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When Low Costs and Low Prices Can No Longer Drive the Sales Or Are Just Not Enough

It Is a New Global Economy

In the old economy the economic model was based on supply and demand. Many of the big corporate winners in the old industrial economy were companies that had big investments in productive capabilities and able to create new market opportunities by keeping low costs or forcing costs down. Low costs and big capital investments were the primary ingredients for success in the old global economy. In the old economy, sales were determined by the company’s productive capabilities, which were driven by the equipment they owned. For decades in the old industrial economy the biggest winners were production focused. As the global economy grew and competition increased, especially from low labor countries, productive capabilities and capacity were not enough and for many manufacturing companies marketing and branding became the focus.

“In the New Economy many of the most successful companies will out-source their manufacturing replacing capital equipment with creativity, speed to market, strong branding and “partnering” with the customer”

In the New Economy the big winners are idea focused. In the new economy creativity is the big driver of sales. In the new economy success comes by distinguishing the company from the competition through inventive thinking, market sensitivity and customization. Many of the most successful companies will out-source their manufacturing and replacing capital equipment with creativity, speed to market, strong branding and “partnering” with the customer. Getting closer to the customer, knowing the customer’s wants and needs, or even anticipating the customer’s wants and needs will become a requirement as the New Economy develops. In this New Economy the new currency is ideas not money. One good idea can alter a company’s future; a number of good ideas can create a giant enterprise. Dell Computer out-sources all manufacturing, they assemble components, they are not a manufacturer and in many cases they are a reseller, buying the entire product from a manufacturer. They “custom build” each computer for the customer, and they do it with speed. This is a New Economy company, which has changed the way all computer makers must offer their products. It is this kind of creativity and ingenuity that will mark the successful companies of the new economy. And at Dell, they believe they can compete with China because they are closer to their customers and understand their needs better. In the New Economy, it is not just about price.

“Successful supply chain resources are no longer in the manufacturing business offering supply, they are in the innovation business helping the customer make more money.”

Helping your customer drive their profits will bring your customer back for repeat business and create stability and continuity for your company. In the new economy a supply chain resource will become a student of its customers business, understanding its needs and creating solutions to help the customer be more successful in their market. Right products will become more important than inexpensive products and knowing what is right and having it for the customer when they need it will be central strategy to the supply chain resources with the greatest success in this new economy. Successful supply chain resources will become an extension of their customer’s business and a “partner” in their customer’s success.

Speed to market created by short development cycles, WELL-ENGINEERED manufacturing cycles and quick service responses will help the customer reduce risks and improve profits. As prices rise and markets become more challenging companies in the supply chain will be forced to get closer to the customer and take on more of the customer’s burdens. As a supply chain resource, getting beyond being a commodity supplier or a product supplier and instead helping to reduce risks and drive profits through speed will make it possible for the customer to pay more for the product and for the supply chain supplier to be rewarded for its ingenuity and creativity.

Customization will become an ever more important requirement as a supply chain resource. In the new economy as markets become even more competitive customers will require products that distinguish them from the competition. Supplying the customer with unique and exclusive creative products will give the customer the opportunity to compete better in the marketplace. This will shift the customer’s focus from price to product allowing the supply chain resource to achieve the margins they require. This customized or exclusive product will help to increase their profits while making them more important to their customer. In this new economy, the most successful supply chain companies will learn what their customers need, create what they need and in so doing, help them to build their business and their profits.

Positioning

“In The New Economy good quality, on time delivery and dependability will allow companies to exist and be in the market, but it will not be what distinguishes companies from the competition or what brings customers to the door”

Positioning the company as an important supplier in the marketplace and in the minds of the customer is essential to success in this competitive world. New Economy. Companies need to know what their customers respect and appreciate in a supplier. Knowing what the customers need, the goal is to position the company as the #1 company in the industry delivering those needs and earning the customers appreciation and respects.

