What can manufacturers do, more than anything else, to be successful? Focus on innovation, according to the 2010 Georgia Manufacturing Survey. Even though the survey focuses exclusively on manufacturers in Georgia, its results are certainly applicable to manufacturers across the United States.
In the article “Georgia Manufacturing Survey 2010: Recession Makes Innovation More Critical Than Ever for Competitiveness,” it says:
The recession has expanded the business advantages of Georgia manufacturers that compete on the basis of innovation in new or technologically improved products, processes, organizational structures or marketing practices. These innovative companies are more than twice as profitable as firms competing on the basis of low price.
More than twice as profitable! Why is there such a big difference between innovators and cost cutters in the manufacturing industry? I think it is because innovations bring costs down in the long run, while price cuts increase sales in the short term, but decrease total revenue. Plus, innovations allow companies to gain competitive advantages that they otherwise could not have obtained.
What kinds of processes can manufacturers improve to be more profitable? Philip Shapira, one of the survey’s directors and a professor in the Georgia Tech School of Public Policy, had this to say:
“Many people think that innovation is something that has to be done in a lab, but our results show that innovation occurs more broadly, particularly as companies partner with customers and suppliers to take into account their needs for a new product or process.”
I suggest the best processes to improve are manufacturers’ supply chain and inventory management systems. If you improve your supply chain management, you decrease the risk of shortages and you improve your inventory management system. If you improve your inventory management system, you increase the efficiency of your manufacturing process. This leads to better customer service.
To be innovative, you need the right tools. Start by using manufacturing inventory software to help you organize your materials and manage your relationships with suppliers. Get the pulse of your customers to find out what product features are most important to them. And then get to work giving your customers what they want!
Why are innovative manufacturers more successful than other manufacturers? Because they listen to their customers!