Owens is a world leader in glass. It had ambitious plans in India. So it set up a few modern plants across India to produce glass bottles.
Its operation was ‘world-class’. They did everything by the book. No mistakes. But soon Owens lost out to its local rival Hindustan National Glass (HNG), a privately held Indian firm. And in a few years it was forced to sell its entire Indian business outfit except one plant to its rivals. Why?
The issue was inventory of finished goods. Owens went by the copy book style of having the minimum possible inventory, producing just what is needed as much as is needed at any specific point of time – all decided by their excellent management tools. But HNG held obscene levels of finished goods inventory, which other called – ‘insanely absurd’.
Theory informs that holding such insane levels of stock means death of the company. While Owens believed this, HNG didn’t. But in the end HNG won the race.
HNG understood that their customers simply did not have a way of predicting and knowing how many bottles they might need and when they would need them. But there were certain times of the year when demand shot through the roof and stayed high for a few days.
HNG capitalized on this phenomenon. When such booms came HNG was ready with the necessary stock while Owens simply could not figure out a way to deliver the huge requirement in such a short time.
Naturally customers preferred HNG to Owens and even paid the premium HNG demanded during such crisis periods. And they kept making obscene amounts of profits year on year.
Acquiring the Owens outfits made HNG still stronger and almost monopolistic in the market.
Morale: Ship as much as possible and as quickly as possible when customers demand.
Are we collaborating with the customer to create wealth for both?