A few years ago, I carried out a metrological inspection of a local factory. I was escorted around the factory whilst carrying out my various duties by the company’s production manager. The production manager was in high spirits. After many years, he had finally got his board to employ an American efficiency consultant. The consultant was to look at their production processes and suggest productivity improvements. I jokingly quipped that the best such measure would be for the company to move premises. The production manager smiled wryly. I suspect this was also his view but he would never get such a measure through the firm’s family dominated board.
The factory had been built by the family firm in the 19th century. It had been located on its current site; on the edge of the town centre and next to the railway station; for over one hundred years. The factory was on one side of the main thoroughfare into town. The company offices sat on the other side of this busy road. It was a rabbit warren of buildings and often the easiest to move from one production department to another was to walk out of one door onto the main road and walk along the pavement to another entrance. The factory site sloped meaning that many of the production processes happened on different ground levels. Despite being next to the railway station, the company’s products were predominantly delivered by road. This meant that lorries and tankers had to traverse narrow streets many of which were now residential. Beside the factory were railway arches which were too low for many commercial vehicles. Many parts of the factory were dark, dingy and dirty. There was a real problem with rodents and major electrical re-wiring was urgently needed.
Another division of the same company was as a house builder and many of the estates around the factory had been built by that company.
The production manager wanted to improve productivity and to grow production but he had little available space to store raw materials and finished products. As much of the equipment used in the factory was bulky, the factory had effectively been built around it. This meant that the business was stuck with aging infrastructure which was difficulty and costly to maintain. It was also virtually impossible to reconfigure production lines for more efficient processes.
The production manager could also see that tactically it was a good time to carry out a move. The area of town where the factory was located was a target for regeneration. The local council had plans to carry out significant improvements to the area. Many of the light industrial buildings which used to be located around the railway station had either been demolished or converted to make way for housing. A big project was underway to attract new residents to the town. At the same time, a new business park, partly funded by the local development agency was expanding on the town’s northern edge. Not only did the business park open up the possibility of a modern factory on a single level, it had direct road links to the local motorway network. Transport logistics would be much easier. A modern factory, on a single level would also allow for easier production line ergonomics and the implementation of just-in-time stock control. A new factory would allow room for production to expand to supply more customers and new markets. A new factory would allow for increased product development and entry into different market segments.
I could also see marketing advantages. The company manufactured high quality specialist lubricants for the automotive and aeronautical sectors. Many of their high-profile customers premises looked more like scientific laboratories than production facilities. For example, the company supplied many of the leading sports car manufacturers operating in Formula One and other leading race series. It supplied companies such as British Aerospace and Airbus. Surely it would be advantageous for two major elements of its marketing mix, its process and place, to attempt to mirror that of its major customers?
A few months later, I returned to the factory to carry out some follow-up work. I asked the production manager about the consultants report. I was told it had been rejected out of hand by the controlling family. They had voted to stay put in the factory their antecedents had built. The consultants carefully presented arguments about efficiency and modern production processes were dismissed out of hand. The board baulked at the initial capital costs of a move and ignored the long-term efficiency savings of a more modern facility. It seemed history and tradition was more important than future viability.
Strategic business management has changed over the last forty years. Aaker (1995) described these changes:
- Budgeting – This was the traditional method of allocating resources in a strategic manner. Budgets were allocated to various functions and monitoring of these budgets was used as a method of controlling complex processes.
- Long-Range Planning – This was a move away from annual budget settlements. Greater emphasis was placed on forecasting future market events. The extrapolation of trends was used to plan future sales, profits and costs. Long-range plans were used as a basis for decision-making.
- Strategic Planning – A specific overall direction of travel for a firm would be determined and control of planning activities centralised. Trends are used to examine the overall business environment.
- Strategic Management – This is the situation today. Strategies are formulated and their implementation managed. The focus of planning and forecasting is putting agreed strategies into practice. The focus of strategy is managing change and transforming the business to meet current market conditions.
Marketing too has seen change. Initially industry focused on making products. The more you made the more successful you would become. This focus on production ignored important things such as the quality and consistency of products or the needs of consumers.
Company’s then developed a product focus where the aim was to reduce wastage, reworking and increase product consistency.
The trend then moved to a sales focus. Marketing activity was focused solely on increasing sales. Many firms still have a structure where marketing activity is predominantly focused on sales figures and promotional activity.
Today many organisations are applying marketing practices across all of their functionality. The focus is to meet the individual needs of customers. For example firms such as Brompton Bicycles, Mini and Reebok allow customers to effectively design their own products from a seemingly endless range of product options.
The lubricant manufacturer is still located in my local town centre. They are now storing finished products in an additional building (which involves transferring barrels of product by fork lift across a street which is a bus route). This building had preciously been leased to a gym chain and the rental income used to offset some costs. This rental income has now been lost and what was once a dance studio and function room is now filled with barrels of oil.
It seems that the company has been set in aspic. I suspect that its ability to be fleet of foot and to explore new markets has been seriously hampered. I also suspect that its ability to adapt to new customer demands and to defend against attacks by competitors has also been hampered. I suspect the firm is surviving and defending its market position rather than being at the forefront of changes in its market. It had the chance to change and modernise. It didn’t take it and I hope that decision doesn’t harm its viability in the long-term.