Confront the brutal facts. As long as 15 million Americans are unemployed, consumers will view the new level they've traded down to as the "new norm," placing additional price pressure on retailers and producers. As such, any hesitation to commit to the new low- cost-pro ducer imperative will make a significant difference on producers' standing once the storm blows over.
“demand driven” Party’s Over: Re-gearing for New Demand Patterns in the Consumer Sector By Mark Sutcliffe s the economic downturn continues, frugality has become Going back to basics. This is about being efficient and better A a core consumer value. No one can predict how long this sentiment will last, but one thing is clear: shoppers are simply not going to leap back into premium product categories. utilizing existing resources to produce the same volume with fewer personnel, less material or in less time, all with the end goal of increasing productivity per labor hour. This means viewing For food and beverage producers, who have traditionally relied plant workers as the biggest variable cost in a food plant and on margins from premium categories, the continued shift in increasing productivity by giving them the tools they need to consumer behavior is rapidly changing the dynamics of the improve performance. Not only is this approach proven to be demand-driven supply chain. These producers must come to highly effective, but changes in people and process are faster to grips with the fact that much – if not most – of the demand implement and require limited capital expense – with results they experienced over the past five years was “artificial,” based that can be measured almost immediately. on unsustainable consumer spending patterns. With the artificial demand for premium products gone, Similarly, companies that have traditionally depended on a manufacturers that take action now to re-gear for greater broader product portfolio must face the fact that although volumes profitability at lower price points and with a smaller product may be up overall due to more in-home dining, the margins across mix will emerge stronger and be in a much better position to their whole mix of products may erode as more of their capacity is prosper in the economic recovery. ■ geared up for products with a lower operating margin. With the artificial demand now gone, companies that react About the Author: Mark Sutcliffe is the president of CDC Software’s quickly to become the lowest-cost producers in value categories CDC Factory, a manufacturing operations management solution. will be in a strong position to redraw the market-share map once the recession is over. They will take volume and customers from Courses those companies that fail to develop the level of agility needed to pivot faster and maintain or even improve t
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