone else jumps in ahead of you? Or do you just hope that you are ready to pounce?
The answer, probably, is that you don’t really know. Yes, you’ve thought about what you’d do if the other outfit disappeared. Maybe you even sketched out a plan for the possibility. But is your plan a plan or really just a goal – grab the market share before someone else – coupled with a single vague tactic – do whatever it takes?
Whether your company’s expansion is opportunistic or has been under consideration for a while, to achieve your goal, you’ll need to have a plan that allows you to respond to sudden market changes. Your plan should map out how all the resources in your organization will work in a coordinated effort to win and expand your market share at the least expense to you.
While it is beyond the scope of this whitepaper to map out plans for every aspect of your organization, the paper will help you create a plan to scale that includes solutions for managing your products, processes, supply chain and business. With a plan for how to prepare for and capitalize on new market opportunities, you’ll be well-positioned to grow your company quickly and successfully.
Step 1 KNOW YOUR PRODUCTS
Products are the heart of your company and the value that keeps your customers coming back for more. Parts are the heart of your product, and their influence on your final product costs is huge. In many companies, though, parts are the most poorly controlled data in the organization. To establish control over your part data, you must understand your products and how you organize part data, communicate design intent, and acquire the parts that make up your products. A little housekeeping in this area will prevent ordering mistakes and sourcing bottlenecks, enabling you to save money and ramp up operations quickly. Here’s how you go about getting a handle on your part data.
Know Your Master Parts List
The master parts list is more than a list of uniquely numbered and named parts. It encompasses all you need to know to order, build, receive, and qualify your parts – drawings, specifications, the approved manufacturers list (AML) and the approved vendors list (AVL). Since this information is gathered and used by many different departments across your company, create a centralized, revision-controlled system so that all departments have a common reference point for part information. Centralization makes it easy to unearth, and then repair, gaps in required data, which will reduce the risk of costly purchasing mistakes. Make sure to establish a list of current acceptable parts to reduce the likelihood of incorporating obsolete components into new designs.
I. Remove Duplicate Part Numbers
Duplicate part numbers can lead to the purchase and inclusion of wrong parts in your products, causing scrap and cost overruns. Find and fix instances where you have a single component associated with more than one part number or a single part number referring to multiple components. Unique part numbers are a best practice in operations.
II. Reduce the Noise of Inactive Parts
If your system has parts that no longer need anyone’s attention, hide, mark, or remove them to make your active parts list more manageable. Junk parts cluttering your data include parts created for product ideas that never made it to production, parts no longer used, and parts available only on the discontinued or gray market. Deprecate parts that you are phasing out so they will not get included in new designs.
III. Document Your Parts Well
Drawings, specifications, and artwork are among the many types of documentation required to purchase a part. You use this same documentation to build the part and verify that it was received and made correctly. But if you store part documentation on personal hard drives, in email, or in folders on servers, no one knows which documents are current or even where the latest document resides. Collect your documents in a controlled central repository that everyone can access. This will minimize
the time wasted by groups searching for the latest revision of documents and the money misspent accidentally ordering the wrong parts.
IV. Find Alternates and Multiple Sources
Everyone knows that PEM fasteners and ZIF connectors exist, but does your purchasing person know where to buy them in production quantities? And do you have credit terms established with that vendor? For each part on your master list you should know who the acceptable manufacturers are as well as which vendors sell those parts. Having a single approved source for a given part will prevent people from guessing and ordering the wrong components. But make sure that you have an alternate manufacturer or a secondary vendor for critical parts. A backup can reduce delays in the event your primary vendor is sold out of the part or, worse, has disappeared.
Know Your Product Bills of Material
The bill of material (BOM) is a product’s DNA recipe, showing how each part is associated to the whole and how all parts work together. A lot of data goes into a BOM – parts, specifications, reports, artwork, drawings, and even annotations – and all of it can change throughout the life of the product. Having accessible records of what is current, as well as what was done in the past, reduces chaos and minimizes time wasted trying to figure out what is going on.