In the New Economy quality and on time delivery are expectations not a market position or an asset that will bring the supply chain company business. Good quality, on time delivery and dependability will allow companies to exist and be in the market, but it will not be what distinguishes companies from the competition or what brings customers to the door. What are the values and services that the customer will value the most? What will drive their profits? What will build their businesses? Positioning the company as the BEST in the supply chain to provide these elements is the winner position in the new economy.

Positioning the company as being a leader in the product category, being a New Economy Company with fresh innovation, unique creativity, keen market awareness, good value and customer sensitivity will bring the company New Economy success. Apple computer is an example of a New Economy company and the IPod is an example of a New Economy Product. A few good products can drive your company’s image and Position your company as a major resource in your product categories. Intel is an example of a New Economy supply chain company.

In positioning the company in the New Economy the company name is the first most critical ingredient towards positioning the company and building the brand. Many of the kind of names that worked in the past most likely will not work in the future. There are too many brands in the marketplace and too many new brands being born everyday. With so many brands and new brands and with New Economy supply chain companies finding themselves competing globally, their name becomes ever more critical. What name will work in American, Japan, Italy and Korea? This makes the brand game much more complicated than in previous years. The company has to be good, very good at the name game to help the company support the positioning and reputation in the New Economy. The right product and services with the wrong name can make success marginal. It all should come together in positioning a New Economy company.

Branding the Company and Branding the Products

Positioning the company in the marketplace as a leader amongst supply chain companies requires a brand sensitivity and brand thinking. The company must become a “brand” in the minds of their associates, a “brand” in the minds of the customer and if possible a brand in the mind of the consumer. A brand stands for certain values, promotes a specific image and reinforces the” brand image” in everything the customer experiences. The company distinguishes themselves from the competition with this “branded” conduct and follows through thus reinforcing its position as a leader in the marketplace.

“A good supply chain resource knows the customer’s needs, anticipates the customer’s needs, understands the customer’s competition, understands the customer’s marketplace and is perceived by the customer as a valued “partner” in helping the customer achieve success in their market.”

The first thing a New Economy company must do is identify what its customers value in their supply chain resources. They want their supply chain resources to make their jobs easier. They want their supply chain resources to help them take fewer risks. They want their supply chain resources to help them make more money. They want their supply chain resources to help them work less and achieve a better result. A good supply chain resource knows the customer’s needs, anticipates the customer’s needs, understands the customer’s competition, understands the customer’s marketplace and helps them to meet the needs of their market in every way possible. This is true whether the supply chain resource is stamping bumpers for an automaker or is a chipmaker for a toy company or a drive maker for a computer company. This needs to be true for everyone in a supply chain business.

The Value Formula

VALUE = DEPENDABILITY, CREATIVITY, MARKET SENSITIVTY, SPEED COST

That is value equals dependability, creativity, market sensitivity and speed divided by cost

If price was the single most critical factor in business in any supply chain, then the lowest cost resource would get all the business.

Value is the critical factor.

As a supply chain resource, your brand must be built around those things your customer values that includes cost, but not exclusively includes cost. A New Economy supply chain resource earn a position close to its customer and knows what they want and need and then supplies it all creating a relationship and becoming an extension of the customer’s business. This makes the supply chain company a “Brand” in the minds of their customer. They and their brand stand for these things the buyer values. Most importantly, the buyer sees them as a MONEY MAKING RESOURCE, a resource that helps their company make money.

In the Old Economy in the world of supply, the buyer converted the supply chain product to a commodity and then pit one resource against another so that price was nearly the exclusive driver for determining who received the order. However, the competitive realities of the New Economy is that competition will require supply chain buyers to find products that distinguish them from the competition while generating meaningful sales and profits for their company. In the New Economy it is going to become more and more clear, that sameness will interfere with profits and buyers will be in search of exclusive products that can be volume, but are not available to their competition. There will be is no industry where sameness is a good thing. Different, fresh, and right are the New Economy goals for everyone supplying finished products to consumers. Creating products that are different, fresh and market- right is the goal of the supply chain supplier and “branding” those products will help to support the new products and provide greater value to the product.

