Manufacturing health check

Mar 28, 2011 | Lean, Operations

Another story about a US company going against the trend and “on-shoring” to shorten supply times, improve quality and certainty, and gain control over their operations.

Forward thinking companies in developed economies are starting to recognise that manufacturing is a foundation stone of innovation, that manufacturing really matters, despite the decades of being told  it does not.

Previously, I have made the point that labor costs alone do not make the case for producing product off-shore, largely in China, and the message seems to be filtering through, as firms start to rethink and bring manufacturing home.

Labor costs are easily measured in the P&L, so can be cut, but time is not measured by traditional accounting, making cutting it a less obvious benefit to many, but if you ask a consumer when they want a product, the answer is usually “now”.

Besides, the bean-counters do not mind inventory, as it is in the books as an asset, not usually measured by  cycle time, and the velocity of cash through a business. Not checking item level inventory and cash velocity through a business is like a doctor not taking your blood pressure and heart rate at in a check-up.

On customer service and empty stables.

Mar 27, 2011 | Customers, Lean, Marketing

Last week I had a problem with my mobile internet connection when changing plans. Usually a simple process, something went array in the supplier, and I could not connect and as the “new improved” plan rolled into service, I had nothing, at a most inconvenient time.

I got onto the carrier, and their technical help desk fixed it quickly by stepping me through a process on my computer. All that is OK, but it seemed that the problem should never have been occurred, so fixing it quickly was good, but it was just bolting the stable door.

The following day I got a call from a researcher setting out to get my feedback on my experience with their techos. A very polite young lady, whose first language was not English took me though a series of 1-10 options ranging from outstanding to poor along a number of parameters, each sought measures of my experience with the technician. He scored very well. However, she did not have any questions about the cause of the problem, or how I felt about the fact that it happened, and when I tried to explain that my high marks for the tech assistance should not be confused with the dismay at having had the problem, it all got too much for her.

Customer service is all about preventing problems in the first place, when you cause them your customers are grateful that they were fixed, but will not necessarily forgive you for causing them. To be effective at improving service, they should have investigated the cause of the problem, so they could take steps to prevent it happening again, not check that an empty stable had been well cleaned.

Carbon tax agnostic

Mar 24, 2011 | Change, Personal Rant

     I am getting pretty sick of being told by blathering pollies and nuts from both sides that I am either:

 1. An ignorant climate change skeptic, or

2.  A proponent of a new tax that will the “roon of us all”

    Both are wrong, I am neither, yet there appears to be no sensible middle ground in what passes for debate in this country. It seems that if you oppose the tax, by definition you do not accept climate change, and our part in it as fact, but equally, if you accept climate change, it seems you must by definition, be in favour of the tax. This either/or logic is fundamentally flawed, or more plainly, crap. It is not a game of mutual exclusion.

    In fact I:

  1. Am a believer in the impact humans have had on the climate, and that we need to do something about it or our kids and grandkids will have a huge bill to pay. The weight of scientific opinion appears compelling, and
  2. I am an opponent of the carbon tax as it has been pronounced, as I see little value in adding more burden onto the already fragile part of the economy that is not mining by making them more uncompetitive by the addition of a further cost impost relative to their international competitors than they currently are.

    3. Imposing  a carbon tax knowing that it will do absolutely nothing for global warming, just export jobs and capital at an increasing rate seems to be a simple minded, shallow, and emotional response to what is really a fundamental and extremely serious challenge to Australia Pty Ltd, and we should treat it as such.

    If we really want to take the lead to reduce carbon emissions from coal fired power stations, get serious and legislate to end coal mining, and subsidise the building of nuclear plants around the world contracted to use our uranium, offer free roof top units to all households (wouldn’t that make the pink batts rort look like Kindergarten time), and pour any money we have left into fuel cell, wind, and geothermal power innovation.

    Such an extreme reaction is as dumb as what is being proposed, but just as simple.

Is this the death-knell of brands?

Mar 23, 2011 | Branding, Communication, Marketing, Social Media, Strategy

    How does a branded product withstand the power of a retailer duopoly that controls 65% of Australia’s supermarkets?