BOMs are used by groups both within and outside company walls. Ensuring that everyone is working from the same data reduces problems that arise from miscommunication and misinformation. Using a consistent dataset also allows you to identify commonalities that can improve both supply chain and manufacturing operations. Controlling your product BOMs will position you to increase production with little notice.
I. Control Product Revisions
BOMs change rapidly during the design phase. In production, BOMs change much less frequently, but those changes have broader impact. How you document and communicate changes to your internal manufacturing group and external contract manufacturers (CMs) is crucial to building good products. Everyone needs to know and trust that they are working with the current revision of the product BOM. A dedicated BOM management system for centralizing product data and controlling changes helps
build trust among all participants by ensuring that everyone can always access the newest revision of your BOM.
II. Track Product Compliance
Most products need to meet a set of external standards and regulations in order to be sold – UL, CSA, FDA, CE, FCC, ISO, TUV, …the list is endless. Proof of compliance is required when filing for many certifications and also when an auditor appears on your doorstep. How quickly can you pull together the specifications, certificates and test reports required for the auditors to let you keep shipping product? Having clear compliance requirements, an understanding of the evidence needed, and a central location for all the regulatory documentation eases the burden when you need to file for certification or submit to an audit.
III. Locate Cross-Product Commonalities
Most companies like to reuse parts from current products when they develop new products, as a way to both purchase in larger volumes and reduce engineering and manufacturing risks. But when products are designed by different teams, commonalities can be missed. Comparing your BOMs to look for opportunities to reuse parts and subassemblies can help reduce your costs across many products.
IV. Identify Substitute Parts
Identify parts whose sourcing is at a high risk for disruption or whose absence would be damaging to the assembly process. Similar to alternates, having substitutes for high-risk parts can be key to keeping your lines up and running. Knowing that a similar part with slightly different specifications, like resistors with tighter tolerances or chips with larger memory, will also function in a particular assembly can give you additional flexibility to solve supply chain problems like shortages and back orders.
Know Your Key Components
The absence of any part will prevent you from building product, but do you know which parts on your product BOM pose the greatest risk of being in short supply? Ideally, you should have secondary sources, alternates and substitutes for every part, but that’s just not realistic. Knowing which parts present significant risks to production will allow you to proactively find solutions to problems that could take down your line.
I. Long Lead Times
When you are building and you run out of parts – parts with long lead times – your line is down and it may stay down for a while. By keeping tight control of inventory, purchase orders (POs), and build plans you will have visibility into potential problems before they arise. Reduce risks by having multiple vendors for high-risk parts and explore acceleration options like overnight or air shipments to get you what you need faster. Know your expediting options and costs before you actually need them so that you can react quickly and make informed decisions.
II. Expensive Components or Assemblies
Both original equipment manufacturers (OEMs) and CMs tend to keep their inventory exposure for expensive parts low. Balance inventory and purchases with build plans and yields to prevent shortages of these components during builds. Having substitutes and alternates will reduce the risk, but you must stay on top of supply to keep a lid on costs. When possible, adding the expensive components only to tested subassemblies will reduce the likelihood of an expensive part landing in the scrap pile.
III. Single Sources
Identify parts that may never have alternatives or substitutes, such as customized parts or specialized components specific to one manufacturer, like a multi-core processor. Monitor those parts carefully from ordering through use. In a pinch, see if you can rework scrap to recover those precious parts.
Step 2 KNOW YOUR SUPPLY CHAIN
Very few companies can do everything to make entire products on their own. Most businesses have a network of suppliers and partners to help them get the job done. When ordering processes run smoothly, you might assume all is well, but knowing the status of partners and suppliers, as well as the state of your relationship with them, is important to establishing the stability of your supply chain.
Check Your Sources
Sometimes change happens without notice. Check in on your sources to verify that what you believe to be true is still true. Checking your assumptions will generally uncover areas where something is different than expected. Finding those discrepancies will allow you to evaluate whether the potential impact to your company is major or minor.
