Customer-driven manufacturing.

Introduction

The gap between manufacturing and marketing is legendary. Traditional differences separate these key functional areas. Some argue that the cause is their different cultures, value systems and traditions. Others see it as a more fundamental division based, at least in part, on status and level of corporate influence. Whatever the origins, companies can no longer live with such preferences or functional whims. With increased competition it is imperative to eliminate this problem if a company is to succeed.

The real question, though, is whether these differences are the symptom or the cause of the misalignments one often sees between marketing and manufacturing strategies. If the misalignment is the result of bad employee attitudes, then changing the organizational structure or employing effective management skills will solve the problem.

Our experience in a broad variety of companies and industries convinces us that it is instead the result of firms being unable to debate some core strategic issues. Typically functional differences are simply allowed to prevail and there is no consensus on strategic direction. In times of greater competition this corporate luxury is, at best, irrational and at worst, irresponsible. Executives who are unable to put corporate strategic requirements ahead of functional differences are living with yesterday's business values. To be successful in the current environment, management must take a more objective, and truly business-related perspective.

Business basics

The basic tasks of a business are straightforward. They are to

* get and keep customers;

* make a profit;

and in such a way as to meet the short- and long-term goals of the organization.

Explicit in both of these tasks is the need for marketing and manufacturing not only to work well in themselves but also to work well together. To do so requires a shared understanding of the business in order to achieve these basic tasks Strategy needs to guide both these functions by providing an overriding and appropriate business context. Optimizing either in isolation rarely leads to optimal results. Thus, these need to be driven by a greater whole which requires operating both functions from the perspectives of its customers.

The source of the problem is often rooted in a company's failure to debate corporate strategy. But, past actions are not the only way in which the status quo had been reinforced. Current strategic research and publicized approaches to developing corporate strategy also put forward the provision of functional statements without either corporate context or stressing the need to link the perspectives of different functions. As a result, key strategic differences are not reconciled and the company operates at a competitive disadvantage, a fact made all the more serious in today's highly competitive and fast-changing environment.

An illustration of the polarization of these functional perspectives in strategy formulation is our recent experience with a US furniture manufacturer. This company has an excellent reputation for producing high quality, solid wood kitchen and dining-room furniture. It is sold through several distribution channels including mass merchandisers, large and small independent furniture stores, furniture galleries, small furniture store chains, and mom-and-pop outlets. To meet corporate sales growth objectives, the marketing strategy included two principal elements. First, it planned to double the firm's sales through furniture galleries over the next two years. This required a wide variety of products to fill a gallery's floor space, including both high and low volume items. Second, marketing also felt that sales to the mass merchandiser segment ought to be held constant due to an "all our eggs in one basket" concern.

An investment programme in the factory had just been completed by manufacturing. The installation of automated equipment in the chair plant to manufacture chair legs at a single machine was one example. The benefits to manufacturing included the elimination of several operations, reduced direct labour, lower work-in-progress …