    That question has exercised the minds of proprietary FMCG brand owners for over  30 years, since the first house-branded  “No Frills”   products appeared on the now almost defunct Franklins shelves. It has  become a really serious question over the last couple of years as the big two retailers more actively set about building a brand of themselves as more than a place to shop, but also a range of products to buy, following the patterns set in the UK by Tesco and Sainsbury, and it hotted up a month ago with the beginning of the “milk war”.

    The Nielsen Global Private Label report puts Australia’s private label penetration at 14%, not really accurate if you happen to own a milk brand. Milk had a sales channel split between supermarket and route sales  about 60/40, with Housebrands holding  a share around 50% in supermarkets, but nothing in route, until a month ago. Overnight, the “milk war” has dragged sales from route into supermarkets, (I do not have the numbers) and the house-brand sales must be now 85-90% plus, again, I do not have the numbers, just a set of eyes. “Dairy Farmers”, “Farmers Union” “Paul’s” all venerable brands in the milk market have had their value decimated almost overnight.

    Now it seems we have Fosters pulling their beer brands from the shelves of Coles and Woolworths owned liquor outlets  as a defense against the risk of having their brand equity, built over long periods, with huge investments, being trashed by under cost sales by retailers. It may lose them  lots of sales in these outlets, but the 50% of the market still controlled by independent retailers will be cheering, it offers them a competitive advantage over the chains to have brands like “VB” on shelf when Woolies and Coles owned Dan Murphy and First Choice do not.

    Suppliers of produce to supermarkets have faced the dilemma for many years. The retailers simply will not allow proprietary branded products on their shelves, if you want distribution of your oranges, potatoes, or lychees, it is as unbranded produce, or increasingly branded with the supermarket brand. In these categories, housebrand share is 100%, so I wonder where the innovation  will come from in this drive to the bottom of the price equation, and will consumers in the long run be better off?.

    Back to the core question,  to which I wish I had a simple, glib answer, but I don’t. However, I think the answer is tangled up in the way we manage the changes emerging from the digital revolution we are undergoing.

  1. Mass media is dead, the cost cannot in the long term be recovered if hard won brand equity can be destroyed overnight by a retailer who wakes up with a good idea. In the future, mass media will not be used to build brands, with the exception of a few huge multinational brands. Apart from the cost/risk equation, the “mass audience” has fragmented anyway, and is increasingly hard to find. Time to sell your shares in TV networks.
  2. Social media now has a framework for communication, like it or not, that framework has two major  dimensions, called “Facebook” and “Twitter”. As we figure out how to use them, these two related frameworks, and the others offering similar but more specifically targetted access to individuals, will drive the way brands engage  with their adherents, attract new ones, reward their loyalty,  and build equity that is remote from the ravages of duopoly bricks and mortar retailers.
  3. Marketers have to get to grips with this stuff, mostly it is beyond the young brand manager who does not understand, and should not have the power anyway to make brand related decisions. The case for the CEO to be the “Chief Brand Officer” in any business is getting stronger daily.

    4. Building a brand just got a whole lot harder. Dollars to spend now bears no relationship to success, nor does longevity, (facebook had its 5th birthday day before yesterday), so just hanging around is not an option. Instead, markets have to do the hard yards to really deliver value, huge value, to customers, and keep “value-innovating” as if their lives depend on it, as it surely does.

     

     

     

Branding for a “war”.

Mar 22, 2011 | Branding

What sort of goose named the US  operation against Libya as “Operation Odyssey Dawn”? OK, they might have had PR trouble calling it “Operation kill Gadhafi ” or “Operation Sandman mash”, but Odyssey Dawn??? Who are they kidding?

The US military has guidelines that emerged from some dodgy operational names during Vietnam which did little to endear them, but get a grip guys, and use one of the names the Pommies,  (Ellamy) or Frogs, (Harmattan, which refers to the hot desert wind), their allies in this party, are using!!

Wars, or police actions, or whatever this ends up being called are now played out in the public arena, so the rules of marketing, as distasteful as that may be, apply, and the last  thing you want is to have people like me making fun of your stupid brand names.