I. Component Lifecycle
The lifecycle of electrical components can change without much warning. Divisions of component manufacturers get bought and sold frequently. Even though a component is still being made, it may have been transferred to a new manufacturer, which has given it a new part number and issued a new specification. Remember when the RoHS regulations were put in place? Many manufacturers reviewed their product lines and discontinued components that were not RoHS-compliant to reduce complexity and expenses. Investigate component lifecycle statuses to ensure they match well with the lifecycle of your product.
II. Custom Part Manufacturers
When a company makes custom parts for you, your company generally needs to invest time to get the supplier up and running and making your part correctly. Verifying that your vendor is doing well and that it still values your business is important. Regardless of the vendor’s status, make sure that you have complete documentation for the parts it builds in case you need to add another vendor. Understand the actual process used to build your parts too. If you are unaware of certain steps in building a part, that may keep another supplier from ramping up successfully.
III. Supply Stability
Check on the last few builds and look for trends that could have an impact on your business. Did any part pricing or lead times change? Have deliveries been on time, late, or early? Has quality been consistent? Hints of problems generally appear long before serious disaster strikes. If something seems not quite right, note areas of concern, validate existence of a problem, and find a solution before the situation becomes critical.
Evaluate Your Sourcing Relationships
Relationships establish boundaries and modes of interaction between companies. They also establish communication paths, mutual understanding, and respect between the parties. Building relationships takes time and energy, and so does maintaining them. The better your relationships with key vendors, the more likely they will be true partners looking for situations where you both can succeed. But the value
of a solid relationship is most apparent during the stressful times when challenges put a strain on your business. During those times your true partners in business will shine.
I. Contracts with Your Key Suppliers
While you should have contracts in place with all of your suppliers, having more comprehensive and detailed contracts with suppliers of key components is crucial. In addition to price and supply guarantees, your contract can require early notification of changes and establish priority in shortage and back-order situations.
II. Contracts with Your CMs
A quote and purchase order can get product rolling down the line. Buying and building to a longterm forecast can get you preferred pricing. But what happens when you increase your forecast by 3X? And who benefits from cost savings from yield improvements that both parties helped achieve? Establishing good contracts up front gives you practice in working out business details when things are easy and helps establish a solid working relationship. That practice and relationship will come in handy when the unexpected happens and conversations become more difficult.
III. Vendor Health
When was the last time you audited any of your vendors? When was the last time you called and asked how they were doing? Have you gone to lunch and had conversations about changes they are seeing in their business? You may not have control over your vendors’ business, but you need to be aware of what is happening to them and understand where risks lurk for you. You need to know where their business is going and how you can benefit from their plans for the future. None of this can happen if you haven’t spoken with your vendors in a long time.
Step 3 KNOW YOUR PROCESSES
If you are selling product, then clearly your company knows how to make good product. But how much do you know about how your products get made?
Analyze the Assembly Process
The goal of most manufacturing organizations is to build reliable products in a repeatable way and build them right the first time. To do this you need to establish a good process and have the appropriate gauges, fixtures, and training to execute the process well. You should create and monitor metrics to verify that your product is good and your process is under control. A quick look at your assembly process, the documentation around it, and the results off the line will indicate if your manufacturing process is clear-cut and prepared to grow or if it’s closer to being black magic.
I. Assembly Process Documentation
Are your manufacturing and quality processes documented? Does your CM have additional steps in the process that you may not know about? Your effectiveness would be reduced if you needed to bring up another plant and you only had incomplete information. Knowing how you build today will help you prepare for making improvements and allow you to move the product to another partner or facility if necessary.
II. Yields and Rework
Once you know how you build, you need to look at how well you build. If you have a large scrap pile, you can be certain you’ve wasted a lot of money. Preventing material from becoming scrap in the first place, instead of reworking it, can save your company significant dollars.