Old Economy Name
Fabric:

• Peach finished twill with Softener= Peach Finish Twill
• Vegetable dyed twill= Vegetable dyed twill
• Twill weave with slub yarn= Slub twill

New Economy Brand Name

Fabric:

• Peach finished twill with Softener= Butter Cloth
• Vegetable dyed twill= Vintage Twill
• Twill weave with slub yarn= Burma

new economy brand name Peach finished twill with a softener Peach finish twill Butter Cloth® Vegetable dyed twill Vegetable dyed twill Vintage Twill® Twill weave with slub yarn Slub Twill Burma®

Building The Team and Sharing the Vision

Being a New Economy company with Old Economy values is not possible. The company must be able to adopt New Economy thinking throughout the company. Everyone on the team must share the same vision, believe in the same goals and understand how their position needs to change in the New Economy. Success will require the team to embrace these changes with enthusiasm.

“For those companies whose success has had to do with their machinery and equipment, with their productive capabilities and their limited competition, great change will be necessary to be able to compete with foreign products coming into their country and for their products to compete in other countries of the world market.”

In the competitive global economy teamwork will be more important than it has ever been in the history of business. Efficient, dynamic organizations pulling together to meet the needs of global competition will create the niche or purpose for their company to thrive in a very competitive world. It requires strong leadership, enthusiastic management and energetic team members open to new ideas, new methods, new marketing and new products.

Sharing the vision, educating the team, challenging the team to meet the needs of the New Economy may lead to the shift in the company’s outlook required to become more effective, more successful and a LEADER in the New Economy. Some of the team may not be able to make the shift and support the necessary changes. It may be, that in the New Economy new personnel will be required to meet new requirements. Management must be able to see the shift in the marketplace and make sure the right team is in place to compete effectively in this New Marketplace. Games are won with Supportive Team Owners, Strong Leadership, Good Coaching and Quality Players, sharing the same objectives and playing well together.

Advertising, Marketing and Sales

Brands are first about image. What the brand stands for cannot be faked and it must be felt by the customer. The customer must experience the brand’s values all the time; reinforcing those values and making it clear what the company is about.

• Every person the customer comes in contact with is an advertisement for the company.

• Every document the customer comes in contact with is a marketing piece for the company.

• Every experience the customer has with the company reinforces the brand’s image and builds the brand’s reputation.

• Every communication, every phone conversation, every e-mail, every fax, every package, every shipment are commercials for the company. They must support the company’s values and build the company’s image.

In the New Economy word-of-mouth and Public Relations play a more important role than advertising. Some very big companies have been built with little to no advertising in the New Economy. When a company successfully distinguishes itself from the competition, when a company successfully shapes a unique posture in the market, the marketplace recognizes this uniqueness and the word spreads rapidly.

Do the job right and the advertising; marketing and almost the sales are done for the company. This is the difference in the New Economy. Plant and Equipment are replaced with service and creativity. Ideas are the new currency. Perception is the new reality.

The Joy of Doing Business With The Best

Most everyone wants to do business with the best in the business.

Most companies want the best suppliers in the industry.

How companies define “the best” may be different, but they are in pursuit of “the best”.

When one is successful at being perceived as “one of the best”, they make an “emotional” or “human” contact between the company, its brand and the customer. People are not indifferent about those companies they perceive as “amongst the best”. They “feel” something about those companies. Some people can say, “I really like doing business with XYZ.” Others might say, “I love doing business with XYZ”. And others might say, “It feels good to do business with XYZ”. But in all cases “like”, “love”, “feels good” is about getting beyond cost and quantifiable factors and creating something greater, something more meaningful, something human between your company and the customer. This is where success can be found in the New Economy, doing so much right; you earn their respect, their appreciation and touch them in ways beyond just business.

The New Economy brings New Values.

Is your apparel industry company selling and marketing for the new economy?

“This is a Guest Post by Billy Kapler of Kapler & Associates”
1223 Wilshire Blvd. #810
Santa Monica, CA 90403
310.394.0504
william@kand.com

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