Businesses living in the edge of challenge.
Not willing to talk the talk on the comparison with trees, business world is permanently into the edge of challenge, which happens to be much more rapidly changing nowadays from good to bad, back and forth.
Trees, some are living on scarcity; others are living in “over-supplies” and others on the borderline, or edge of challenge, as wisely Ali Anani pointed out
A matter of fact is that the business scenario is full of variations. No place for “tree” living in the same condition for a long time, without the need to adapt is longer available. To deny it is very risky. It is going to happen, like it or not.
As many bees already know, I am just a Service Technician in a Packaging Machinery Company.
Therefore, the ideas I am going to expose are just my point of view, and as I am not an expert on the matter, I will use the type of company I am working on, as a clarifying example.
- It is inevitable that there are alternating changes on business turnover.
To go from small to big uses to be easy. Some companies experiment a normal growth, others can instead have an unexpected and overwhelming growth.
In both cases, there are risks, and is important not to “die due success”
A company with a rapid growth could be accepting big orders, and forgetting about financing problems it might occur by having a bigger production capacity than its economical capacity.
More in detail, if you take a machinery company, typically the customer will place an order and make a down payment of about 35 % of the value. Then the designing of the machine starts, and after parts will be produced and assembled. When the machine is ready and working, the customer would make the acceptance of the machine at the company dependences, and prior to delivery, would make a second down payment, around 35 %. The remaining 30% would be paid once the machine is at customer’s dependences, ready and running.
Typically, if the project runs well, a profit from 10 to 20% could be expected. This means that the company, in the best case, with just the initial down payment, has to cover the 45% of the costs until the machine is delivered at customer’s satisfaction.
So the company needs to have enough “financial muscle” to endure this effort, which normally is based on its value as company, and the consequent banking credibility.
An uncontrolled growth could unbalance this credibility, putting the company into a delicate position if something goes wrong.
Nevertheless, let us say that the company goes full swing, and is appropriately growing.
With the growth, new recruitments at all departments are needed, on primary level as production and service, on secondary level as designing, purchasing and sales, and at third level accounting and personnel.
To grow is a desired issue at all companies.
- What happens when business decreases?
Typically, “scissors” start its work, normally at second and third level, the “non-productive” departments, as they are a “cost”. Then it follows the personnel at first level, starting with the most experienced and therefore, the most expensive ones, decreasing this way the company’s overall quality.
So all the investment done at those levels is lost, the rest of the company needs to assume tasks they are not ready to, and the company could fall into a non efficiency loop, which could make things even worse.
- What if....?
As the company grows, understands every department as a business unit which has to be sustainable for itself.
Some examples, sorted by departments
Production and after sales
The usual trend when the company is growing, is just to sale machines and allowing customers to service them on their own or using external companies.
Excellency on after sales is most of cases overseen, when the production of machinery has its growth trend, or the production team is overwhelmed.
To dedicate for selected and emblematic customers a small amount of the working force to build a reputation on after sales despite having a tight schedule might provide a secondary door when production schedule is not so full.
This strategy can be applied into any business.
It will help you to be closer to your customers, and be aware of trends and customer’s wishes which could be overseen otherwise.
Apart from the fact that a good communication between designing and sales/after sales department can be the key to be present when customers have further needs and wishes, in the growth trend designers could take some time of their tight schedules to see in first person some delivered projects, so they can better understand and improve their further designs. Most of times customers when they order, are unaware of all the possibilities the designers can provide them, or even more, they are facing a new line of production, but only want to make an initial investment and see what happens. To be there with them and help them to see/evaluate their results together with Sales department is a way to enhance the relationship, and make them feel they have the right partner for their further needs.
Further to the healthy habit to be aware of slow moving stocks, and making programmed purchasing, as being a machinery company, the power of its purchasing department might be bigger than the supplier’s purchasing budget/department. To offer the supplier purchasing the raw materials, can be a good solution to enhance the supplier loyalty and fast response by sharing the costs and human resources of it.
This way, it would be easier for the supplier to absorb the raising trend and not to “die of success”, provoking a domino effect to the machinery company.
Accounting and Personnel departments.
To form an independent company with the personnel of these departments in the growing trend, would allow extending this type of services to other companies or private customers, adding other services like real state, taxes, or worker’s rights with the same amount of people working on it.
Same as the production dep., diversify the efforts can grow alternative customers to support the department costs when the trend goes down.
This buzz is an extended response to the wonderful buzz of Ali Anani