Ask The Expert: Increasing Domestic Productivity

By Liv Jensen

A successful economy must sustain and encourage national production, industrial development and domestic sales of goods and services. Thus, domestic production must be monitored and supported within the domestic retail, food, energy and service industries.

Analysis of the recent economic downturns, which have been experienced both in Europe and in the United States, have exposed the extent to which these economies depend on imports and foreign lending. In order to increase economic recovery, domestic production and export levels must increase.

In part, the economic downturn experienced in Europe and the United States has been caused by an inability to compete, in terms of price and production levels, with Asian manufacturing industries. Other factors, however, have also been influential. These factors include difficulties accessing equipment and resources, the lack of a skilled workforce, the lack of local demand for products and expensive transportation costs.

In a bid to identifying potential manufacturing opportunities within Europe and the United States, many have suggested focusing on specialist 'niche' manufacturing products. The hope is that these products might appeal to local consumers.

'Niche' manufacturers have had some success within the sporting industry. America's Chicago based sports manufacturer The Brunswick Group is a good example. It has successfully manufactured sports equipment for many years, managing to continuously evolve so as to meet the needs of multiple generations of American consumers. Recent diversification strategies have included manufacturing  bowling pins and bowling balls.

Growing Domestic Production within the Sports Industry

In order to increase domestic production within the sports industry, high quality and desirable products must be produced under cost effective manufacturing conditions. To achieve this, companies must identify, and structure their manufacturing business models around, relevant production drivers and supply chain management policies.

Improving Production and Supply Chain Management

A number of drivers impact upon production and supply chain management. Through these drivers, raw materials are converted into finished goods. Each driver offers opportunities for cost savings and efficiencies. As per Vinold Lall of QFinance, the drivers most commonly thought to influence production costs and supply chain management are: procurement, design of the supply chain, inventory, transportation, warehousing and collaboration.

Procurement

Procurement is the process of purchasing raw materials, parts, services and labour for use in production. In order to increase domestic production levels within the sports manufacturing  industry, procurement processes must involve a thorough cost benefit analysis of each component of production. This analysis must engage with potential suppliers; comparing their prices, warranties, and contractual obligations.

Design of the Supply Chain

In order to reduce costs within a supply chain and increase flow of production, care should be taken to identify potentially linked products or components. Where possible, product ranges should be compatible with existing factory machinery and produced using common components (for example standard sportswear zips). Not only does this speed up the manufacturing process, but it also enables the manufacturer to benefit from bulk purchase discounts and reduced production overheads.

Additionally, manufacturers should seek to keep goods in an unfinished state until near the point of sale. This enables the manufacturer to link supply to demand, increase production monitoring and reduce inventory reductions.

Inventory

The principal aim of inventory management is to reduce the need for inventories within the supply chain. As inventories are both labor intensive and time consuming, this facilitates a reduction in staffing costs and increases the speed of production. There are two main ways in which inventory costs can be reduced; activity-based costing and vendor managed inventory.

Transportation

Transportation represents a major cost in domestic production. This is the case both within sports manufacturing and sports service industries. Transportation costs can be reduced by adopting successful local marketing strategies, using low cost methods of transport and taking steps to ensure fuel efficient routes and delivery schedules.

Transportation should be considered within the procurement process and, when sourcing haulage and freight services, multiple options should be evaluated. When purchasing company pool cars and delivery vehicles, capacity, insurance costs and fuel efficiency should be considered. For example, vans should be sized appropriately and be as fuel efficient as possible. Companies providing sporting expeditions  or services should consider purchasing 7-seater cars. These could increase transportation capacity, thus servicing potential growth within the business.

Collaboration

Collaboration builds upon the procurement process and focuses on ensuring joint planning, co-ordination and process integration between the manufacturer and its suppliers, service providers and customers. Fostering collaborative relationships enables the manufacturer to develop strong links with its suppliers and service providers. These links may open up cost reduction opportunities such as loyalty discounts. Fostering collaborative relationships with customers is also fundamental. This is because it enables the manufacturer to develop a sounder understanding of key market trends and gauge potential opportunities for business development.