Two less-is-more ways to repair margin

Electronics contract manufacturers no longer have the exclusive privilege of operating with low margins;* this year many of their customers — electronic product companies — also are experiencing rare tightening. Not a minute too soon are two “less is more” strategies for adding margin to both types of companies: One has to do with your stuff, and the other with your time.

Corporations habitually buy IT equipment, furniture, supplies for offices and cafeterias, capital equipment, marketing collateral, and product-related materials. Managers fear that if they don’t buy enough stuff to consume this year’s budget, then next year’s budget will be smaller. So the process has been “Buy it, then Use it or Store it.” Employees are starting to get disgusted with how their companies are laying off people while offices and storage rooms brim with unused or underused investments.

Replace the old procurement habit with “Identify the need, then Find a solution” — whether that solution is borrowed, second hand, leased, a service, or a better process requiring no additional stuff whatsoever. CFOs need to start rewarding departments that use “Identify the need, then Find a solution” instead of those tactically following “use it or lose it.”

Cisco had it right when they created CREDO — an online inventory that matches surplus items to identified needs. Several years ago we consulted to a client trying to bring this buying-stuff alternative to other companies, but you can easily create one on your intranet. And expand your thinking to include strategic solutions that avoid opening new facilities and taking on other major expenses.

Secondly, imagine the time we’d free up if we halved the time we spent in meetings. Check out four smart tips to reducing hours (even minutes) from meetings that do not further corporate objectives. Executives can insist on dogged project-management practices, comprising milestones and accountability for accomplishing corporate objectives. Leverage priority-only meetings and on-line tools for collaboration and accountability.

Corporations will not overcome their addictions to buying stuff and holding unlimited meetings until a “less is more” culture is embraced by top management and frequently re-enforced through employee training, fun competitions, and rewards.

Before you run to your next meeting or fill out a purchase requisition, take a minute to share with the TFI network your successes with repairing margins, by leaving a reply.

*Watch for an upcoming post in which we’ll write about notable mid- and smaller-sized contract manufacturers whose margins have actually been good.

Posted by Pamela J. Gordon, June 12th, 2009