Like almost every manufacturing sector, the building and construction products industry generally worked through their backlog, focused on margins, and experienced an overall drop in customer demand last year, yet expect a positive year ahead. Of course, the strongest took advantage of opportunities and are well-positioned for growth whereas the weakest are not prepared for success. Since there are several approved infrastructure projects —rebuilding that must occur to address the damage from Hurricane Helene and the L.A. fires, and there has been a tremendous number of million- and billion-dollar investments announced in U.S. manufacturing — manufacturers of building and construction products must be ready to scale. Creating sustainability is cornerstone to supply chain success and profitable growth.

Creating Scalability in Your Supply Chain

Creating scalability does not mean building inventory in anticipation of growth. This strategy could be a piece of the puzzle, but it will not create the resiliency and responsiveness to scale up and down as needed to keep margins intact and meet changing customer conditions. In fact, it is likely you will end up with the wrong inventory in the wrong place at the wrong time. In this sector, you would think building large infrastructure, buildings, and construction projects would result in stable demand; however, reality is the opposite. Due dates change daily, if not hourly, approvals and designs are delayed, yet expedited orders occur frequently. Because the product is a mix of standard and engineer-to-order (ETO) or configure-to-order (CTO), yet customers frequently change orders and revise specs late in the process, the successful companies must navigate VUCA (volatility, uncertainty, complexity, and ambiguity), create commonality, and upgrade and automate processes while preparing to pivot.

Ramping volume up or down rapidly while maintaining your customer service, profitability, and core workforce is the key to achieving scalability. To achieve this objective, companies must transform their supply chain processes, create a culture of innovation, and better leverage, upgrade, and optimize their ERP systems and related supply chain technologies. For example, you must have a SIOP (sales, inventory, operations, planning) type process in place to predict changes to your revenue backlog, translate these needs into capacity and staffing to proactively reallocate volumes among facilities, work centers, offload and outsourced suppliers, and to provide visibility to your suppliers. Additionally, you must have the appropriate culture of cross-training, continual improvement, and radical change to enable your teams to respond efficiently to changing business conditions.

Building Products Manufacturer Case Study

A building products manufacturer had to ramp up rapidly to meet a spike in demand, as the Great Texas Freeze of 2021 created an immediate need to replace pipes and related products. If it could scale up rapidly, it could take advantage of the revenue opportunity and create customer loyalty with new and existing customers. On the other hand, if it couldn’t ramp up, its customers would find alternative sources of supply. Because the company focused on creating scalability following the spike in demand created by the pandemic, it was ready to take on the challenge and meet customers' needs.

There were a few keys to its success. The company rolled out a collaborative demand planning process, incorporating Sales input and customer feedback as part of a SIOP process, and better utilized and optimized its ERP system to quickly respond to changing conditions. It cross-trained resources, rolled out common-sense lean initiatives, automated processes, and installed new equipment to upgrade its capabilities. And it engaged its end-to-end order life-cycle resources in a proactive approach to order backlog management to respond resiliently to changing business conditions. Thus, it set records on manufacturing output and scaled operations to achieve substantial revenue growth targets.

The Bottom Line

Creating scalability is often an afterthought once sales come to fruition. However, once sales ramp up, it is typically too late to scale up quickly enough to serve customers successfully and profitably. Thus, the best companies create a culture of innovation and responsiveness and upgrade processes and the use of ERP and related technologies to create resiliency, flexibility, scalability, and the resulting ability to ramp up or down efficiently and effectively. Prepare to take advantage of the upcoming revenue opportunities.

For more information, contact the author at landerson@lma-consultinggroup.com or visit www.lma-consultinggroup.com.