Part 1 of 4
Business requires growth, and achieving growth frequently means that businesses must move outside of the comfort zone of their familiar markets and seek success in new markets. One obvious strategy for companies that serve primarily the government is to look to the commercial world. Likewise, companies that are predominately commercial may look at government sales as a huge opportunity for growth.
Once the decision is made to look at operating in both worlds, it doesn’t take too long to realize that this strategy requires more than just good intentions, great product and a savvy distribution channel. Selling across the fence—to both government and commercial accounts—brings a new level of complexity to your organization, business and operational practices.
This does not mean that the strategy is not sound. There is greater opportunity for manufacturers that sell into both worlds. There is great benefit to not being tied to the peaks and valleys of one domain versus the other. Having both commercial and government accounts can insulate the manufacturer from downturn in one area while the other area remains strong. It can provide previously impossible scales of economy that will be beneficial to all accounts and can instill discipline and order that translates into operational efficiency through better performance and financial reporting.
Company Structure and Systems Requirements
Some will suggest that selling government and commercial requires two separate corporate entities. Cincom Manufacturing Business Suite Product Manager, Craig Phillips, points out that this is not necessarily true. What most government relationships require is segregation of the costing and operational effort required to fulfill the government contract. While a commercial relationship may only require that a negotiated price not be inflated to assure unreasonable profits, the commercial customer is likely to be more focused on the value delivered in comparison with the price quoted.
Phillips goes on to explain that manufacturers must be able to segregate and track expenses and effort at the project or contract level. This would include things such as labor, material inventory or supplies acquired for the project or contract fulfillment. Being able to do this and provide auditable tracking is a typical requirement.
Others may involve special pricing and billing requirements, performance-based discounts, delivery timing and similar dynamic contractual elements.
There is no real need to operate the government and businesses as separate businesses. The systems isolate the information to facilitate auditing and ultimately protect the integrity of the relationship between company and government.
The specific systems required to accomplish this project, contract and customer view will be examined in more detail in subsequent articles.
Who Ya Gonna Call?
It may be hard to visualize, but some companies are quite comfortable with operating in this mixed or hybrid environment. Cincom has been operating in this manner for several decades. In addition to our commercial customer base, which consists of primarily contract-based relationships, Cincom has maintained an ongoing GSA contract as well as other project-based contracts for decades. Some of these include or have included the Defense Logistics Agency; Defense Finance and Accounting System; the Social Security Administration; the Departments of the Army, Navy and Air Force and the Defense Information Systems Agency.
We have also collaborated with other contractors under specific individual agreements aimed at tackling some very daunting projects. Our partners on these projects have included companies like Grumman, EG&G, Boeing, General Dynamics and Newport News Shipbuilding.
This level of experience in working in the commercial, government and mixed or hybrid domain has served us well. We have been able to translate that experience into systems and expertise that are available to our customers and partners who are moving to work both sides of that proverbial fence.
Over the next few weeks, we will be looking at a number of capabilities and strategies that you can employ to enhance your ability to move into and simultaneously address mixed or hybrid commercial and government markets.
Be sure to hear Craig Phillips at the Microsoft Dynamics Industry Summit 2015. Craig will join other industry experts in a panel discussion Going Big with Government Contracting in Manufacturing on Wednesday, February 18 at 2:15.