Manufacturing Business Growth: is there any hope?

Last Tuesday, Bill Testa (Vice President and Economic Advisor at the Federal Reserve Bank of Chicago) showed some interesting data on Current Developments in Manufacturing Activity at the annual meeting of Chicago Manufacturing Center's Board of Directors. In all the doom-and-gloom numbers was one interesting and unheralded number that speaks to the opportunity for manufacturing profits for Greater ChicagoLand's 12,500 small and medium sized manufacturers.

Bill's data showed that all manufacturing capacity is at 70% untilization. Knock out the sectoral peaks and valleys (petroleum and coal products sector at 88%, and iron and steel at 41%), and what are the implications? Well, let's assume that when a manufacturer is at 85% or higher capacity utilization, the company faces profitable growth challenges that require the application of Lean, Theory of Constraints, and other continuous improvement approaches to overcome.

There's about 15% of capacity available (on average, in sectors that matter in Chicago) for instant exploitation, which when sold right, creates gross margins that pretty much all fall to the bottom line as pure profit, or EBITDA. The sales guys will immediately cry that they need marketing support to sell that capacity, and that's true (but it isn't all they need). Do your own math, but anyway you run the numbers, you're going to come up with some nice EBITDA growth.

What should small and medium-sized manufacturers do first and right away to make money from that 15% available capacity? Industrial manufacturers have relatively modest marketing skills, so why not make an intense, highly focused, effort to create more effective marketing messages, and reinvigorate the sales guys with new hope and confidence? How many industrial manufacturers have marketing messages that clearly explain what's in it for the customer by choosing to buy their products? Very few. Time after time I see Chicago Manufacturers' expensive websites, catalogs, glossy trifolds and all manner of other marketing collateral pieces that are all about feeds, speeds, specifications, technical data, and features, all presented in visually unappealing, dense and hard-to-read tables, charts, and graphs. Almost none of them tell me what customer problem they're solving, and how much customer value is created.

Chicago Manufacturing Center's first call to action for the small and medium-sized manufacturers in ChicagoLand who seek top line growth and higher profits in the hardest economic outlook we'll ever see? Spend the next ten work days improving your marketing message to answer the most basic customer question: "What's in it for me?" If you're a ChicagoLand manufacturer, create customer pull by specifying the numeric benefit advantage received, enjoyed and experienced when customers purchase your products.

Here are some ideas to stimulate your thinking about how to do that:

• translate your equipment's feeds and speeds into $$$ value for your customers (their profitable output per hour, their shorter lead times, their improved on-time delivery performance - everything your equipment will do to put money in your customer's pocket)
• convert the tolerances held by the capital equipment you make into the $$$ value received by customers when their scrap or rework is reduced or eliminated when they use your equipment
• turn your exotic alloy specifications into the $$$ value created by increasing the planned service intervals after your product is installed at the customer.

Next time I'll talk about the two other marketing message questions any manufacturer seeking to profitably grow their top line must answer - before their competition does.

Alistair Stewart
Manufacturing prophet with a passion for Manufacturing Profits