Dr. Stephen Hummel, P.Eng
Strategy Guide, Berlin KraftWorks Inc.
COVID-19 has caused massive disruption. No matter the industry, every business has been reassessing, changing plans, and trying to find their way through the uncertainty. Manufacturing had already been evolving, but in the wake of this global pandemic manufacturers need to change incredibly fast in order to survive.
Global trade has seen escalating tariffs, supply chain shortages, and closed borders. Advances in technology are accelerating, resulting in product and industry life cycles becoming even shorter and shorter. And on top of all that, social media is amplifying the good with the bad, resulting in escalating customer expectations. For years competitive manufacturers have known that their products must have a complementary service component to support the product. This has become even more prevalent with all this disruption. It’s no wonder traditional goods producing firms are finding it harder to sustain their competitive advantage.
How can manufacturing firms keep up with all of this change? Time has always been an important factor for success. Now, time is the competitive advantage. Firms need to look at their agility, ability to innovate, and the timeliness of their analytics if they want to keep up with their customers.
If we have learned anything from COVID-19, it’s that businesses need to be able to pivot. This applies to employees, capital equipment, supply chain, the whole team. In other words, firms must pivot not just one element of their business but their entire “system” to create and sustain a competitive advantage. Examine those firms who were able to pivot their production to needed medical supplies, equipment, or PPE. They were able to keep their teams working and ultimately supported the front-line workers. Firms who have agility can recover faster and with higher quality of results, for themselves and their customers.
Successful businesses collaborate. By fostering relationships with employees and suppliers we can create partnerships rather than strictly transactional relationships. Allowing employees room to experiment can generate agility through increased knowledge and understanding. Using this same approach, we can turn suppliers into partners, they work with us to deliver success. After all, it is a “system”.
How quickly can your business scale to meet increased demand? If your company cannot keep up, customers will move on. When looking at capital equipment, flexibility is critical. Assessing your entire operation for additional capacity can show how changing certain aspects can reduce waste and deliver higher value. If your firm can scale quickly, faster than competitors, then you have an opportunity to keep their customers, perhaps forever.
There are three key sources of innovation for a company – employees, supply chain partners, and the customers. Employees are a company’s preeminent resource. Not only do they know the products inside and out, they understand all the details of the equipment that makes it. They must be partners in development and improvement. Their tacit knowledge gives insight that can lead to incredible innovation and efficiency, if given the opportunity.
Supply chain partners can be another source of innovation. Once again this is where a deeper relationship allows for better understanding rather than simply fulfilling orders. Capturing their tacit knowledge can be a game changer.
Take the time to listen to your customers. Find out what makes your customers successful and ensure your product is fulling actual needs. Listening and adapting with customer feedback is a key component of service, and an additional source of competitive advantage as service is a very difficult for a competitor to copy. Monetizing your customers’ tacit knowledge results not just in better recurring business but a stronger sustained competitive advantage.
Data leads to decisions. While most businesses track a number of different statistics, unfortunately many of these are not measured immediately (financials are a good example of this). Businesses need to focus on what they can do right now. Start by measuring one day – Were all of the orders that came in fulfilled today? Was there any excess capacity? Could there be? By using timely data, businesses are in a better position to adapt to changing conditions. The trick is to find those leading measures that link directly to lagging measures such as financial performance.
The manufacturing industry is rapidly changing. Firms that are agile, innovative, and able to access timely data can position themselves to successfully evolve. Please remember - many ideas may fail, but you have to keep trying! By looking ahead and experimenting, your team gains valuable knowledge and will be ready when it is time for change. Bottom line, time is the only resource that, once used, cannot be replenished. Agility, Innovation and Analytics optimize the time that your firm has.
Co-Founder, Berlin KraftWorks Inc.
Since the creation of Berlin KraftWorks (BKW) in 2017, there have been several common questions from folks about what we do. In basic terms, we accelerate ideas and mitigate risk relative to manufacturing and product design, and we help companies to develop and maintain competitive advantage in their operations. We combine Professional Supply Chain Management with Professional Engineering in an integrated system approach. To define that better, it seems like a great idea to document some “Frequently Asked Questions” with some information for context.
What is the role of Supply Chain?
I’ll start by qualifying some thoughts about effective Supply Chain Management and its role in the modern world. During my career as a Supply Chain professional, I’ve found that there isn’t really a common perception of what supply chain is, or what its function is in a company. Other common areas such as Finance, Sales, Marketing and Engineering are reasonably well understood, and if you work in one of these areas and someone asks you what you do, you can throw out one of these terms and folks will immediately have some concept of what you do. For me, when I say I’m a “Supply Chain Professional”, the usual response is “what’s that?”
