Situation: A company uses outsourced manufacturing but is concerned about inventory damage by the manufacturer. Tests have been established to assure both visual compliance and functional performance, overseen by a company employee. Still the company is receiving too many unacceptable parts. How do you minimize inventory damage by an outsourced manufacturer?
Advice from the CEOs:
It is perfectly acceptable for a vendor of consigned materials to bear the risk of product that is not to specification.
In any contract for manufacturing, require that the vendor carry insurance to cover the full cost of materials and processing in case of damage either during manufacturing or shipping.
It sounds like this is a new opportunity and situation for the company. In the process they have not guaranteed that both cost and risk are covered.
There is no point in assuming all this risk.
For future opportunities like this, take on the work as a time and materials project at an appropriate hourly rate for the market, and with a significant mark-up to cover risk as the project is transferred to a contract manufacturer.
Another option is to take on the project under a project management contract, and to bill engineering separately.
This situation sounds familiar for an evolving project. In the future try to unhitch the manufacturing piece from the engineering. Engineering should be more profitable, which will allow the company to more successfully manage the project into early manufacturing.
Strategically, this could be a good move for the company provided they partner with a reliable vendor to facilitate early stage manufacturing. One option for paying sub-vendors is to pay for yield – particularly if early stage work has a high failure rate.
If the market opportunity is there do two things:
Set up an organization with professionals who know early stage manufacturing.
Be aware this group will have a different culture and approach compared to design engineers.
Situation: A company has two key managers who battle constantly. Recently these battles have escalated. Both people are valuable, but this has become a significant distraction. What’s the best way to handle this situation? How do you deal with management infighting?
Advice from the CEOs:
Talk to the two people individually. Acknowledge company awareness of the situation and ask what’s going on.
Listen – make sure you understand what’s going on.
After you listen, coach. The message: I need you to step up. The company counts on you.
Both parties must feel empowered by the conversation.
Focus on behavior only, not the person.
Make sure that each feels validated but with clear direction to change behavior.
Acknowledge each individual’s value. Point out the problem, but make it clear that nobody is indispensable.
At the same time, be firm as to what is expected of individual behavior as well as individual performance. Set the expectation: either you act in a way which does not harm the company environment, or I will take your notice in 30 days.
If either individual can’t agree to this, then that individual is the problem.
Revert to guiding principles and values of the company. Raise the conversation to a higher level.
Establish what the individual wants from the company. Are their needs currently being met? What can be changed to better meet their needs?
An important end point of the conversation – because both are key players – is for each of them to value the other.
If, after providing time for the two to resolve their difference, they still can’t make peace with each other, you may have to make a hard decision.
Be careful – it may be necessary to take a different approach with each individual.
It may turn out that one individual is the instigator and the other is simply reacting to the first’s provocation. In this case, get a 3rd party to coach each of them.
Another company recently had this same problem.
The CEO sat each person down – talked about impact, big picture and what this does to their image in company.
Interview with Keith Merron, CEO, Avista Consulting Group
Situation: Ongoing uncertainty makes it difficult to clarify strategies going forward. What are the bases for these uncertainties and how do you manage opportunities in this economy?
The world is moving so rapidly that they key to success is differentiation. There is so much information about how to do this that companies start to look similar very quickly. The ability to stand out as different is critical. Ask yourself:
What is my target market?
What are the needs that my offer will satisfy?
What is my unique approach that is distinct from other solutions which meet these needs?
Once you identify the answers, you need to back these up.
One has the opportunity to write the future. If you can get one step ahead of the curve this is a huge advantage.
Products that died were often two steps ahead.
Successful visionaries see patterns that are emerging, sense what is next, and speak to that.
Because information is at your fingertips through the Internet anyone can set up a business. The Challenges are viability and sustainability. If these are present the opportunities are huge.
The web is a place where you can share information. How to monetize this is unclear.
Once you have a following you can offer things for sale that are valued by your following. When this happens, the potential for fast growth is more available than ever. So is the flip side. If a restaurant gets trashed on Yelp this can kill it!
In a recession, M&A activity is faster. This enables one to establish a presence much more easily.
There are many virtual companies. You no longer have to be in the same place to work together! There are also many ways to partner or co-brand via the Internet.
What’s hard is to create tensile strength in the relationship. Because it is so quick and easy to cobble together relationships, the biggest challenges are creating loyalty and commitment.
The needs are communications, motivation, commitment and follow-through – just like in a traditional company but in a virtual space. This creates a true bond.