Strategic planning, budgeting, and forecasting are integral to the success of small and medium-sized manufacturers (SMMs). However, these activities can get overlooked, as leaders of small and medium-sized manufacturing organizations are often very involved in the company's day-to-day operations, leaving little time and bandwidth for high-level strategy.
In this blog, you’ll learn what strategic planning for SMMs involves, its purpose, and how effective strategic planning can keep you competitive without draining executive resources — freeing your leadership team to focus on running the business.
What is Strategic Planning?
Strategic planning is the process of creating action plans that will guide the direction of your business. This vital organizational management activity will address planning, budgeting, and forecasting concerns. It will also ensure that employees, stakeholders, and management work from the same script.
Strategic planning should guide a business towards achieving its short- and long-term organizational goals. Additionally, strategic planning processes should outline how a business will measure its overall success. Typically, SMMs will revise their strategic plan every 3-5 years.
Business leaders must never lose sight of the fact that strategic planning is a process. SMMs must continuously modify their strategic objectives, analyze market conditions, and set new goals to continue growing. They will need to determine what aspects of their plan were successful and which components were not.
What is a Strategic Plan?
The strategic plan is the final product of an SMM’s budgeting and forecasting process. This strategic plan will serve as the company’s roadmap for the future and keep all parties on the same page as they collaborate to achieve organizational goals.
Creating a plan and forecasting market conditions can provide an organization with actionable insights to guide decision-making processes.
Frequently, organizational leadership will make important discoveries during the planning process because the process gives them the opportunity to look at old problems from new perspectives, identify key vulnerabilities, and better understand the company’s strengths.
While each SMM’s planning process will be unique, all organizations should start by laying out their vision for the future. From there, organizational leadership can create a game plan for making that vision a reality. To ensure that the plan is viable, leaders must compare their goals with financial planning data, internal resources, and market analyses.
What is the Purpose of a Strategic Plan?
A strategic plan can serve many purposes but is typically ideal for established businesses interested in fueling new growth, expanding, or improving existing operations. Strategic planning is essential for many reasons, but it’s especially integral to protecting business continuity.
One of the components of a strategic plan is a master budget. This spending plan will aggregate more niche financial outlines like production and manufacturing overhead budgets. Creating a master financial plan and combining it with an overall business strategy will help your organization manage notoriously complex manufacturing budgets.
In addition to guiding spending, a strategic plan should also outline your company’s strengths, weaknesses, opportunities, and threats (SWOT). A SWOT analysis allows you and other organizational leaders to take an honest look at the state of your company and zero in on business continuity threats and weaknesses, enabling you to remedy any vulnerabilities.
How to Create a Strategic Plan for SMMs
Many small and medium-sized business leaders understand the importance of having a strategic plan but are unsure where to begin when creating one.
It’s natural to feel overwhelmed by the process, but remember: any strategic plan, even an incomplete one, is better than no strategic plan at all. The first iteration of your plan does not need to be perfect. You can always go back and improve upon it in the future.
As you prepare to create your strategic plan, you can leverage these established tactics to streamline the process:
1. Discuss the Company’s Mission and Vision and Get Cross-Departmental Buy-In
Once your business establishes itself and orders start flowing in, it can be easy to lose sight of your “why.” However, it is impossible to know what direction you want to take your company unless you know your “why.”
With that in mind, the first phase of strategic planning involves answering questions like:
- Who are we?
- Why does this company exist?
- Who do we serve?
Once you've answered these pivotal questions, you can turn your attention to your vision for the future.
Is your goal to break into a new region? Would you like to expand your services to a broader range of clients? Do you have aspirations of opening a satellite facility within the next year?
Use your strategic aspirations to define your vision and broadly outline what you want your company’s future to look like.
From there, you must work to obtain cross-departmental buy-in. As you start to lay out the framework for your strategic plan, ensure that it aligns with the capabilities of the marketing, finance, and operations departments.
As part of your efforts to optimize staff buy-in, you should also seek line-level employees' feedback. Hold a Q&A session with your personnel and outline your vision. Solicit input from attendees and take the time to listen. Making your team feel heard is an excellent way to get them on board while also optimizing the quality of your plan.
2. Determine Desired Goals and Outcomes
After you’ve laid the foundation for your plan, you should set specific goals and outcomes. These objectives are typically long-term (think 3-5 years); however, you can establish short-term objectives as well.
Once you have determined your desired goals and outcomes, begin to fill in the blanks in your plan. What needs to happen for you to achieve those goals? Are your expectations realistic and in line with the current state of your company?
3. Analyze Internal and External Environments
To determine the viability of your goals, you must know where your company currently stands within the manufacturing sector.
By conducting a comprehensive SWOT analysis, you can better understand potential barriers to your company’s growth. Once you identify them, you can work to eliminate these hurdles by leveraging current organizational strengths.
Depending on the size of your organization, you may need to perform multiple SWOT analyses. For instance, you and your leadership team could perform the initial SWOT analysis while your department heads complete separate analyses for their divisions. Different departments and team members will view problems from different perspectives based on their unique roles within the organization.
To obtain external insights, you can employ one of several different frameworks. Common examples include PESTEL analysis (political, economic, social, technological, environmental, and legal) and the Five Forces analysis. The former focuses on the society in which your company operates, whereas the latter can improve your understanding of your industry.
4. Assess Competitive Positioning and Select Strategy
Most SMMs will have the ability to choose one of three generic strategies to improve their competitive positioning.
- The first is the low-cost/low-cost niche strategy. This plan involves offering your clients a cheaper quality product than your competitors. Typically, this approach requires you to focus on a niche product lineup to minimize manufacturing costs.
- The second strategy is the differentiation niche approach. This strategy involves creating a unique product that allows you to differentiate yourself from competitors. While the product will likely be more costly than what the competition offers, it will also offer distinct benefits that other options do not.
- The final approach is the best-cost provider/low-cost differentiation strategy. This strategy is the riskiest approach because it requires you to create a unique product while also attempting to beat the prices offered by the competition.
5. Identify Key Tactics and Corresponding KPIs
At this stage, you should identify which tactics you plan to use to achieve your established goals. You should also select key performance indicators (KPIs) that provide relevant information regarding your progress.
While you can track the performance of each department within your organization using KPIs, you must be cautious not to fall victim to information overload. Focus on a handful of KPIs for each business process so that you can gain access to actionable data.
6. Establish a Budget and Identify Available Resources
The final step to creating your strategic plan is to develop a budget. A common mistake is to create a budget and then attempt to develop a strategic plan.
You should be aware of budgetary constraints while creating your strategic plan. However, you should not hammer out the fine details of your master budget until you’ve established your plan.
By creating the plan first, organizational leaders can quickly identify which initiatives are realistic and which ones may be too cost-prohibitive. When creating your plan, remember that strategy should drive the allocation of resources, not the other way around.
How CMTC Can Help SMMs with Strategic Planning and Budgeting
At CMTC, we understand that effective strategic planning requires a substantial commitment of time and effort.
A strategic plan can help guide your business to success if given the proper attention. However, small and medium-sized manufacturers may not have the resources or bandwidth necessary to engage in effective strategic planning.
Fortunately, CMTC can step in and assist. Our expert consultants can help you understand, develop, implement, and monitor every component of your strategic plan. Contact us today to learn how we can help you jump into strategic planning today.
Leave a Comment