There are a lot of highly skilled professional specializations within Supply Chain, and you may know of some of them: Purchasing, Sourcing, Logistics, Materials, Production and Inventory Management, Warehouse/Distribution Management…there are several more and I won’t dive into all of them here. But it’s only when all these skilled specializations are considered and executed as a whole, integrated system, that you have an effective Supply Chain. The term “Supply Chain” in itself is misleading, since “supply” is just one aspect of many in the system. Value Chain may be a far better term since we’re ultimately talking about the managed integration of several disciplines to generate and deliver value for the customer.
Supply Chain, as an integrated system is everything in-between the common areas of Finance, Sales, Marketing and Engineering. It is the connective tissue that adapts, integrates, synchronizes, validates and executes. Supply Chain is the art and science of getting things done effectively, and it is the system from which information for building competitive advantage in a company’s operations strategy is extracted and verified.
An effective Supply Chain manages the interactions with these other functional areas in an integrated fashion. The best managed Supply Chains are still ultimately limited to the design and manufacturability of the products it exists to produce.
Effective Supply Chain requires integration with Engineering
Supply Chain must be synchronized with Engineering and integrated in a system thinking approach. Neither should be focused strictly on departmental targets, but on the success of the product and its ability to deliver value to the company and its customers. At BKW we have combined Professional Engineering with Professional Supply Chain, and our team understands the system thinking approach to optimize products from first concept all the way to the customer, without disruptive silos that cost time and money. We integrate Supply Chain considerations with every aspect of Engineering in real time, not as separate stages, all of which is focused on supporting our customer’s Business Case. We use this integration to develop intelligence in product designs and operations (which consider quality, manufacturing execution, costs, etc.) that is critical to the success of that product over its intended lifetime.
Our customers are the key ingredient to their own success.
Our integrated system approach builds intelligence in both the product design and our customers’ ability to execute that design effectively…this is a Competitive Advantage and it belongs to our customers. In order to achieve true Competitive Advantage, our customers need to have in-depth knowledge of their product designs, costs, operations strategies and capabilities residing in-house, not with a third party. To make appropriate business decisions and have the agility to respond to ever changing market conditions, companies need to be able to make evidence-based decisions regardless if their product is produced in-house or elsewhere. In fact, this becomes MORE critical if the product is produced elsewhere because a company’s success, ability to adapt, ability to set operations strategies and manage costs, and even their reputation in quality, service and support rest in someone else’s hands.
Therefore, teaching is CORE to what we do. We collaborate with our customers and their suppliers and subcontractors to help them develop their own competitive advantage. We do this by integrating our professionals with our customers’ teams and we provide our customers with the maximum agility possible to respond to their customer’s needs. In today’s business environment, companies who can develop their own competitive advantage will prevail even in challenging times.
BKW makes it quicker and easier for companies to get their products to market, and we help companies to maintain competitive advantage.
How do we do that? Here are the answers to the most popular questions we’ve been asked.
Are you a design firm?
We have authorization from the Professional Engineers of Ontario to complete engineering design work; however, design is only part of our offering. We can help you define and manage design elements of a project and ensure that those elements will consider all factors required for effective execution.
Are you consultants?
We are an Engineering firm consisting of hands-on professionals spanning Supply Chain, Engineering and Operations Strategy. We firmly believe that the only way to provide true value with any business challenge is to roll up our sleeves and get our hands dirty, which is beyond the typical mandate of consulting. After evaluating your current situation and providing recommendations, our team will work with yours to implement new processes and/or design.
Are you a contract manufacturer?
No. However, we can help you to find and evaluate the right contract manufacturers for your specific product and production volume. We help people manage their contract manufacturers to ensure that they can maintain direct control of their operations, products and business reputations with applied education, project management and experience.
Do you send products offshore?
Generally, no. Many companies are unaware of how many products can be produced right here within North America (if not within Ontario) at greater speed and less overall cost than offshore. Canada primarily produces low-volume, high value/complexity products where precision is essential. The resources exist within North America to efficiently and competitively support those products. Local support means increased time to market and lower landed (“all-in”) cost. There are some exceptions, and when those exist, we ensure our customers approach those with the knowledge they need to have a successful outcome.
Do you have supply partners for various requirements?
Our team at BKW has cultivated many relationships across multiple industries over our decades of experience, however we do not default to these as a “one size fits all” approach with a pre-built supply chain and partners already in place. Instead, we build supply chains suited to your specific business level, volume and product needs, and we build this with you collaboratively. This also allows us to work with your existing partners and suppliers. We believe our customers should remain in full control of their projects and we enable that with applied education, supplier selection and evaluations to empower educated strategic decision making for our customers.
What industry are you focused on?
We support multiple manufacturing industries. We have experience in automotive, defence, medical, electronics/tech, industrial automation and equipment manufacturing and batch/process manufacturing (for example, food products) to name just a few. The essential rules of design, engineering and supply chain and how they need to integrate to be effective, apply across industries.
Who are your customers?
We work with anyone who manufactures (or intends to manufacture) a physical product. Most often these are SME’s – Small and Medium Enterprises. We exist to help companies do more with what they have and build their competitive advantage.
