Intelligent Manufacturing € February € 1997 € Vol. 3 € No. 2

Balancing the Trade-Off Between Growth and Risk

Opportunities for growth is the number one business issue facing manufacturers as they direct their companies into the next millennium. Although technology has made growth easier in areas such as communications, traditional key elements still need to be considered, such as developing new products, establishing distribution channel strategies, global supply chain management, and addressing changing technology and information needs. These findings were revealed in a recent survey conducted by the manufacturing industry practice at Arthur Andersen (Los Angeles,Calif.; http://www.arthurandersen.com),a professional services organization.

"Manufacturers need to focus on the big picture and take a more global view of their businesses," explained Steven Hronec, worldwide director of Andersen's manufacturing industry practice. "While technology has simplified some processes and has made expansion easier, it has created new challenges in areas such as product development, logistics and distribution due to increased complexity."

As rapidly as the business environment changes, the level of risk also is elevated. Manufacturers must pay attention to a growing list of risk areas. According to the survey, the top three risk areas that decision makers need to manage to ensure success as they move into the 21st century are: competition, customer satisfaction, and productivity and efficiency.

Survey respondents discussed a diverse number of actions they plan to take during the next year to assess and control relevant business risks. These actions include:

• creating new senior level positions;
• establishing performance measurement systems;
• restructuring company capital to ensure sufficient resources for growth and product innovation;
• developing strategic alliances with entities that possess significant product licensing results; and
• establishing profit-oriented incentive schemes.

However, the two most prevalent recurring themes in the survey regarding planned initiatives involved strategy and customers. Strategic actions mentioned include:

• restructuring marketing activities to match corporate strategy;
• redefining global management structure based on global strategy;
• creating investigative task forces to recommend and implement strategies on key business aspects; and
• developing strategic planning scenarios.

Actions related to customers include:

• focusing on understanding the marketplace and customers to ensure resources are directed to highest return products;
• improving customer satisfaction activities;
• holding more customer meetings to gain insight on opportunities to improve service, quality and satisfaction; and
• solidifying regional and business line structure to improve response to key customer requirements.

Arthur Andersen's Manufacturing Business Risk Model enables manufacturers to identify the risk factors that impact their company and helps company executives execute key strategies and achieve their objectives.

"It is important to ask the hard questions when creating or improving on a business plan," said Hronec. "Any company, whether they make automobiles or sneakers, must evaluate potential risk in order to maintain a competitive edge. Decision makers must make ongoing risk assessment a high priority in order to assure growth now and in the future