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Customer Centricity for Contract Manufacturers – Nice to have or imperative?

Posted by Sabine Kempe on May 21, 2019 8:42:56 AM
Sabine Kempe
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The industry is buzzing with questions such as “What is your digital readiness factor?”, “How to unlock the benefits of digital transformation?” or “What are the best ways to build a digital smart factory?” Reports and analysts’ views on these topics are indeed valuable, but we decided to ask some of our customers in the manufacturing industry to give us direct insights into their approach and best practices. Our new blog series starts with one of our clients in precision engineering and what would be their take on the big buzz around Customer Centricity.

According to a McKinsey article “Industry-leading B2B companies increasingly respond to intensifying global competition by putting customer-centricity and experience at the heart of their strategy.” But with contract manufacturers not exactly being “born digital”, how can they catch up to successfully transform operations, infrastructure – and not to forget - sales? What does customer centricity exactly mean to contract manufacturers?

Contract Manufacturing: Low costs versus high expectations

customer centricity2Let’s burst a bubble straight away: our customer admits that digital transformation measures do not initially took a high priority in an industry where the clients’ cost sensitivity is directly reflected in the company’s operations.

“When you produce tens of thousands of pieces of a single design over the next five years, your focus lies on the equal amount of cost factors. We will spend many hours, days and even months wondering how to hit target margins for a rather complex project whilst trying to find the best technical solution for our client.”

Customer expectations run high when it comes to excellent quality and low prices. Meanwhile production costs need to be kept as low as possible to make this a business and not a charity. How can contract manufacturers walk this very fine line without falling off into the grounds of globalized competition?

 


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Customer Centricity has a direct line to cost centricity

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"Our success largely depends on engagements remaining profitable over year-long running contracts. So, for us it is crucial to get customer requirements right from day one and delivering solutions in a complete and accurate RFQ. That’s what our customers expect.”

But balancing the initial requirements with production costs is just the beginning. Cost management over the time of production and pulling project balances and forecasts at the point of contract re-negotiations are imperative. This cannot be based on someone’s experience but needs to be backed by exact cost and production data in real-time to a) keep the business steady and b) the customer aboard.

With largely variable cost factors such as labor, raw materials and purchase parts distributed over several plant locations and even countries, an informed and low-risk decision making is key in this game. Sounds impossible? Hoist the digitalization sail!

Fast and not furious – the secret to a great customer experience

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So how does a great customer experience actually look like in contract manufacturing?

“I would describe our sales process like that: our customers will send us technical designs and extensive Excels filled with features, materials and several other attributes of the requested product. Our job is to capture all these requirements and come up with a production process and final design. This includes the input of several teams, delivering capability considerations, process designs, material cost calculations, machine utilization rates and so on and so forth. It used to take us weeks to get back to our customer with a detailed RFQ.”

Digitalizing complete cost and production structures was the route to choose for our customer to create a flawless customer experience in the RFQ phase and beyond. With the capability to directly upload the customer designs and requirements into the system manufacturers can not only save time but guarantee that all data is correct. A push-the-button cost simulation of a different configuration, material alternatives or choice of production plant is as close as it gets to looking into a crystal ball. It also proves to be the backwind needed to surpass competitive offers.

Customer Centricity as an opportunity

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In a business with slim margins it is evenly hard as it is essential to invest in boosting customer experience and operational performance. We won't go as far as saying digitalizing the manufacturing sales will guarantee you always clear skies and smooth sailing. But according to McKinsey the win rate of offers can be improved by 20 to 40 percent, and costs to serve lowered by up to 50 percent when adding the wind of customer centricity to your sails. Factoring in the threat from increasing global competition, a digitalization strategy is considered a massive opportunity for manufacturers that wants to go beyond their current horizon of profitability.

As our customer confirms: “Customer Centricity for us starts right at the beginning when we send out that 100% accurate RFQ in the fastest time possible. It continues with us delivering the high-quality products our customer asked for and comes full circle back when we are rewarded with re-contracting while retaining our margins.”


For contract manufacturers a customer centric sales strategy includes providing a complete, technically feasible, accurate and competitive offer. If you want to learn how a Manufacturing Sales Platform can help you with that, sign up for our upcoming webinar!

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Sabine Kempe

Written by Sabine Kempe

Sabine is responsible for In Mind Cloud´s marketing. A cloud solution enthusiast at heart, she is dedicated to finding answers to customers' questions before they have even been asked.

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