Build what the customer wants to buy rather than what the company wants to sell. Despite the advantage of being close to the American consumer market, American industry will not and cannot compete with operating methods designed in the 1950s that cater to detached boards of directors and financial markets rather than the consumer.
The post-World War II mode of “Push and Promote” based on low unit cost and high efficiency is a recipe for disaster in today’s intolerant fickle markets. The automotive industry is an excellent example. In January 2012, Ford had almost twice the inventory at the dealership as auto executives like to have on the lot and in the showroom, but the plants continue to push more Focus and Fiesta cars out of the plant. Ford isn’t alone.
American industry must start making decisions based on customers first and old-school accounting costs second. This requires a significant operating shift from making what the forecast says because it is more efficient to making what the customer wants because it is more profitable.
This is not a new idea. In the 1990’s, Chrysler increased its sales by 40 percent when shifting to this velocity model, which enables customer demand to pull products through the system. When Chrysler reverted to the old ways of doing business, sales plummeted consistent with the other Big Three automakers at that time.
Improved responsiveness doesn’t have to be synonymous with increased cost. However, the cost of being efficient but out of synch with the market is staggeringly high and is currently bankrupting companies daily. Successful American companies develop the ability to significantly reduce the time to manufacture the product, reduce working capital, and improve customer service – all at the same time.
