Instead, Radjou preaches the benefits of what he views as three ingredients for success in the current manufacturing environment: innovation, flexibility and services. Regarding the first, he says, "You need to focus on coming up with some kind of product innovation that makes your customers feel like you have something unique, something that they haven't seen elsewhere." On flexibility, Radjou says this implies that companies must learn not only to be responsive to rapidly evolving customer requirements but also to combine responsiveness with operational effectiveness, which translates into the ability to "gracefully scale their operations up and down" as demand fluctuates or market circumstances change.
And finally, the analyst calls on manufacturers to find new ways of wrapping services around their products so that they can embed themselves more deeply within their customers' processes. "You need to think about what else you can offer your customer to make that customer feel like you're a solution provider that is an integral part of, say, their product development process or asset management process," Radjou explains. "That requires a mindset where you're not looking at customers and just thinking about them as passive buyers of products, but you're actively thinking about addressing customers' pain-points and helping them better serve their own customers."
Naturally, each of these ingredients for success entails specific challenges in its own right. Take innovation. At Freudenberg-NOK, the company has been working to address its customers' future needs by working on such next-generation technologies as fuel cell sealing systems, magnetic encoders for vehicle dynamics systems and active power train mounts. But driving innovation at the company has required bringing together multiple product development teams coming from several different corporate cultures and tackling over-arching project management requirements to ensure product quality and to reduce costs.
Freudenberg-NOK resides at the upper end of the mid-market spectrum, with sales of close to $1 billion. Formed in 1989 as an American partnership between the global Freudenberg Group and NOK, the company is, as Thomas Gill says, caught in the middle between large automotive OEMs focused on lowering costs while raising quality, and raw materials suppliers seeking to raise their own prices. Contending with these market forces, Freudenberg-NOK has continuously undertaken production-oriented initiatives, with a heavy focus on lean manufacturing including through a company project called Growtth, or "Get Rid Of Waste Through Team Harmony," Freudenberg-NOK's company-wide program stressing lean business practices.
On the product development side, the company has focused on advanced product quality planning (APQP), the automotive product development standard. However, implementing APQP company-wide prompted Freudenberg-NOK to re-examine how it managed its nearly two-dozen geographically dispersed product development teams. Viewing its capacity for managing those teams as a critical factor for the success of its innovation strategy, the company opted to implement a product lifecycle management solution, Aras PLM, in order to get its various development projects under better control.
Freudenberg-NOK's own IT staff worked with Aras specialists to create a "stage-gate" product development template for use across the company, introducing a standard process for all the product teams to follow as they work their way through projects. "The thought is," Gill explains, "that this will help us both on the quality side because we end up with electronic check lists to ensure that we get everything done and we don't forget anything in development and then, ideally, reduce our costs as well, because we won't be missing these steps and having to expedite things and do things over again." Importantly, in addition to these benefits, the PLM solution, which will ultimately be rolled out to some 400 users at 20 different sites, can provide executives at the company with a higher degree of visibility into Freudenberg-NOK's portfolio of development projects through built-in reports and performance metrics.
Like Freudenberg-NOK, the graphite electrode business of Wilmington, Del.-based GrafTech International historically has faced downward price pressure on the customer side and upward price pressure on the supply side. The graphite electrode business which operates six plants around the world accounts for about 65 to 70 percent of GrafTech's total revenues, which in 2003 amounted to $713 million. GrafTech formerly was a part of Union Carbide.