Top Line Syndrome can Harm Manufacturers
Coach Marcie Hanhart - Business Strategist and Profitability Coach
“Bigger is Better” or “More is Better” are common thoughts in American Business today and we frequently see this carry over to manufacturing.
Manufacturing businesses often believe that selling more products or services, hiring more people, going after larger customers, having a larger space are the keys to success. However, this approach can actually harm profitability. Instead, the focus should be on the money that remains after purchasing, servicing customers and paying bills. This is where the concept of Top Line Syndrome comes into harmful play.
Top Line Syndrome refers to the belief that increasing sales or expanding the business will automatically lead to higher profits. This is not always the case. In fact, growth in profit can come from various areas such as efficiency, ingenuity, sales per existing customer, repeat business, add-ons, faster turnover and innovation. The key is to not stagnate, but to focus on the bottom line - real profit that can be located and put in reserve at the end of the day.
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As a manufacturer, it is important to identify any products or services that are costing more money to produce, sell, inventory (shelve) or otherwise support than they should. This can be done by asking questions such as why it is costing more, why it is being made or sold, or why it is sitting on the shelf for too long. By doing so, manufacturers can make informed decisions on what to do about it.?These are not always simple decisions.??For instance, one manufacturer of custom product was faced with the problem of manufacturing standard “off the shelf” product (which had to be batched in large runs and ended up on the shelf for months) because the manufacturer felt they needed to serve the “off the shelf” requirements of a specific customer in order to keep the custom business. A debacle for sure.
In conclusion, Top Line Syndrome can be a dangerous focus for manufacturers who believe that selling more is the only way to succeed. However, by focusing on the bottom line and identifying areas for growth and for cost savings, manufacturers can increase profitability and ensure the survival and success of their company.