Finding out what your customers need and then giving it to them is as fundamental as apple pie. But it doesn't always come easily to manufacturers. From the early years of the industrial revolution, manufacturers have concentrated on doing what they do best -- making stuff. Others -- retailers and other channel partners -- traditionally deal with the customers' ever-changing hearts.

Today, engaging with buyers of the components you make as well as the end user of the ultimate product is a critical survival skill for all progressive manufacturers. It's one that manufacturers would do well to perfect in 2005.

"Every company in every industry has to be more responsive to customer needs," says John Moore, vice president, ARC Advisory Group (Dedham, MA). Manufacturers are now experiencing the pitfalls associated with decades of dealing with customers at arm's length, Moore adds.

Want proof? Just consider the imbalance between production and demand. Nearly every manufacturing sector has excess capacity. "Equipment utilization in the chemical industry is 75%. The automotive industry can produce 20 million more cars worldwide than can be consumed today," says Moore.

This situation at least marks an improvement over the not-so-distant days when finished product sat unused on warehouse shelves. High-tech manufacturers will not soon forget the excess inventory they were saddled with during the crushing economic downturn of 2001. This was a direct result of relying on distributors' over-optimistic forecasts as opposed to hearing directly from customers.

Another troubling development: As customers, businesses are getting just as pushy as consumers. To the age-old customer mantra of more, better, faster, add cheaper and unique. It is no longer enough to offer a customer a pre-set menu of products and features. Increasingly, business customers are demanding customized goods supported by services.

If you automatically assume the answer is customer relationship management (CRM) and see dollar signs swimming before your eyes when you hear about the need to engage with customers, take heed. Becoming customer-centric isn't just about software. It is about starting a conversation with your customers to get a window on their world.

Customization is one way to hedge against relentless price pressures while satisfying customers at the same time. "Pricing transparency pervades everything. The price games you used to play are becoming ... irrelevant," says Moore. "You've got to have another play. Loyalty doesn't exist much anymore." Customization can help provide a unique experience that will keep customers coming back.

The rub, of course, is that you have to provide an ever-expanding universe of choice to your customer but, at the same time, meet their exacting demands. "The challenge is to respond to a high volume of unique requests with the same speed and efficiency they have for standard product orders," says David Vredenburgh, CEO and president of RuleStream Corp. (Wakefield, MA), a vendor of engineer-to-order software products.

Thanks to their higher margins, custom products keep many small to mid-size manufacturers in business, he adds. Many companies pre-engineer as many potential custom products as possible to hedge against the possibility of getting flooded with custom orders. "They say, 'If we had to create all those engineering drawings from scratch, we would have to add three weeks to every order. That wouldn't be acceptable,'" says Vredenburgh.