Planning for the future.
One of the more dynamic trends to invade the casting industry in the decade of the 1980s was the application of the concept of long-range profit planning.
Many foundries now realize that planning ahead for future growth and profits is not only desirable, but essential to survival in this highly competitive industry. A formalized program of managing product mix, operating costs, marketing and profits has become necessary to success.
It is difficult to accurately assess or even envision the full impact that new molding and coremaking processes, accelerating automation, robotics, computerization and other developments will have on our industry. But we can anticipate with confidence that future markets and marketing opportunities will be heavily influenced by changing technologies.
Another major reason for long-range planning is to better handle the profit squeeze that narrowed the margin between costs and sales revenues for many foundries, despite the substantial increases in overall volume they have experienced.
Either for competitive reasons or because they lack negotiating skills, many shops have been unable to increase prices, and these companies have seen production and distribution costs take an over-increasing share of profits.
Planning ahead will also enable you to better capitalize on the substantial market growth that will most certainly take place through the 1990s. U.S. producers can expect to see unprecendented overseas demand from former Iron Curtain countries and from underdeveloped areas such as Africa and Asia. And with a favorable foreign exchange rate, foundries and their customers are well positioned to better compete more effectively on an international basis.
Against this framework, long-range planning is more imperative than ever in order to provide for future growth and profitability. Technological advances, narrowing profit margins and expanding markets will all combine to produce a fiercely competitive environment in the casting industry. For a foundry to expand and increase profits it must make use of every available means.
Form a Marketing Program
To meet the many challenges of the future, it will be essential to have a well-organized marketing program. After all, profit planning is just guesswork without the basis of a good marketing plan.
How does a well-thought-out marketing program figure into the survival scenario? We'll find very quickly that it requires us to take a good look at where we best fit in the marketplace - or if we fit. Are we competitive? Will we be able to match our capabilities with the casting needs of specific prospects in specific markets? What are those markets? Where are our best prospects?
What the marketing program does for us is first to provide the answers to these critically important questions. The next step is establishing realistic sales and profit objectives. Finally, we make it all happen with innovative programs. Operations with good marketing programs have learned that their investment in developing and implementing marketing plans that work really pays off. And it's just as practical to calculate the ROI on marketing expenditures as it is on those for facilities.
This brings us to an important distinction: the difference between sales and marketing. Most foundries have sales programs. Few have good marketing programs. Look at marketing as the discipline of planning how you are going to go about developing increased sales and improving profitability. This can be an involved, complex problem.
Sales, on the other hand, can be likened to front-line trench warfare, where casting salesmen fight it out toe-to-toe for the business. Sales is really an integral part of the total marketing effort. Sales and marketing are completely interdependent. Both are vital, but sales efforts are infinitely more productive with marketing objectives and groundwork laid, and the sales program effectively managed and monitored.
Understandably, you don't hear much about successful foundry marketing programs. These are well kept secrets. But you do see the results of them in foundries with higher operating rates and much higher profitability. Just take a look at arrayed industry profitability date and you quickly see the "marketing" effect in action.
Do you have a marketing program? Probably. But if it's not well planned, it's undoubtedly not very effective. The "get out there and sell" philosophy that has been so prevalent in our industry is as passe today as smokestack sales prospecting. However, if you don't have a good working program, it's not too late to get started on one.
Individual foundries place varying degrees of emphasis on the marketing function. However, the importance of establishing realistic marketing and profit objectives and implementing them with effective programs cannot be stressed too strongly.
If someone in your organization asks, "Why do we need a marketing program?", just tell them your foundry is going to be one of the survivors.
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|Title Annotation:||methods of long-range planning for foundries|
|Author:||Warden, T. Jerry|
|Date:||Sep 1, 1990|
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