Ian Walsh, Partner, Argon & Co NZ

 

Over the last 40 years I have seen the change in how manufacturing businesses compete.

We have moved through the quality revolution, bringing new expectations re quality and cost, the lean revolution and associated methodologies delivering better service, value and reduced costs, supply chain optimisation, bringing end to end thinking and no longer business vs business but supply chain vs supply chain enabled by ERPS and now value networks.

With no longer point to point, but integrated webs of suppliers and partners delivering products and services to end users through multiple channels seamlessly and of course the rapidly increasing deployment of AI to enable this.

At the root of this is how do businesses better deliver what the end user wants, when they want it and at the right cost?

So, understanding the value equation and then aligning their service delivery model to meet and exceed this expectation, better than competition, and all the while doing this at the most competitive cost to maximise margins.

Very few, if any, businesses can do all of this by themselves. Although larger businesses with more scale, buying power, connections have more leverage than SME’s. On the positive side though interconnected SME’s can create highly efficient clusters which can compete with anyone and be highly agile and scalable.

So, as we know NZ has a high proportion of SME’s and therefore presents an opportunity and a risk.

The risk is, that if we are unable to create these value networks then our competitors will fill the gaps and erode our share or margin and ultimately eat our lunch.

Technology is enabling competitors from anywhere to provide goods or services into markets with lower barriers to entry (tariff discussions aside) and low-cost delivery models.

The opportunity is we create these high value clusters and enable them to be highly agile, integrated and capable to deliver high value products and services through multiple channels to customers around the world.

We certainly have a good reputation, some great examples of success in different fields in doing exactly this.

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?
2. Of course, this is a large company that 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; how can we accelerate this?
3. We need to understand what is required to create a world class value network. Many businesses in NZ do not know how they rate versus global competition in terms of value delivery, productivity, cost or delivery, let alone digital maturity.

If we don’t know where the bar is, how do we know what to do? Very few businesses do benchmarking, some of this is due to size being a SME, but at a time when NZ needs more export dollars and better productivity there is no excuse.

SIRI (smart industry readiness assessments) are available and have been previously funded by the government (not sure if this will continue but hoping so, (regardless they are not too expensive). Supply chain assessments and manufacturing benchmarking are all now relatively quick and available.

4. 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 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 environment and ahead of the curve?

These relationships are no longer tactical point solutions to address current problems but now part of the knowledge capability of the integrated value network and 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.

Of course, if you want to know more, discuss further or need help creating your cluster drop me a line. Ian.walsh@argonandco.com