Last week in this column, barrister Michael Gerard offered his advice on how to get through the economic downturn, including practical tips and ideas on surviving the anticipated decline in 2009. Continuing this theme, and focusing in on a specific area that will be of interest to DPA readers, we welcome Fibox UK managing director, Steve Gallon’s following advice to OEMs and their suppliers, drawing on his extensive knowledge of the enclosures market. His views are applicable across a broad range of OEM/supplier businesses:
As the economic climate bites and companies look for ways to save monies on manufacturing costs, the use of top grade materials comes ever more under the microscope as a possible way for OEMs to cut costs. However, before companies embark on cost-cutting actions, we should remember the legacy left to us by our Victorian forebears, who transformed our nation. For example, the Victorian polymath, John Ruskin (1819-1900), made the following distinction between ‘price’ and ‘value’:
"It's unwise to pay too much, but it's worse to pay too little. When you pay too much you lose a little money and that is all. When you pay too little you sometimes lose everything because the thing you bought was incapable of doing the actual thing that it was bought to do.
“The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you deal with the lowest bidder it is well to add something for the risk you run, and if you do that you will have enough to pay for something better."
As we all know, the use of polycarbonate and polyester enclosures has now become so well established in the original equipment manufacturing industry, that there has sprung up a vast array of companies manufacturing all manner of plastic enclosures. However, there are some concerns arising from this development as the temptation is growing in some quarters to downgrade the enclosure in a bid to reduce a portion of the ever rising manufacturing costs.
However, that route spells disaster and as most of the more astute OEM companies will concur, modern manufacturers demand and receive much more than mere enclosures from their enclosure suppliers.
Over the last few years, many enclosure manufacturers have adopted a far wider approach to safeguard their relationships with their customers, and that is why many organisations are taking a more intelligent and rational approach to trimming their costs – and taking care too, not to alienate their own top performers.
Successful manufacturers also understand that every day their customers are challenged to build better products, identify, evaluate and select appropriate components, meet mission-critical deadlines, and beat the competition to market; therefore, the right choice of enclosure product and reliable component selection is critical if those companies are to meet those challenges.
All customers need a supply source that they can trust for comprehensive and current electrical and electronic component information, along with technical innovation. Mindful of this, most forward thinking enclosure manufacturers have, over the past few years, streamlined their production by investing heavily in new and more technically advanced plant and production lines, and are therefore, entering this difficult period with leaner workforces.
Many of today’s more perceptive companies have learned lessons from the past and have experienced the times when across-the-board redundancies and mass layoffs created significant long-term problems. Today, many manufacturers – JCB, for instance - are replacing mass workforce reductions by more targeted, strategic workforce reductions, collectively agreed temporary wage cuts, intelligent product rationalisation and cuts in other discretionary spending.
However, throughout this downturn, companies must recognise the importance of maintaining their brand imaging and should avoid doing anything that could jeopardise their hard won, hard ‘paid for’ position in their respective markets, or take actions that could have a detrimental effect on their particular product offering or service.
Organisations must also recognise the importance of recognising and rewarding their ‘in-house’ talent and have come to recognise why it is vital that maintaining people with the right balance of commercial, technical and management skills is an essential key to the future success of their organisation.
It is also important for companies to try to retain their marketing commitments despite the economic conditions they are facing. In fact, as is now inevitable, as some manufacturers will feel compelled to cut their marketing spend and risk losing presence in their marketplace, many others will take a more proactive approach, and actually increasing their spend in order to gain a higher profile and increase their sales in even more competitive markets.
So, as we look back over the steady growth of the last twenty years or so, whilst reeling at the recent economic mistakes that have brought us the banking crisis, the credit crunch and worldwide recession, perhaps we should try to emulate the courage and foresight of our Victorian forefathers and embrace industrial and economic expansion through technical innovation. Let John Ruskin have the last word:
“There is scarcely anything in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man's lawful prey.”
Steve Gallon
Fibox UK (www.fibox.co.uk)
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