Ten years ago, one of the best ways to remain competitive in manufacturing was to apply the practices of lean management. But now that these principles have become more or less universal, they can no longer be relied on to yield a significant difference in price and quality. So how is it that German manufacturers are still managing to rise to the challenge of cheap and often high-quality goods that are being produced in countries such as China, Mexico and Brazil?
In addition to competition from these and other emerging nations, German companies face some of the world’s most stringent regulations regarding labour, facilities and equipment. Yet they are prospering, according to the judges at Europe’s annual Industrial Excellence Award. Writing in the Harvard Business Review (HBR), they cite four distinct strategies that helped German companies compete and win against competition from emerging markets:
- They are closely connected with their supply chain partners through shared data
- They optimise customer value across the entire supply chain, not just their part of it
- They cooperate with suppliers to improve their manufacturing processes
- They use their technical capabilities to offer a high degree of customisation.
In short, the successful companies manufacture solutions for their partners by working closely with other partners. It’s relatively easy to change your supplier if the only links in your value chain are product and financial flows. You’ll almost certainly find a cheaper option in a low-cost country like China or Vietnam. But when companies are linked by information flow, trust and loyalty are involved. If you’re smart, you’ll seek opportunities to build information sharing into your business relationships.
A typical example, and one of the “Examples of Excellence” award winners, is Schmitz Cargobull.
Schmitz Cargobull manufactures trucks and trailers. Its main customers are truck and trailer fleet operators based in Europe. Like most of its competitors, a growing share of the firm’s income comes from support services – financing, full-service contracts for breakdowns, regular maintenance and supply of spare parts.
What’s so special about the company is that it integrates telecommunications and data (telematics) to monitor the state of any of its vehicles. For instance, when the trailer is on the road, they can track how much weight is on board, the temperature of the cargo, and where exactly the vehicle is. The driver, too, can continually access key information. The company introduced telematics because management believes that real-time data sharing binds customers more closely to the company.