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Risk, reward and refinement are the “three R’s” of today’s manufacturing world. As the mainstream media relentlessly drone on about an impending recession, a look at successful manufacturers would indicate a more positive outlook. Those using the “three R’s” of today’s manufacturing world continue to succeed.
At the recent Automated Imaging Association (www.machinevisiononline.org) Business Meeting in Orlando, FL, more than 150 representatives from the leading vision companies in the world heard economist Dr. Lawrence Chimerine (www.larrychimerine.com) explain the dynamics of the global business environment. Chimerine spent a great amount of time speaking about the last of the “three R’s”-refinement. To dispel fears about recession, Chimerine explained the actual significance of monetary policy, currency valuation, commodity supplies and prices, and the roles that central banks and the Federal Reserve play in global economies. He shed light on the reality of the credit and housing crunches in the United States, dispelling some of the media’s hyperbole. In the simplest of terms, Chimerine showed how all these economic “trouble spots” were a normal “refinement,” or adjustment, of market forces that, in some cases, must happen so that economic opportunity and growth can occur.
I can’t do justice to Chimerine’s work in this short column, so I recommend picking up one of his books or looking for his columns in some of the leading newspapers and journals. I also recommend picking up any of Thomas Sowell’s books on economics to get a better understanding about basic economic mechanics, as well as some of the myths and fallacies perpetuated by politicians and the media.
Chimerine also told the audience about the dynamics needed to succeed in the new environment. His advice, while not new, bears repeating. Manufacturers need to invest in new technology and products, service their clients better, control both raw material and production costs, and build better quality products. These mandates are not a one-time instance. Rather, they must be done each day and repeatedly “refined” and done better. As manufacturers, you constantly review and revisit and refine your manufacturing practices and company direction to stay ahead of competitors.
The fact that manufacturers are competing and thriving speaks to the other “R’s”-risk and reward. Opening a business, developing a new product line, expanding one’s market reach, hiring an employee, or buying a piece of equipment or software is all part of “risk.” Such activities may seem like mundane exercises, best suited for a “Business 101” course, but those who underestimate the risk in such activities do so at their own peril. According to research from Bradley University, “The failure rate for new businesses seems to be around 70% to 80% in the first year, and only about half of those who survive the first year will remain in business the next five years.” Longevity in business is not an antidote to failure, as research shows a 25% to 30% failure rate for companies open for 10 years or longer. There is risk to being in business, let alone to making decisions that will help that business increase and grow.
“You must constantly ask, going forward, ‘What if I am wrong? How much will it cost me?,’” says Chimerine.
The reason for risk is the last “R”-reward. Despite mainstream media reports, the 2007 economy was a growing one and manufacturers benefited. The December 2007 durable goods order numbers, the latest available, showed a 5.2% increase in orders for that month. This was the sixth increase during the past seven months. Manufacturing tool consumption and related products increased during 2007. And, anecdotal reports from individual companies, such as yours, support the idea that the risks you have taken are being rewarded by increased profits, increased market share and overall company growth.
Keeping your business productive and growing is a process that requires some complex decisions. But underneath all that complexity, successful manufacturers are supported by those three “R’s” as a guiding principle. In doing so, they can circumvent that fourth, unnecessary “R”-recession.
How does your company use the “three R’s”? Share your thoughts with me at email@example.com.