Reprinted from the January Business column in Metalforming magazine.
By: Michael Bleau
Having made it through the fray, now may be the best time to redefine your stamping offerings or overhaul your entire approach to the business. Historically, post recessionary economies represent some of the best times to start new business ventures. Encouraging entrepreneurial thinking within your workforce can be a catalyst to new opportunity. Taking in a fresh perspective by questioning everything you do, why you do it and how it came to be may create some uncomfortable conversations with individuals who tend to be averse to change, but the payoff exceeds a few bruised egos. To really dig deep takes an unwavering commitment by management. It also may benefit from an outside perspective that isn’t restricted by political or emotional equity—someone who isn’t concerned with tipping the sacred cows. Recognizing and embracing alternative strategies can be a challenge that may simply escape longtime executives and employees who may have had little opportunity for exposure to other approaches—you don’t know what you don’t know.
A recent conversation with a retired stamping executive highlighted the importance of making the hard choices, challenging the status quo and reaping the rewards of changing the rules governing the way we do business.
Frank Maday has a long history in stamping having served his tool and die apprenticeship at Chrysler, then moving onto becoming a tool and die manager at VW, tooling and QC manager at Budd, tooling manager for Ford Walton Hills and then, where our story begins, as VP of engineering at Mayflower’s US operation. The few years leading up to 2000 were taxing on Mayflower’s European operations specifically their vast operation in Gaggenau, Germany. In early 2000, Frank was named managing director for the division where he immediately began dissecting the multiple-plant campus’ $65-million business to better understand how they were losing nearly $8-million annually. As a tier-one automotive supplier, Mayflower produced stampings and finished assemblies for European automakers, including catalytic converters and exhaust systems. To understand the cost structure, Frank implemented detailed value mapping exercises to break down material, labor and general overhead costs on a per job basis. This quickly uncovered a number of jobs that were generating losses with each part shipped. After assembling the details, Frank led efforts to approach customers in an attempt to justify piece price increases. In those cases where the customer refused, Mayflower tactfully as possible, gave back the non-profitable work. This helped, but it did not solve the basic problem of having too little opportunity and too many competitors driving prices down.
In a game-changing move, Frank shifted Mayflower’s basic focus of being a tier-one supplier to becoming a tier-two supplier. This had the immediate effect of growing their customer base from around six to over thirty—effectively converting competitors into prospective customers. Furthermore, it placed Mayflower at the top of the tier-two competitive food chain. Their experience as a tier-one supplier simply better prepared them in terms of equipment, capabilities and processes. Their overall capability simply surpassed that of the other tier-two suppliers they were now competing against. It also changed the nature of how they conducted business. The company was able to shutter now unnecessary and consistently unprofitable engineering centers, and to thin bloated middle management by creating self-directed teams—all told, a reduction in headcount by 20%. By concentrating on the elimination of all non-value-added elements, improving work flow and methods and refocusing their business into a tier-two operation, the company quickly flipped their losing streak. Within 18-months they recognized profits of $4-million on sales of $60-million.
Encouraging entrepreneurial thinking and sparking some bureaucratic controversy can be productive. Consider the following;
As you embark on the post recessionary economy of 2010 recognize that you’re in the position, possibly the best of your career, to recast your business into something stellar. Don’t let this moment pass. Identify and take advantage of this opportunity, invent, redefine and break free from the things that constrain you.
Served in various capacities within capital equipment engineering, robotics, project management, sales and marketing.
L&A collaborates with Industry Scope, Prior to L&A Nancy was Vice President of Public Relations for a full service B2B agency.