A new report from the Information Technology and Innovation Foundation (ITIF) indicates that manufacturing job loss is not due to automation, but instead due to the activities of countries who incentivize transfer of manufacturing jobs through their policies. Those of us who work in manufacturing already know this. Yes, automation is a factor, but not everything can be automated cost effectively.
The good news is that folks who grew up in the service sector now have a little “data” to influence their opinions about the relevance of domestic manufacturing jobs. I’m not a proponent of protectionism. However, I do believe that countries with strong manufacturing sectors prosper. I also believe that manufacturing regionally (vs. perpetually chasing the lowest cost manufacturing market) is more cost effective for many products. Back when I was teaching leadership and marketing classes at a couple of local universities, I frequently brought up the example of Henry Ford because his choices apply to both curriculums. He was criticized by his peers for the above market wages he paid his employees. He pointed out that his production lines could build more cars than the rich could buy and that he needed a middle class capable of buying cars. We need transformative manufacturing jobs to sustain a middle class. By transformative, I mean jobs with a path to higher compensation as an employee’s skills increase. The service sector doesn’t have enough of those. A manufacturing resurgence floats all boats by increasing consumption, lowering governmental “welfare” costs associated with underemployment and creating a growth driver for the middle class that isn’t paid for by our taxes. To me, the middle class is the conscience of the country and also its biggest engine of consumption. When trade is balanced that is good thing globally and well as domestically.
As I’ve written before, a U.S. manufacturing resurgence is also good for EMS companies. Reports such as this signal changing attitudes. It is the right time to invest in marketing strategy. PMCI can help. Learn more here.
Some electronics manufacturing services (EMS) companies do a great job of differentiating themselves, but many don’t. If your company copied what your nearest competitors have on their websites, touts its equipment as its primary advantage, tells everyone it is the industry’s best kept secret or says it is customer-centric; it is really just screaming me too.
The reality is that within a specific size class most EMS companies have the same equipment and industry-standard processes. What makes a difference is the expertise of the team and the home-grown systems and processes that solve customer problems.
Yes, I used the word problems instead of the nicer euphemism, challenges. Companies rarely outsource manufacturing projects that have perfect design and quality metrics, well-understood demand trends and no surprises. When things run that well, they normally want to keep it in-house. Instead, they either outsource because they don’t want to be in the business of manufacturing or because that product doesn’t fit well into the mix of manufacturing they want to keep in-house. The end result is that EMS companies are in the business of managing controlled chaos. Outsourcing decision teams understand that and are looking for companies most likely to make them look good. When all competitors look the same, their safe choice is to make the decision on price. When one appears to have a better ability to address the issues that keep them up at night (and will get them fired if the contract manufacturer fails), that EMS company will likely get coached into meeting a reasonable target price.
So how do you package the secret sauce that makes your customers think your company is the best but isn’t obvious until they become your customers? There are two key steps. The first is understanding enough about your secret sauce to sell it (and yes, PMCI has tools for doing that), and the second is building a strong team sell. Prospects won’t understand that your team (engineering, production, program management, purchasing) has a superior solution, if they aren’t exposed to your team until after they are customers. Companies that successfully differentiate understand that and selectively engage team members with prospects throughout the sales cycle. Prospects aren’t sold on capabilities, they are exposed to the expertise of team members who discuss how the problems that keep them up at night are going to get solved if they select that EMS provider.
How do you turn your entire staff into that powerful a salesforce secret weapon? PMCI’s EMS Concentric Selling™ one-day onsite seminar can help. The course is designed for sales, program management and key staff members in engineering, manufacturing and purchasing. The goal is to provide a common framework of industry and selling process understanding to the members of your team who interact with customers and prospects. Case study breakout sessions are designed to help team members learn to develop specific account strategies and work together to close the sale. These sessions also help break down the disconnect that often occurs between sales and the technical staff in terms of what ideal projects look like. Request an informational brochure here.
As I write this at the beginning of February, President Trump is establishing himself as a man who follows through on campaign promises. Assuming that trend continues and there is a clear path to tax and regulatory reform, there will also be changes in OEM sourcing strategy. It may even be the level of shift seen when China devalued the yuan.
What does this trend mean for US regional electronics manufacturing services (EMS) providers? Beyond the immediate benefit of regulatory and tax reforms that has many of the EMS CEOs I know practically dancing in the streets, I think it will open the door to significant opportunities across the board. When OEMs outsource offshore, they tend to bundle all their projects. There are two reasons for this. First, a smaller supply chain is easier to manage at a distance and second, low cost labor markets typically have a higher percentage of “one size fits all” EMS providers. When OEMs outsource in the US, they tend to look more closely at the value of tailoring their outsourcing strategy. Niche projects may go to suppliers better interested in those volumes or technology associated with those projects. There may be interest in keeping new product manufacturing in close proximity to the engineering team. There may also be a desire to keep some manufacturing in-house and source production that is not a fit in close proximity. While these scenarios already exist today, tax and regulatory policies which incentivize re-shoring will ultimately increase the number of available opportunities.
The challenge is that if your company is the EMS world’s best kept secret you may not be on the bid list. So, from a marketing perspective, this is the right time to be developing a marketing strategy that will get your company’s name more widely known. It is also the right time to be reviewing existing accounts and looking for additional business opportunities either within the account or other divisions of that customer. The bottom line is that if the Trump Effect continues companies that weren’t on your company’s radar screen as prospects may be ready to buy your services. But they won’t be talking with you if they don’t know who you are. EMS providers that are upping their networking and marketing activities now, will benefit when those companies start re-evaluating strategy.
Powell-Mucha Consulting, Inc. specializes in helping companies develop marketing strategies that build market mindshare and highlight each client’s unique capabilities. This differentiation can be especially important in attracting OEMs pursuing niche outsourcing strategies.We also offer sales and program management analysis, coaching and training services, which can help your team quickly broaden their focus. Contact us if you’d like additional information.