Building for Longevity? Be The Buffalo, Not the Cow

Written by: Paul Van Metre and David Vuyk

We get it, running a manufacturing business is tough. For every challenging situation that you overcome, there’s another one on the horizon waiting for you. Perhaps you just completed that run of high-complexity parts that were accidentally under-quoted (who hasn’t made that mistake at some point in their career!). Maybe one of your best team members just gave you their notice. Maybe one of your main customers isn’t sending you as many PO’s as they once did, causing you to worry. What about that $100K of overdue AR that you desperately need to pay vendor accounts and make payroll by Friday? The emotional roller-coaster of being a manufacturing business owner can’t be understated.  

These are the every-day challenges that can occur in any season of business, even when the economy is hot, and you’re otherwise firing on all cylinders. Frankly – that can feel painful enough. Now add to that a season of economic instability, global conflicts, fears of a recession, and market opportunities that haven’t panned out as expected. All of this bad news might cause a manufacturer to feel a bit down on their luck, and in many ways, how could you blame them? 

How does one respond to such adversity when you’re low on optimism and it feels like it’s too tough to move on? The answer lies within a lesson from nature: run towards the storm, not away from it.

Perhaps you’re unfamiliar with the phenomenon (as was I until recently): It turns out that Buffalo and Cows have very different ways of dealing with bad weather. As a storm approaches, cows instinctively move away from the storm in a futile attempt to outrun it. Since cows aren’t particularly fast, the storm eventually catches up to the cow as they both move in the same direction, exposing the cows to a prolonged period of hardship as they overlap while moving along.

Buffalo instinctively take a different (and seemingly wiser) approach. As the storm approaches, they head directly into it. In doing so, the buffalo pass through the storm more quickly, exposing themselves to less hardship, getting them to greener and sunnier pastures more quickly than the cows. They also spend less time in the leading edge of the storm with its high winds which are the most dangerous part of a storm. Quite a different outcome when compared to their cow cousins.    

So, Manufacturing Professionals – how do you react in the face of life’s storms?

Perhaps your inclination is to be like the cows, adding insult to injury and you try to avoid the problems of the day. Maybe you’re intuitively more strategic like the Buffalo and take action to prevail over the challenging circumstances that inevitably confront you.

Ask yourself: When’s the last time you saw a successful manufacturing leader who was always stressed out, overwhelmed, and confused about what to do next? You probably haven’t. Successful manufacturers instinctively take strategic and decisive action. They behave like the Buffalo. 

Wondering what actions you should take right now to confidently charge the storm? Our suggestion is to optimize your business for revenue and profitability in these ways:

Be deliberate about your sales and marketing strategy. We see many machine shops that are not sales-driven. Marketing doesn’t seem to be something they ever think about either. Some more mature businesses have been lucky enough to get into a niche or on the supplier list of a few good customers and have ridden that horse for years. But that doesn’t guarantee continued growth nor does it equate to a long-term strategy. Instead, have an understanding of what problems you are good at solving for customers, the types of work that are most profitable for your business, and seek out more of that type of customer. Don’t wait for them to find you.  

Create a robust job-planning process. When the planning process can be thoroughly completed in a shorter amount of time, the job can be executed and completed sooner with fewer mistakes. Our recent blog series titled “Managing Machine Shop Chaos with the 6Ps: Proper Planning Prevents Piss Poor Performance” can help guide you on this further. This may seem like an “in-the-weeds” recommendation, but there are fewer things that will help boost profitability of a shop with little to no expense.

Implement a digital work order system. When jobs are managed in a digital environment, jobs can be simultaneously worked on by different teams. Planners, programmers, and purchasers can complete tasks relating to the same job simultaneously, increasing productivity and efficiency. This increases throughput, gets jobs completed quicker, and avoids having too many jobs fall onto the dreaded “back burner” (among other benefits!). 

Reduce machine idle time. Machine tools can’t make you money when they sit idle. Why do machines sit idle in the first place? Outside a lack of sales activity, could it be on account of poorly managed job planning, raw material, tooling, workholding, and programming details that result in long set-up times? More spindle up-time results in increased revenue and profitability! Analyze what setup activities can be done offline, and develop a kitting checklist and system (like the one built into ProShop) so that you can spend more time cutting chips!

Shorten lead times. When you have systems and processes in place for job planning, raw material procurement, cutting tool management, fixture management, programming, work order execution, inspection, shipping, and everything else that goes into a successful job, jobs can be completed quicker, resulting in shorter lead times and better cash flow.   By being able to parallel process work, and with better visibility, we’ve seen shops cut 7-10 days out of the lead time of their office processes, allowing them to start cutting chips faster and slashing lead times.

Determine which jobs actually make you money. Have a method to determine job costing and profitability. Knowing which jobs make you money and which jobs don’t can be a huge factor in understanding where to focus your efforts. Accurately tracking labor and out-of-pocket costs is essential to knowing which jobs might be slowly bleeding cash from your business. This is also a good time to define your niche and aggressively pursue the type of work you can do profitably.  Don’t just take any work to keep your spindles busy. It might be tempting to do that, but you’ll likely regret taking those loser jobs in the long run.

Invoice sooner and make it easy to get paid. Do what you can to invoice as quickly as possible. Don’t batch your invoicing one day a week – send them every day! Send out customer statements and payment reminders to mitigate late payments from customers. Make it as easy as possible for your customers to issue payments. You might even consider accepting credit card payments. Nobody likes paying credit card fees, but sometimes it might be favorable to lose 3% on an invoice rather than wait for a late payment. Also, don’t extend credit to new customers without a credit check.

Negotiate progress payments on larger projects. When dealing with large jobs, consider working with the customer to negotiate progress payments, a down payment, or at least payment for the raw materials in advance. If you don’t, you’ll likely have to pay your invoice for raw materials and commercial items well before getting paid for the job itself, potentially leaving you with a cash flow problem. Many clients will be open to this if they’re a good partner and care about your success as their vendor.

By no means is that an exhaustive list, but hopefully it stirs some thoughts on what you can be doing to level-up your business and set it up for long-term success.  Many business owners retreat like the cow when things get rough.  If you can find the confidence and plan to charge the storm, you’ll weather it faster than your competitors and come out much stronger when fair skies return.

Charge Forward with ProShop. 

Running your business with effective systems and processes is a wise approach regardless of the season you find yourself in. ProShop has helped 100’s of manufacturing businesses get out of reactive mode by dramatically improving the way they complete their shop floor processes. If you’d like to take your manufacturing business to the next level, consider booking a call with our team today!