Volume 2 Issue 2 Summer 2001
e n e s t r a t i o n f o c u s
Managing for Fluctuating Demand
by Ric Jackson
Twelve months ago we were writing about the shortage of labor in the window industry and the early effects of the stock market decline. Today, we are facing even greater challenges: the slowing of the residential housing market and shrinking consumer confidence as it begins to affect window demand.
In all areas of service, we are sure to experience an increase in aggressive competition, including lead times and minimum quantities, while our brethren fight for every order. In addition, the labor market has not improved much, if at all, and hiring reliable workers in many regions of the country is still difficult.
How, as producers, do we maintain our efficiency, which may be even more important in this market environment, while riding the roller coaster of demand?
To answer this question there are three key areas to focus on in insulating glass production: quality, flexibility and capital. These factors, which may apply to all areas of window production, are integral to minimizing the inefficiencies of rapid swings in demand.
Firstóand most importantóis to maintain consistent high quality. Know that the cost of re-work and poor quality ultimately will be lost margins, especially in this cycle of the economy. Research and implement manufacturing systems and utilize products that simplify your production process while raising your product quality consistently. Simplified processes tend to minimize losses in margins and production capacity due to human error. These systems also make training easier since they require less supervision and are less complicated. A typical example would be a spacer system that comes pre-assembled with several sub-components such as desiccant and sealant or a precut and notched muntin bar, which eliminates cutting and notching mistakes.
Second, build in the flexibility to scale up and scale down. Over the past seven years, many companies have enjoyed an environment of constant growth. It is easier to budget for growth than it is for shrinkage. Large volume producers tend to think in large increments of capacity, which is fine if everything is going well.
It is just as important to think about the impact of flat, or declining, sales and how high-volume automated equipment will deal with half the throughput. Does the system cost as much to operate at full capacity as 50 percent of capacity? If the answer is yes, does it make more sense to consider several smaller increments of capacity in systems that can be scaled up or down to maximize efficiencies at varying levels of demand?
Third, in this economic environment, one of the biggest influential factors may be capital expenditure. Most of us are watching every penny of our capital funds to ensure that only the most rewarding projects get the capital allocation. Smaller may be better in the end, particularly if the investment can be utilized in later scale-ups or upgrades.
|These factors, which may apply to all areas
of window production, are integral to minimizing
the inefficiencies of rapid swings in demand.
Do not underestimate the need for sprint capacity. One inevitable truth in slow markets is that nobody wants to hold inventory anywhere in the channel; therefore, lead times are squeezed. Be prepared for short delivery times. It is possible you will be faced with having to produce more in less time than one year ago. Inevitably, when there is excess capacity in any market, increased expectancy for faster delivery and lower prices are the first to emerge. Donít pass up any opportunity to make a sale because you cannot respond fast enough. Production models that allow your business to expand capacity easily without increasing the labor component dramatically are ideal, as long as the cost of that excess capacity stops when product demand returns to its lower
This is not the first time the residential window market has turned and it isnít the last. Successful businesses will adapt to changing economic conditions in the market and ultimately become stronger for it. Think about these three areas of focus while you consider what you can do to improve your ability to deal with fluctuating demand.
Ric Jackson is the director of marketing for TruSeal Technologies Inc. in Beachwood, Ohio.
© Copyright 2001 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.