Keeping Customers Happy Despite Rising Tariffs

Quality and technology work together to maintain supply chain efficiency

Published: Monday, May 13, 2019 - 11:03

Operations management plays an important role in the manufacturing process, but similar to a stage crew at a theater, operations managers do all their best work behind the scenes. The best operations managers strive to go unnoticed, and why shouldn’t they? A seamless supply-chain process should require little to no attention from customers.

But recent tariffs are jolting operations. NAFTA changes, along with tariffs on Chinese imports, are forcing operations managers to step out on center stage. New tariffs on materials like steel and aluminum as well as electronic components could mean disruption in the supply chain process, and operations managers have to work diligently to mitigate any hiccups that crop up for the company and its customers alike. Certainly costs are going to increase somewhere, so companies have to decide whether they’re going to absorb them or pass them along to their customers, both of which are less than ideal options.

Tariffs are only one of the many challenges that operations managers deal with on a regular basis. With this in mind, how can these managers ensure successful processes and keep their businesses healthy and customers happy? The answer lies in offering high-quality products, delivered on time, while still keeping prices competitive.

Quality’s critical role

Quality is arguably the most important factor of operational excellence. Customers need to know they can rely on their vendors and suppliers to provide first-rate products. To do this, operations managers need to implement strong testing and measurement procedures to ensure that every product that goes out the door meets customer expectations.

Testing and measurement practices should always keep the customer in mind. This means developing customized testing methods for products based on how the customer is using them. Companies from different industries will no doubt have different uses for the products being developed. For example, construction managers will need highly durable, weather-resistant products, while those in the automotive space would instead prioritize a product that can be customized to address changing industry demands. By keeping this in mind, operations managers can make sure they’re giving their customers the exact solution they need, and that it’s ready to use for their specific needs.

Whatever challenges customers encounter, operations managers can make sure they’re supporting their customers by equipping them with the best devices and products to get the job done.

On-time delivery

After building the perfect product for customers, the next challenge is getting it to them. It can be difficult to run your business on a set schedule when you have to rely on multiple parties. Vendors and suppliers could easily disrupt the entire process, even if they’re just a few days late on their delivery. It’s up to operations managers to make sure they are not the broken cog in the machine.

Operations managers can support their customers better by helping their own employees stick to the production schedule so they deliver products on time. This is a great way for vendors and suppliers to demonstrate their value to the customer and prove they can be relied on to get the job done, not only well, but on schedule.

It’s nearly impossible to avoid late deliveries at some point, whether they’re within or beyond the company’s control. If any issues do arise, operations managers must act quickly to let their customers know. This transparency will be appreciated and will give customers enough time to account for a late shipment so they can diminish any hiccups on their end.

Staying on top of on-time delivery ultimately helps customers maintain their budget and keep unexpected costs to a minimum, which is the last key to operational excellence.

Good, quick, cheap... impossible?

Deliver products that are good, quick, and cheap. It sounds like an impossible task. Although quality and on-time delivery are key to customer satisfaction, price is still important. Maintaining low prices is arguably the most difficult area of operational excellence because it’s often outside of an operations manager’s control. New NAFTA changes and tariffs on Chinese goods don’t help, either. The 25-percent tariff on steel and 10-percent tariff on aluminum from new NAFTA demands have significantly hurt companies that use these materials most, and it’s showing in their bottom lines.

For example, because of the tariffs on steel and aluminum—two metals commonly used in the production of cars—the auto industry has been dealt significant losses. In fact, the industry is expected to lose 2 million car sales and 715,000 jobs, while the U.S. GDP could fall by more than $60 billion. Ford’s CEO estimates steel and aluminum tariffs will cost the organization $1 billion.

Additionally, the United States’ 25-percent tariff on more than 800 categories of Chinese electronic goods is hitting electronics manufacturers hard. In 2017, the U.S. Census Bureau valued all of these electronics at more than $5 billion. During the next few years, that figure could reach $9.4 billion.

There are two factors operations managers should consider for maintaining fair prices despite rising tariffs. The first is seeing how competitors are handling the tariffs. It’s important to stay competitive and make sure customers don’t jump ship for lower prices.

With this in mind, it’s crucial that operations managers take care of their own business, which brings us to the second factor. Prices should be competitive but still cover the production costs for a quality product and allow the company to earn a profit. If the cost is reflected in the quality of the product, customers may be willing to pay a higher price. For example, a high-quality telematics device that’s only slightly more expensive than a lower-quality device will most likely remain competitive in the marketplace. This means that, to a point, extra costs spent on improving quality can more than pay for themselves.

Now we move from the “what” of this operations management puzzle to the “how.” Specifically, how can managers set prices that match their competitors and cover the expenses of their products and still make a profit?

The best way to do this is to use smart technology wherever possible to cut down on production time and boost efficiency across the board. A few of these technologies include:

Telematics. With telematics, operations managers can collect real-time data to analyze how their machines are performing and ensure they’re being used in the most efficient way possible. This can cut down on production time and save costs in the long run.

Sensors. During the past few years, sensors have improved in effectiveness. With capabilities like predictive maintenance and automatic shutoff, sensors enable manufacturers to use their machines in agile and lean ways, and to make proactive decisions that will save time and resources later on.

Automation. Using automation solutions such as robotics can expedite production processes and cut costs for manufacturers. By automating certain processes, manufacturers can spend their time checking on product quality as well as supply chain efficiency.

These technologies can help manufacturers and operations managers improve production and cut costs related to product development. The result? More competitive prices without compromising profits, quality, or delivery.

New changes to NAFTA along with tariffs on China’s electronic goods can make it difficult for operations managers to prevent supply chain disruptions. However, by keeping prices competitive and turning to new technologies such as telematics, sensors, and automation solutions, operations managers can bring benefits to both their companies and customers.

About The Author

Bill Laverty

Bill Laverty is a business segment manager at Morey. Bill's primary role is to ensure profitable growth and operational excellence. He has 30 years of experience in operations as it relates to engineering and manufacturing. While Bill mostly works with high-volume automotive companies, his expertise expands across a number of industries, including many electronics OEMs.