Feed Forward: Why it's wrong to downsize in a down market

An uncertain economy has many companies reeling in capital spending and cutting payroll. A few companies, however, are doing just the opposite, keeping headcount and inventories at about year-2000 boom levels. From a business perspective, laying people off may save money in the near term, but it also destroys valuable relationships, hurting the potential for future sales. And lower sales will ultimately trigger more layoffs. Many companies that pursued this route are no longer around. Those that have invested, on the other hand, have actually gained market share.

One reason these companies are growing is that years of downsizing have gutted many engineering departments, leaving them ill-equipped to select and install appropriate automation and motion-control technologies. Short-staffed, these organizations rely on outside help with applications and are willing to pay for it.

A slowing in capital spending has also hit technology suppliers. Fewer suppliers are now entering the market and many smaller companies born of the boom have gone under or been absorbed. This trend also happens to mesh with the general push to reduce supplier count. Greater focus on fewer suppliers allows everyone involved to become more polished on existing technology and product lines. It also tends to make suppliers more responsible.

In our experience, as a motion-control and factory-automation distributor, we go so far as to implement action plans for our suppliers with measurable milestones. This approach stimulates not only the development of products, but custom solutions based on detailed specs and needs.

This attitude should not be confused with the “any order is a good order” mentality some distributors have adopted to keep afloat. Adding value can spiral out of control. For instance, there is a big difference between installing connectors on motors and building panels and full-blown system integration. Many distributors bite off more than they can chew. If such added services are necessary to adequately solve a problem, there’s nothing wrong with looking outside to get the required help.

Training is another area where tech companies, especially distributors, must invest wisely. A corporate trainer might be best to teach selling skills, while Web-based tools such as testing software might be better suited to verify technical skills. Suppliers can also help, providing benchmarks and test questions to measure competence. Ultimately a better trained, more focused workforce means more value and satisfaction for all.