I had an opportunity to spend some time with an Australian friend last week who was in the USA to begin the process of opening a manufacturing operation. He runs a small, very lean factory Down Under and was starting to export to the United States when the exchange rate went south on him and rendered it untenable.
He met with a handful of potential customers and demonstrated his quality, promised competitive pricing, and more important, told them he could deliver any of an incredible array of permutations of his product in a matter of days, rather than the weeks they are getting now. He left with better than a half million dollars in committed business – enough to pay for moving equipment, setting up operations and getting things up and running on a break even basis. From there he can do serious marketing and selling. The future looks very bright.
It is similar to the results I saw in New Zealand last year, in which a handful of very lean manufacturers are making a nice profit exporting into the United States – just a couple million or so a year, but enough to make it well worth their while.
In all of these cases, the competition in the USA is one of two types: Importers from China, or old school mass production folks who can only customize if you want a staggering quantity, and need a month to process an order and ship … not too far from the ‘any color so long as it is black’ mentality.
The American competitors are big, and the loss of market share to guys like my Australian friend or the Kiwis will be only a few percent of their total. Unless they have a well oiled communication process, the reason for losing sales will probably never be understood at the top. If they respond to the threat at all, it will most likely be in the form of replacing the sales rep, or price reductions because they won’t know what else to do.
Next year they will lose a little more to an American start up, and the year after a little more to a Canadian lean company, then to another small American lean manufacturer. Little by little, niche by niche the small, fast, lean producers will nibble away at them, and they will tell Wall Street that the economy is down, foreign competition from low cost producers is fierce, and they will embark on layoffs and restructuring plans. All the while they will never really know what hit them. The worn out old lions will stare at each other and roar, completely oblivious to the creative, nimble hyenas behind them who are eating all of their prey.
I am pretty sure that this is happening all across the country. It is the only explanation I can find for the fact that small manufacturers are doing well everywhere I go, while the folks on Wall Street and in Washington and in academia theorize and wring their hands over the difficulties of global manufacturing.