Proven Formulas for Manufacturers in Surviving Tough Economic Times
Our European readers are acutely aware that the ongoing severe recession affecting the Eurozone has taken a severe toll on manufacturers and retailers. At the same time, time tested principles of market specialization, global outreach, and a highly skilled workforce can often provide a basis for a firm to outlast a recession in one’s home market.
In late 2010, in the midst of the previous global recession, Supply Chain Matters featured a commentary highlighting specialty small and mid-sized manufacturers in Germany, termed the Mittelstand companies. These German companies featured conservative, non-flashy management and came to understand that growth comes from a focus on market niches, sometimes in traditional industrial areas where bigger companies choose not to compete. They viewed the world as one global marketplace for specialty products or materials. Our 2010 commentary highlighted three lessons for growth and surviving a geographic recession:
- Building recognized product innovation, even when that innovation is within traditional industries.
- Understanding that niche markets can be huge when projected on a global scale.
- That small and medium sized manufacturing focused businesses can be an engine of sales and employment growth, providing they have an unwavering focus on operations excellence and continuous improvement in every process.
In 2013, Europe is enduring close to two years of severe economic contraction, yet the above lessons remain as guideposts for surviving the recession. Further evidence has come forth in a series of articles on European industry published by The Financial Times. One particular article, Skilled workers give Italy an edge, (paid subscription or sign-up for free metered view) should capture interest because it reinforces similar principles.
The article highlights Italian manufacturers Guala Closures, a global leader in the manufacture of premium bottle tops, IMA, a global producer of automatic machines for the packaging of pharmaceuticals, cosmetics and other products, Luxxotica, global eyewear manufacturer, and Sogefi, a producer of specialized automotive components. While Italy endures nearly a decade of economic stagnation, these manufacturers are holding their own. As an example, Guala has grown fourfold in the past ten years, selling to more than 100 countries, with a presence of 24 worldwide manufacturing facilities. IMA which garners revenues in excess of €743 million, boasts that 93 percent of those revenues are derived outside of Italy. It sales network includes 70 countries with 23 global manufacturing centers. Sogenfi supplies Audi with a super lightweight spring made of composite materials.
FT points out that each of these companies stress innovative products in niche markets coupled with premium manufacturing skills and lean operations. Sound familiar?
While there are obviously other factors necessary for enduring a severe economic downturn in the host geographic region, including access to affordable credit, time proven principles of product innovation, an unwavering focus on manufacturing excellence coupled with a highly skilled workforce have endured to provide our community continuous evidence of their importance.