III. Repeatable Processes
Are there parts of the assembly process that are labor-intensive? Do they require precise skills and extensive training? Aspects of your process that are not easily repeatable can have a large impact on product reliability. Manufacturing processes requiring that “special human touch” are also difficult to replicate and can prevent you from easily expanding your production. Simple ways to increase the repeatability of your process include adding fixtures, gauges, and clear acceptance tests to assist in the process and put bounds on the results. A precision fixture is often more easily replicated to multiple workstations than a specialized operator and can provide more repeatable results.
Step 4 KNOW YOUR BUSINESS
In addition to knowing what is happening on your factory floor you need to know how the rest of the organization comes together to support the product. Some functions support the product through administrative activities like contracts and financing while others contribute to its success through technical support.
Evaluate Full Product Impact
You want to get more product into the hands of customers, but are all parts of your organization ready to support the additional activity? Understanding the full impact of a product on your company will help you scale the whole organization properly.
I. Think Through “What-If” Scenarios
What would you change if you had to triple production on your largest volume product? You have lots of levers at your disposal – which one would you flip and under what conditions? The possible changes you can make are endless, but might include increasing the number of days a month that you build, adding another shift or another line, or possibly shifting resources from another product. Thinking through what actions you can take and under what conditions each action is the right response, will help you adapt quickly to events as they happen.
II. Think Through “And-Then” Scenarios
If you have the good fortune of selling lots of product, what is the impact on other parts of your organization? Once you have figured out how to build all that product, you should think about what happens once that product gets to customers. For example, selling more product means additional product support will be required. A good support experience will enhance product sales, while a bad experience can cause significant dips. The amount and form of support required will vary for different business models and different stages of your product lifecycle. The support might be in the form of multi-language user documentation or creating a full technical services team that can configure and install a system at a customer site. Understanding the state of the entire company and how the product fits into the bigger picture will help you balance needs and resources appropriately.
Know Your Financial Health
Companies differ in how much of their financial information they disclose even to their employees. Often an understanding of their company’s financial health can help employees make better decisions, especially when planning for growth.
I. Cash Flow and Debt
Is your company flush with cash or does it have seasonal cycles? Knowing which months are tighter than others can help you make better decisions about when to spend money on inventory or invest in capital improvements. Conferring with your finance professional to understand what lines of credit, leasing, and other financing options are available is important when making decisions on when and how to expand.
II. Contractual Commitments
As part of your financial review, you should know your company’s contractual commitments and what penalties and bonuses may be applicable. Will the decisions you make now put existing contracts at risk or help you get a bonus? After a supplier evaluation, are you concerned that your supplier might not fulfill its contractual obligations to you? Knowing the financial landscape will allow you to maneuver around obstacles or recognize places where you may want to renegotiate or seek out additional options.
Step 5 LOOK FOR OPPORTUNITIES
If you follow these steps then you’ll have a clean BOM, stellar processes, stable contracts, and solid supplier relationships. You’ll have thought about what could happen and what you would do about it. You’ll be ready to deal with any situation. The reality, of course, is that most of us don’t have time to be that thorough. But you can still be ready to respond to changes quickly and effectively.
Straighten up the BOM of your highest volume product if you don’t have time to clean the whole master parts list. Any amount of part data exploration and repair that you can do is better than doing none. By identifying parts and aspects of your process that pose the greatest risk to your company you can more easily recognize when immediate action needs to be taken.
Since you now know how to deal with surprises, why not look for ways to make good things happen? Did you recognize a possible connection between your business and one of your suppliers? Why not talk more and explore it? Did you come up with a great idea for a new product while digging through the BOMs of one of your current products? Opportunities big and small lurk everywhere. With the right mindset you’ll recognize these opportunities, and with proactive planning you’ll be in a great position to take advantage of them.
It is likely that your company is ready to move forward quickly in some areas and not quite as ready in others. But no matter what your company’s current market situation is, you can always bolster your current competitive position and improve your readiness to take advantage of unexpected market opportunities if you plan for success.
Download the 5 Steps to Scaling Your Business When Your Competition Stumbles Checklist