In orderd to manage global competition, enterprise must succeed in at least one of these dimensions:

  • Cost structure
  • Quality
  • Speed

Best company is competitive in all of these sections but depending on the product it should pick one dimension to focus on. Manufacturing mass products like baking powders, raw metal and paper business should be cost efficient. Bulk products are all the same and almost only way to stand out is price. Quality is seldom the key factor.

Manufacturing luxus items like expensive cars and watches quality is more important than price. Also brand itself has value. High technology products like computers, medicines and consumer electronics are the field of speed. Especially product development and launching should be fast so that you are not run over by your competitors. It’s lethal.

How to stand out?

Good way to stand out is to have different strategy than your competitors and focus on different customers. Example when sending packet customer can send trough post office or express freight. Lets have American companies USPS (U.S. Postal Service) and FedEx (Federal Express) as an example. USPS is cheap and FedEx is costly. Why would anyone send via FedEx?

Operation strategy of FedEx is not focused on price, it’s focused on quality which in this case is speed. (It’s not speed itself, it’s the quality that customer has that comes in the form of speed). FedEx’s logistics is arranged so that it makes fast deliveries possible. USPS in the other hand is focused on costs and it’s supply chain is resource efficient which makes it cheaper and slower.

Between these two companies we can draw a line that is called efficient frontier. It will work as an indicator for other companies competitiveness. X-axis is speed and Y-axis is costs. FedEx is placed on the upper right and USPS bottom left.

Efficient frontier formed by USPS and FedEx.

Efficient frontier formed by USPS and FedEx.

If new firm is coming to market it have to be able to place itself underneath this line. If it will position itself above the line it’s operations are inefficient.

Production strategy

Production managing is not only copying others. It’s not about some trendy philosophy that production uses. Like This is Lean book says, Lean is a mode of thinking, not some predetermined way to do things. None of the practices is working in all factors. It could be copied in the same field or product but not for entirely different product. Problems should be faced one by one, there is no predetermined way to solve them.

Leadership

Good leader know manufacturing process and the way the factor works. He solves problems trough experience and intuition. This way problem solving is fast and it works. Practices that are copied from the outside are not necessarily workable elsewhere.

Good leader knows enough theory, manufacturing process and the way factor and it’s employees work. So leader must have good basic knowledge. In addition leader has intuition which leader uses to apply theory in practice.

Leader consider a lot of things. How decisions will affect on workers, process, logistics and economics. Good leader sees things with a wider perspective and is not focused on narrow sphere of influence. Consequences for the previous and next process are considered thoroughly. Part of this is subconscious so good intuition is necessary in order to consider all the influences that comes from own decisions.

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Jesse Uitto

Written by Jesse Uitto

Entrepreneur, Purchasing Professional

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