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During my travels over the past several months, I have been asked many times what I think is happening in our industry and what will occur in the fourth quarter. On an intellectual level, I think everyone knows that if I (or anyone) had such insight, we wouldn’t be out calling on customers. However, it is certainly nice to be asked!
What I have discovered in my travels is that overall business levels are OK, margins stink, and very few people are willing to make major capital investments or take any risks. We have gone from the Dot Com euphoria to an almost Depression Era mindset.
Most certainly, to err on the side of caution is prudent. However, if you take no risk, you can’t expect to reap much reward. You will simply mark time. Our economy is driven by investment and risk, so marking time also stalls our economy. I wouldn’t presume to tell anyone how to run their business since they alone must live with the consequences of their decisions. (Consultants, however, are seldom burdened with conscience.) I can tell people what dsi is doing and what strategy we are employing.
We have the fortunate circumstance of being profitable and having a positive cash flow. (Before Enron, profitability implied positive cash flow.) Investment accounts aren’t paying even enough to keep up with inflation, so cash accumulation beyond that needed for working capital represents a lost opportunity. Everything is on sale right now, from stocks to capital equipment. Consequently, dsi is using cash to make strategic investments that will improve our technology, our efficiency, and our speed. We may get a corollary increase in capacity, but that isn’t a primary objective of our investments. We are taking this opportunity to upgrade our processes, our equipment, our systems, and our training.
We have funded a revamped website with a secure customer log-in feature for access to information about the status of orders. Our secure website also provides design tools to help our customers’ engineers with technology decisions by allowing them to cost out various design options. We are implementing new front-end software for change management, material sourcing, planning/scheduling, and enterprise resource planning (ERP).
We also have upgraded our testing capabilities and are now offering flying probe testing for rapid-turn assemblies. We have added an automated alternative finishes line for gold, silver and tin. Manufacturing has been charged (and funded) with the responsibility of accelerating our technology roadmap. Project management has been tasked with enhancing our ability to absorb new high-mix customers. Quality has reviewed all of our certifications for compliance with the new standards, and has even submitted for Ford Q1.
Although we haven’t added debt, we have used our resources to position dsi to rapidly respond should there be a significant up-turn in the economy or to profitably deliver the services needed by our customers should the economy continue to run in “low gear.” We don’t believe that the need for technology will decrease in either case. New product development and introduction is the engine that drives consumption. Even though I’m an engineer rather than an economist by training, even I know that consumption drives investment. Although I can’t predict the timing or the shape of the recovery, I do know that those who have the infrastructure in place to rapidly respond will benefit the most. So, don’t just hunker in the bunker; get out and kick some butt!
