Using the “FEWER” Principle to Beat the Imports

What is the “FEWER” principle?

The “FEWER” principle holds that when developing new products, a manufacturing company should focus on those that allow for shorter production runs and/or customization in order to better compete with imports.

Why focus on shorter production runs and/or customization?

Because the concept of having exactly what one wants – as opposed to a “one size fits all” mentality – has become ingrained into today’s consumer, particularly those in the U.S.  There are numerous examples of this phenomenon, but here are three.

Consider how we order coffee today.  In the 1970’s you had basically two options, regular or decaffeinated.  The server would give you the cup of coffee and you would add your own cream and sugar.  But walk into most coffee shops today and the options are almost overwhelming.  Regular coffee, espresso, lattes, decaf, all with a myriad of flavor options plus cream, milk, skim milk, soy milk, etc.

Remember when Lay’s had two types of potato chips, regular and ruffled?  The company just recently held an online poll that allowed their customers to choose whether their next new flavor would be Ginger Wasabi, Mango Salsa or Cheddar Bacon Mac & Cheese.  The winner will be added to options that include barbecue, sour cream and onion, ranch, sea salt and vinegar, etc.  In fact, there are now 51 different combinations of chip styles and flavors listed on the Lay’s website.

Those of you my age recall putting on a record album and listening to songs you did not particularly care for because you had to hear every song on the album side in order to hear the ones you really liked.  Now, we create our own digital music playlists and listen only to the songs we love.  And Google recently announced the launch of a music subscription service that anticipates your mood and plays what it thinks you will want to hear based on your past habits and the time of day and/or venue.  So not only do you now have the option of listening only to the songs you love, but this service actually anticipates and plays those songs you want to hear at a particular time of day based on how you are feeling.

We have come to expect products and experiences customized to our own tastes.  From Burger King changing the fast food business by asking you to “have it your way” to Dell revolutionizing the personal computer business by allowing customers to pick and choose the features on their laptop, consumer expectations have irreversibly changed.  The power of 3D printing is the latest, most extreme manifestation of the “FEWER” principle.

There are numerous examples of large manufacturers using 3D printers to speed up the product development process – and lower its cost – by using 3D printers to make prototypes.  But these printers are nearer to making the leap to consumer products than you may think.  Nike has used 3D printing to create custom sports bags, and in a recent interview, Under Armour’s Senior Innovation Design Manager, when asked whether the company has any plans for 3D printing, responded, “If you want to put something in your hat (figuratively), definitely something big is going to happen in the future.”  It sounds to me as though a cap tailored exactly to the shape of your head is in the works.  So, if you are in the process of creating a new product or service, you want to be certain that you have the flexibility, as a company, to cater to the consumer’s desire for something personalized.

Michael McKeldon Woody explains the FEWER principle

How does focusing on the FEWER principle make me more competitive against overseas companies?

It makes your company more competitive because most overseas manufacturers, when it comes to exporting, have a business model that focuses on long production runs of commodity products.  Given their distance from the U.S., and the costs for transportation, they need to produce long runs in order to keep prices low.  And they need to ship a lot of product at the same time in order to keep the costs of shipping low.

When competing against an overseas manufacturer, hit them where they are weakest.  It is next to impossible for overseas manufacturers to revamp their factories for short production runs or to create customized products.  And even if they did, those companies would still confront the cost inefficiency of shipping smaller quantities halfway around the world.

Makes sense for consumer products, but how does this affect business-to-business transactions?

The same people that have developed a craving for a niche flavor of potato chips and a half caffeinated vanilla latte with no foam are also working as purchasing managers at companies that buy parts.  So they, too, will want precisely what they want, exactly when they want it.  When you go to work, you don’t check your personal preferences at the door.

Also keep in mind that B2B buyers are increasingly focused on maintaining lower parts inventories in order to improve their cash cycle and their companies’ bottom lines.  By developing the ability to make and ship smaller quantities, a U.S. manufacturer can exploit that need.  An overseas manufacturer, with a business model built on making and shipping high quantities of a commodity-type product, cannot.

Davis Industries beats the imports by benchmarking their overseas competitor’s minimum order size, then reducing their own to 10% of those competitors, far below traditional industry standards.  How?  By making a modest investment in new production technology that allowed them to produce smaller quantities with lower set up costs.  They also moved smaller orders into what was formerly their “fast-track” sample production line so these orders would not be stuck in the queue behind larger orders that took more time.  Finally, they lowered set-up charges to remove a significant hurdle to new orders, calculating that they would recoup those costs in repeat orders.

Their accountant fretted about the operational costs of those smaller orders, but I urged them to consider them marketing costs for customer acquisition and retention, not production expenses.  Since implementing the change, their order count has quadrupled and 90% of their orders use the new technology.  Has the new technology displaced workers?  Just the opposite – their workforce has almost doubled in size.

Implementing the “FEWER” principle in your product development and production areas is an essential step in your battle against overseas competitors.  But the “FEWER” principle alone is not sufficient to ensure success.  It must be implemented in conjunction with the “FASTER” and “FINER” principles to have the greatest impact.  More to come on “FASTER” and “FINER” in future blog posts.

Michael McKeldon Woody is host of the upcoming television program, and author of the upcoming book “American Dragon,” both of which profile U.S manufacturers successfully competing with overseas companies by using the principles of FEWER, FASTER, FINER.  He can be reached at mmw@americandragon.us and on Facebook at American Dragon – Michael McKeldon Woody.  Twitter @usdragon1 

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