Is your value network world class?
Over the last 40 years I have seen significant change in how manufacturing businesses compete. We have moved through the quality revolution which brought new expectations around quality and cost, to the lean revolution and associated methodologies delivering better service, value and reduced costs.
Businesses then shifted their focusses onto supply chain optimisation, bringing end-to-end thinking. Their approaches moved from comparing their business models with their competitors’, to comparing their supply chains. Top performing supply chains became enabled by ERPs, and are now enabled by value networks, no longer in point-to-point structures but integrated webs of suppliers and partners delivering products and services seamlessly through a multitude of channels. Of course, the rapidly increasing deployment of AI further fuels optimisation and connectedness in these supply chains.
At the root of this change in manufacturing are constantly moving market-led goalposts for how businesses better deliver what the end customer wants, when they want it, at the lowest cost possible. Understanding this value equation and then aligning their service delivery model to meet and exceed this expectation better than competition is what separates the wheat from the chaff, and industry leaders are doing this at the most competitive cost to maximise their margins.
Very few, if any, businesses can do all of this by themselves. Generally, larger businesses with more scale, buying power, and connections have more capability than SMEs. However, interconnected SMEs can create highly efficient clusters which can compete with anyone and be highly agile and scalable.
As we know NZ has a high proportion of SMEs and this presents both an opportunity and a risk.
The opportunity is that we can create high-value clusters and that can be highly agile, integrated and capable of delivering high-value products and services through multiple channels to customers around the world. We certainly have a good international reputation, with great examples of success in different fields in doing exactly this.
The risk is that if we are unable to create these value networks then overseas competitors will fill the gaps and erode kiwi market share, and ultimately eat our lunch. Technology is enabling competitors from anywhere in the world to provide goods or services into markets with lower barriers to entry (tariff discussions aside) and low-cost delivery models.
The challenge as I see it is;
1.We need some co-ordinated effort and focus on some key sectors to create exemplars. A global example is Lego, which has resulted in many clusters of integrated suppliers to develop and deliver products, and innovation (who saw Lego movies coming?). Of course, this is a large company than then creates a beachhead for clusters, but we have this too! I am hoping the government can help here alongside universities and businesses. We have some clusters underway already – the question is how can we accelerate this?
2. We need to understand what is required to create a world class value network. Many businesses in NZ do not know how they compare to their global competition in terms of value delivery, productivity, cost of delivery, or digital maturity. If we don’t know where the bar is then how can we know what we need to do to remain competitive? Very few businesses do benchmarking, sometimes due to size, being a SME. But at a time when NZ needs more export dollars and better productivity there is no excuse for being unaware of how your business compares. SIRI (Smart Industry Readiness Index) assessments are a low-cost benchmarking tool available, and these have been previously funded by the government. Supply chain assessments and manufacturing benchmarking are also now relatively quick, affordable and easily available.
3,Businesses need to come together and engage with external service providers as part of their value network to provide the capability that they do not have and are unlikely to develop. The rate of change is accelerating – who can develop AI solutions you will need to stay competitive? Who can help you implement technology solutions to optimise your supply chain network and partners networks? Who can keep you abreast of the rapidly changing digital environment, and ahead of the curve with the latest technologies? These relationships are no longer tactical point solutions to address current problems, but are now part of the knowledge capability of the integrated value network and are a strategic competitive advantage (or disadvantage if this is not in place). The relationships with these providers should reflect the strategic nature of this, and be seen as an ongoing relationship, not a cost.
If you want to know more, discuss further or need help creating your cluster drop me a line.
