As we move into 2020, many businesses are reflecting on 2019 performance and planning for 2020 and beyond. People in my consulting communities have asked me what major trends manufacturers and distributors should consider as they plan for coming year. In no particular order, here are the top trends to consider, regardless of the type of business you’re in.
Plan For Growth
A recession is unlikely in the near future. A banker recently asked me if we should do a presentation on how to prepare for a downturn. I said no…we need a presentation on how to prepare for growth! Many forecasters have predicted a recession for the last several years, and look what’s happened…not only are we at record levels for the stock market, but business and consumer optimism are also at record highs. Don’t be a wallflower while your competitors move past you; get into the express lane and build for the future. Make a contingency plan, but don’t let fear of recession hinder your growth.
Productivity Will Become a White-collar Issue
With the increased use of AI and automation, as well as the movement of labor resources from offshore back to the US and its neighbors, there will be more white-collar workers on the shop floor and in warehouses. This creates challenges not only in talent acquisition, but in managing costs and reducing turnover. The focus of productivity improvement programs will change from direct labor to overheads such as engineering, sales, IT, supply chain, and automation implementation. I already see companies not spending enough time planning and controlling overhead costs, and those costs will rise rapidly in 2020 and beyond.
Speed and Agility Are Vital for Success
Delivery times are declining rapidly. Remember when two day delivery seemed unbelievable? Last year, one day became common, and I recently saw that Amazon is now pushing for four hours. Supply chains are being challenged like never before, and just being more efficient isn’t going to solve the problem.
Being agile means being able to customize not only products, but also services, delivery, returns processing, repairs and more. Inventory turns below 12 will increase the risk of obsolescence, not having the newest designs when the customer wants them, and consumption of working capital resources that companies can’t afford.
Partnerships Will Drive Growth and Profitability
To respond to speed and agility, companies will be looking outside their own walls for resources to leverage knowledge and technology. For example, leading companies are using well-managed Vendor Managed Inventory (VMI) to speed time to market and reduce inventory and costs. More and more contract manufacturers are including assembly in their product portfolios. Value-added will be table stakes for products and services.
A Return to Face-to-Face Communication
Not only in-person meetings, but Zoom, Skype and other services where you can see and interact with the other person will shorten lead times on problem resolution. Creating strong partnerships will allow your company to boost speed. The use of email will increase, but mostly for confirmations and quick replies. People will be calling and e-meeting much more to leverage their time while building stronger relationships.
The Take Away
The Greek philosopher Heraclitus is thought to have said, “Change is the only constant in life.” I would change that to, “Rapid change” for 2020. Continuous improvement is not enough. Exponential improvement throughout your organization and beyond will be essential for growth and profitability in the 2020s. If you would like to talk about how you can plan for exponential growth, give me a call.
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