Future Capacity Building Planning

Posted on October 9, 2015 By

Rethinking the box we find ourselves in day and day out can be difficult.  Even exceptionally smart folks find themselves in a box.  Ask them how they are doing, and it couldn’t be better.  They actually enjoy working on moribund products, outdated computer systems, and making buggy whips.

An example is the world wide switching to cloud accounting.  It’s happening by fits and bits and perhaps should be ignored or glossed over by accounting professionals.  I mean, like Detroit is the only place that really knows how to build cars, isn’t it?

The race to cloud accounting by new business owners is even something Oracle is even taking notice of and they have their own cloud accounting services.  Intacct, Netsuite, Sage, Wave and others are converting new business owners like it’s cotton candy for the bottom line.

Are there other industries facing this same challenge?  Yes, if you can pack it in a box and mail it; there is pretty chance that large internet retailers are competing with you.

But what does that have to do with capacity building, you ask?

It’s about planning for an appropriate amount of capacity building in the appropriate direction.  It’s not enough expand the factory line by an additional 10,000 units.  You have to figure out the entire product life cycle and ponder how someone will hack the process.

In the last few months, there have been immensely popular kickstarters for calendars, note books, and other stationary items.  One note book declared itself revolutionary by having a small pen that lay flat on the notebook spine.  I might be imagining things, but those items look like products that you can buy at office depot.

Is there something that you are making/manufacturing that can be suddenly rebranded as revolutionary?

Okay, Laura, you are saying, you are getting carried away.  Nothing is going to damage my chinese suppliers shipping products by the millions to retailers.  There is no way.

Really?  What about 3D printers?  What would happen if someone could manufacture your product on the spot and skip the 45 day boat trip from China?  How safe would your million dollar investment in injection molds and equipment?

You can do all the math on your large computer network that uses three or four IT people to maintain, using the expensive ERP systems that you spent a million to install and program.

Or you can do some calculations on the cloud based Google Sheets, research innovative crowdfunding projects, visit some maker fairs and consider how these places might effect your industry.

You might be building capacity, but is the correct capacity?

  • Instead of injection molding, perhaps selling the raw materials for 3D printing.
  • Instead of cookie cutter dolls, people are now making action figures with custom faces.
  • Regular shipments of product crates, like beauty supplies, geeky stuff, organic food are immensely popular.

You do need to be careful, though, impossible innovation, that cheats the system or consumer safety rules can backfire.

Volkswagen manufacturing diesel cars that would adjust to emissions tests and then readjust to have more power when they were on the road.

Uber, Lyft and other taxi apps ignore important safety rules and regulations.  They require a newish car, which impoverished taxi drivers with poor credit may not be able to afford.  Or did you assume that Uber driver just happened to be driving around?  About half of ridesharing taxi drivers; are actually taxi drivers.  Who else is going to be looking for fares on a saturday night when the bars get out?

Adjusting to new realities does not mean trying to stuff things in a box that don’t fit. It means that you think about the process and streamline and eliminate extra cost.

Does that mean that drones will take over package delivery?  I think there are a whole host of technical problems, like driverless cars that need to be solved before that happens.  For example,

  • What happens when a drone doesn’t get a knock at the door?
  • How is the person supposed to know that a delivery is going to be made?
  • Does a drone flying around really use less fuel than a delivery driver?
  • What happens when the product is dropped by accident?
  • Is this going to be normal only in cities or will this be for rural deliveries as well?

The market pressures on clothing have been extreme.  Light weight, flimsy, poorly sewn seams and probably made in a sweatshop.  I’ve described most of the women’s clothes in malls.  I don’t even want to talk about the poor fabric that most craft stores stock.  Most of it looks good for quilting, but thin, thin, thin.  The clothing manufacturers are creating an opportunity for quality goods.

Think I’m wrong?

What about the emergence of quality shaving supplies for men vs the cheap disposable shavers?

Think about your products?  Are you building capacity based on the past or the future?

 

Laura Dodson
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Laura Dodson

Laura Dodson, CPA is a Seattle Financial Planning & Analysis consultant.She has attended Western Washington University, Pierce College and Bates Technical College. She has written four accounting instructional books. She has worked for small family businesses, mid-sized businesses and a Fortune 500 company.She founded and operated Blue Stone Accounting LLC for five years.She currently runs Paper Butterfly Forge LLC.
Laura Dodson
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