Focus on core competency should strengthen brand
By Doug Colbeth, president and CEO
Everyone knows there’s been an incredible push to outsource manufacturing over the last couple of years. The push to reduce costs to increase competitiveness in a highly demand driven world has been the driving force. Companies have been evaluating their core competencies with greater scrutiny than ever so they can focus on them and outsource the execution of everything that doesn’t rank as a core competency.
For manufacturers, this has created a clearer distinction between brand owners and contract manufacturers. Brand owners view their core competency as sales and marketing over the actual manufacturing of the products, something they have substantially outsourced to contract manufacturers. In doing so, however, they have had to develop extended supply networks comprising partners that now manage the day-to-day execution of these tasks. While this has taken place, customer expectations and competitive options have continued to increase with no end in site. This creates a significantly more complex “virtual company” for the brand owner to manage–a company that still retains full accountability for performance in the eyes of the customer.
In order to achieve the full benefit of outsourcing, the virtual company needs to execute better than before. In other words, the focus on the brand owner’s core competency should actually strengthen the brand’s appeal in the marketplace. While this sounds obvious, I see many brand owners struggling with the lack of control and visibility inherent in the newly created extended supply network.
We’ve worked with a variety of global leading brand owners–Agilent, Teradyne, Lucent, Network Appliance (NetApp), Casio, Toshiba, to name a few–who have recognized that the ability to effectively manage the extended supply chain of a virtual company is essential to realize the benefits of focusing on your core competency. And, in this highly volatile and rapidly moving global marketplace, the ability to respond quickly and effectively to ever present changes is at the core of their ability to successfully achieve the desired results. While it is no longer the case that they manufacturer everything internally, neither is it the case that they can outsource and focus on their core competencies without the means to ensure success of their extended supply network. Visibility and control are essential for brand owners to deliver results, and developing skills in responding to change are at the heart of being in control.
