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Whether the measure is growth, profit, return on investment, market share, or another similar metric, manufacturers are constantly looking for opportunities to improve business performance. At the same time, the availability of resources, time and investment to apply to improvement efforts is limited.
As a result, manufacturers need to select and execute their business improvement efforts with surgical precision. They must select just the right spots to apply their business improvement energy to ensure that real and meaningful results are achieved. A lot is written these days about the need to focus on non-value added activity and to eliminate waste–this thinking; this needs to also apply to our business improvement efforts, as nothing is perhaps as wasteful as spending time to improve a part of the business that doesn’t contribute to overall business success in a meaningful way.
So where do we start? How do we find “just the right spots”?
As with any journey, start with a clear view of the destination. For manufacturers, the end destination, or goal, is to generate wealth for owners. Excellent customer service, world-class production or outstanding product quality is the means to the end goal, not the end goal itself.
Before you think that manufacturers must focus on shareholder value at the expense of creating a positive work environment, implementing strong sustainable practices or being a good corporate citizen, this is certainly not the case. Incorporating these elements into your business supports the goal of shareholder value creation. The point here is to make sure the end destination is never lost, and the goal of shareholder value remains a central, guiding focus.
Where do we look for shareholder value opportunities? While opportunities likely exist within your facility’s four walls, many are in other areas of your value delivery process. The first step to finding these is to identify the value delivery process for your business.
The value delivery process is much like your supply chain, as it generally captures activity that starts from raw materials then flows through the manufacturing process, and on to product and service delivery to the end customer. This process may include multiple levels of suppliers, as well as multiple levels of distribution and, of course, all production activity.
The value delivery process differs from the supply chain, however, in that it is focused on delivering value to the customer, and not just on delivering physical goods and associated information.
So what’s the difference? In the case of a company like, for instance, Lululemon, the supply chain delivers yoga pants and other apparel to stores for sale to the end customer. While this activity clearly adds value for the customer, I expect that Lululemon’s customers also value the company’s brand, as well as the design of the apparel. Lululemon’s value delivery process is more than its supply chain, as the value that Lululemon customers pay for comes from more than the physical manufacture and delivery of product.
So while having a strong, efficient supply chain and production process is clearly important, it may not be all that is required to deliver outstanding customer value. The ultimate prize is to have a value delivery process that delivers excellent customer value, and that drives greater levels of shareholder value. Achieving a high level of sustainable shareholder value cannot be done unless the business is also highly effective at delivering excellent customer value.
In summary, manufacturers need to first have a very clear understanding of what their customers value, and an equally clear understanding of their own value delivery process. With this foundation in place, they can focus on finding the improvement tactics that will have the greatest positive impact on shareholder value.
Related Topics:Business Performance
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