Dec 9, 2012 | Branding, Change, Lean, Operations
Tim Cook, the Apple CEO has just come out and announced that Apple will restart manufacturing in the US, starting with an unnamed Mac computer model, some time in the near future.
The driver of “offshoring” to sources of cheap labour to escape the high manufacturing labour costs in developed countries, has been a convenient excuse for a lack of ideas by the management of many companies. Virtually all the manufacturing businesses I interact with have an operational labour cost of substantially less that 20% of total BOM and operational logistics costs, so why not work on the other 80%? Often I suspect because it is easier to join the herd charging towards China than do the hard yards on their own business model.
“Outsource the manufacturing, and let the capacity utilisation be someone else’s problem”. Clearly this happened in Apple’s case, as the business tanked in the late eighties, cost cutting led to the closure of factories, and outsourcing of manufacturing and key parts of the technical design, remained the model through the revival led by the ipod, iphone, ipad, and siblings.
However, the competition has now caught up, and volumes are not growing the way they were. Apple may be hugely profitable, but as they no longer ship the volumes, capacity utilisation in their supply chain must now have swung away from over utilised to underutilised in a very short space of time. Android is rapidly becoming the OS of choice in both phones and tablets as Apples share drops, so the Apple profit bubble must be getting a bit fragile.
It is significant (I think) that Samsung is a major supplier to Apple, what a competitive advantage they have been handed by foreknowledge of component specifications, and delivery dates, and now the supplier has become the major competitor, competing on the ground they are in a position to choose.
This boom/bust cycle of manufacturing volumes imposes huge costs on the supply chain. Having too much capacity and carrying the unrecovered overheads is as bad having too little, and chasing output targets that end up in carrying high logistics and operational costs while compromising quality. Weather this is owned capacity, or outsourced, it remains a part of the supply chain, and somebody is paying for it, generally the consumer who has little motivation to pay for stuff that does not add value.
Perhaps I am a cynic, certainly I have no insight into the workings of Apple, but the move to announce the re-opening of manufacturing in the US without any detail at all sounds a bit “iffy” to me, perhaps a PR gesture to deflect some of the odium from the ongoing saga of Foxconn. Just put the word Foxconn into the search engine of a media outlet, this one Huffington Post, and you get over 6000 articles in response, and not one is doing the Apple brand any good at all.
Too little too late, or the beginning of another swing in the cycle?
Dec 7, 2012 | Governance, Sales
We are all pretty familiar with the typical sales funnel, wide at the beginning, narrowing progressively as you get closer to the “business end”. It is a simple, descriptive metaphor for other than an impulse or regular consumer purchase, but like most models, rarely reflects reality.
Prospects come into, and leave the sales process at all points, and then often come back, for all sorts of reasons that have nothing to do with the efforts of a sales/marketing program.
Given that is the reality, it follows then that the relationships that evolve are far more valuable than the position of any prospect in the sales funnel, as it is the relationships that evolve that enable lead nurturing and recycling through the irregular, stuttering, and often unpredictable sales cycle.
A much better metaphor in many cases may be a game of snakes and ladders, but that is nowhere near as neat and tidy in a board paper.
Dec 6, 2012 | Lean
There are three types of activity in any business, from the small one man service operators to BHP.
- Doing all the things that generate revenue, today, tomorrow, and into the future,
- Doing the necessary things that support the generation of revenue,
- All the other crap that takes time, costs money, and does not add any value to anyone, just costs.
Every person in business should be maximising 1, ensuring that the time and resources spend on 2 are as productive as possible, and eliminating 3.
I had a carpenter at my home a while ago, building a deck. Watching him prepare a joist, I noticed the rule of three operating.
- Cutting the joist was adding value, and ultimately what I was paying him for
- Setting up his drop saw, organising to feed in the timber to be cut, measuring the wood for the cut point, and a few other things were necessary in order to cut the timber accurately.
- The walking back and forward to his van to bring in things he had forgotten, looking for his pencil, then leaving it in an inappropriate spot, and a whole lot of other stuff, was waste.
- It took 10 seconds to cut the wood, probably 3 minutes to do all the necessary stuff, and another 15 minutes to do all the unnecessary stuffing around. For a 10 second cut, I paid for just over 18 minutes, of which 15 minutes was waste.
The rule of three at work.
Dec 4, 2012 | Leadership, Management, Strategy
Listening this morning to a discussion about the value of a review of the GST sharing regime currently in place, a small part of the GST regime, I was reminded of the geometric nature of the complications that arise from complexity of a system.
The greater the amount of data, the greater the opportunity for analysis, apparently. However, the greater the amount of data, it usually follows that the level of complexity also increases, and as complexity increases so does the number of interactions, and cause and effect relationships that need to be anticipated and interpreted.
Unanticipated relationships that have an impact on the performance of the system, but have not been “risk-assessed” can create a huge risk to systems, simply because they are not in the rule-book. The system is supposed to be “fail-safe” so the response to an unanticipated situation is not enabled. Remember Lehmann Brothers, a massive institution that on paper was AAA, but in reality was so complex that risk was not easily assessable except with hindsight.
Finding the needle gets harder as the pile of hay gets higher, and the complexity of hay-stack increases.
How complex is your business model?
Dec 3, 2012 | Management, Uncategorized
A really good explanation of the Kickstarter process.
Crowdfunding is not the new panacea for new ventures to raise money, you still need a robust business plan, the right people, and a value proposition that really works, but it is an option not available just 2 years ago.
Astonishing evolution of a funding option.