We work with Contract Manufacturers (CM’s), and Service Providers to help them improve their own operations, and to help them work with their own customers by assisting those companies to develop effective requirements, specifications and manufacturable designs that exceed the core skills of any particular CM.
We work with Investors and Stakeholders to provide risk mitigation, and to develop structured and measurable strategies and execution support to get products to production.
Do you offer stand-alone training?
Yes. We can provide this for any company that simply wants training for some aspect of their engineering or supply chain. When ever possible, we tailor this training to their specific product(s) or needs as applied learning.
Can you support products that are already in production?
Yes. We optimize existing products where supply chain, market or economic conditions have changed from the original intent and we bring those products back to effective production. We also provide support to optimize existing operations for those products. As with all our services, we do this with a system approach governed by the requirements of the Business Case.
We already have contract manufacturers and/or a design firm. Can you work with them?
Yes. We help manage contract manufacturers and third-party relationships, and we collaborate with those firms to ensure a balance of integration across internal and external resources that aligns with the business objectives of our customers. We help our customers to remain in control of their own products, costs and operations.
Co-Founder, Berlin KraftWorks Inc.
Scale (or Scale-Up) and Growth are two terms commonly heard these days when talking about just about any kind of business. More and more these terms seem to be used interchangeably, but they are in fact two very different things.
To “scale” fundamentally means to increase your firm’s overall revenue without adding significant increase in fixed and/or variable cost spending. Essentially this is the challenge every start-up will face, however Small and Medium Enterprises (SMEs) and even large multinational companies also have this challenge when attempting to respond to a changing environment. For a start-up, resources are constrained, however the business must find a way to advance especially if it has not reached break-even. For an SME or a very large corporation, the market may dictate the selling price for their product - therefore the only way to beat the competition is to find a way to provide more value than others at the same price. The only way to do that is to scale - to offer greater value without taking on greater cost to do so.
Growth is the opposite strategy to scale. Growth is the commitment of resources and money in order to make more money. We see this scenario all the time: a company has a great idea and receives an investment, which is intended to give them the tools they need to get to the next level. If it were this simple, why do so many companies continue to struggle and at a far greater cost post-investment?
Our experience has illustrated to us that many companies that believe they have a growth challenge actually have a scale challenge. You may be aware of Dr. Peter Drucker’s seminal research over 60 years ago that resulted in the popular expression: “before you can be efficient, first you have to be effective”. In a manufacturing business, this relates to the idea that there’s a hierarchy in the development of any product or service - where no product or service can be optimized until it is first capable of producing the requirements dictated by the business. If the product is poorly engineered and can’t be supported by supply chain or operations, no amount of optimization will improve it. We have seen countless efforts to optimize or continuously improve business processes that aren’t effective, and the result is wasted effort, cost, time (time being the most expensive, non-renewable resource), and often a lot of fire-fighting and churn in an attempt to delay the inevitable failure of that product.
The only way to know if something is effective is to measure it against the business case, the primary objectives of the company. If the process or product isn’t delivering what is required by the business, the solution is often to take a scaling approach versus a growth perspective.
Once you’ve managed to scale, strategic investment in resources and technology can expand the firm’s scaled operations and leverage the knowledge developed through the preceding scale process.
That knowledge is a firm’s competitive advantage, particularly if it enhances the value that customers experience with that firm’s products and services.
When a firm has been able to scale, they have developed the internal knowledge of their product and operations without adding significant capital expense or investment. Their cost to produce and deliver has remained more or less the same, but they are realizing greater value for each sold unit. Often however, scaling leads to lower costs with higher value, so the firm enhances its performance at both ends of the profit equation: price and cost. Beyond this however, this newly developed product and operational knowledge is difficult for an outside competitor to replicate. A firm that has scaled successfully has changed the behaviour of its employees and supply chain. This usually results in even further improvements in both effectiveness for customers and efficiency of production. At this point, carefully targeted growth strategies can leverage a firm’s effectiveness - while the unscaled firm lacks the internal knowledge and capabilities required to effectively utilize investment.
Scaling is possible here, in Ontario
The number of times we have heard people say that manufacturing companies can’t scale here in Ontario (or Canada) is staggering - yet it’s simply not true. Here in Waterloo Region, we are the 4th largest manufacturing sector in Canada, virtually any type of high-performance service you can imagine is within a 250km radius.
Scaling efforts need to be guided by hands-on experience, for which there is no substitute or magic technological bullet. Scaling effectively means taking a whole-business (or “systems”) approach versus a “silo” approach (focusing only on individual business functions or symptoms as disconnected challenges) to unlock value. The silo approach is the most obstructive barrier to achieving successful scaling. However, once a firm has developed its own “system” knowledge around scale, the sky is the limit for what the firm, its employees and supply chain partners can achieve.