To Make or Not To Make – That is the Question

Manuficient - Kid Costume
Manuficient – Kid Costume

What do you want to be when you grow up? I remember being asked this question as a kid once or twice. I may have even asked my own small children what they wanted to be; not expecting a well thought-out answer…just want to get them to think about it. Most of us had at least some idea of what we aspired to become at some distant point in the future. It was fairly easy to just pick something – after all, since we planned to live forever, we had plenty of time to work on it.

Then over time, life happens and you look up and realize that you’ve become many things. An employee, a student, a parent, a church member, a husband or wife, a moonlighting entrepreneur, etc, etc…  In the end, we seek to be as good as possible in all these things and that’s fine. That’s life. Strangely, the exact same dynamic exists in the world of manufacturing. Many manufacturers start out with the modest ambition to make something great to serve a given market. Over time, more and more operations are brought in-house for one reason or another: rather it be to cut costs, improve service levels, hire more people, or something else. I’ve seen manufacturers start out with one production line and then take on all its own outbound logistics, kit packaging, and anything else it could fit within it’s four walls. This approach has its advantages but it can also make you lose sight of why you exist in the first place. You end up spending so much time and effort dealing with these supplementary processes that they start to feel like your core business. This is called vertical and horizontal integration. I’m not suggesting that integration is always bad; I am suggesting that any process that can be done better by someone else, you should strongly consider letting them have it. Then you can focus on achieving excellence at what you should be making.  Although its perfectly fine to be good at everything in life, you need to be great at something in business.

At some point, you have to take a step back and ask what is uniquely valuable about what is done at the factory. What is the Core Value Proposition? Ask yourself: “What process or set of processes are critical to our business that we can do better than anyone else?” Then you can start asking what can be outsourced. This is an approach to leverage economies of scale. As long as the factory or company is able to focus on becoming great at what it should be great at, it can partner with other great companies to take care of the rest. In the end, you end up with a truly great business system where each component continuously strives toward operating excellence.

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