You’re in a Box

Not that long ago, most CPG manufacturers had a relatively large number of customers. None had a killer percentage of their business. This put more power in the manufacturer’s hands. To some extent, the customer had to take what was offered, the way it was offered.

Few companies have that luxury anymore. They’ve been boxed in by the various big stores. Walmart is exhibit A but hardly the only one. Many companies depend on Walmart for 50%-60% (or more) of their revenue. Three or four other companies may account for a big chunk of what’s left.

This dependence on a few large customers is risky. Losing a 10% customer hurts but is survivable. Surviving the loss of a 50% customer is much harder, maybe impossible. The big chains know this and use it to leverage better pricing, tighter quality, shorter lead times and specialized products. Things that the 10% customer can only dream of.

The pressure that this creates on the manufacturer is intense.

Nor is it a one time thing. No matter how good the manufacturer gets, the customer will always want more.

Here are a couple of ideas to help deal with this.

1. Get ahead of the curve. Don’t wait until customer and competition force you to become more flexible and efficient. Do it now while you still have a bit of leeway. If you don’t already have a continuous improvement program, start one today. If you do have one, make sure it has the organization and resources it needs to make a difference. Is your plant set up for stable production schedules and long production runs? That’s in the past. Nimbleness is all. You need to be able to make small production runs on a moment’s notice.
2. Make quality a culture. The consumer wants every product they buy to be exactly the same. You must make sure this happens.

You’re in a box and it doesn’t look like you’ll get out anytime soon. You need to adapt or die.

At Frain, we have a really big box (over a million square feet) full of machinery and engineers. When time counts, we make it work for you. Give us a call at 630-629- 9900 or visit us online at www.fraingroup.com.