Oct 27, 2011 | Lean, Management, Operations
What a great phrase to start a debate around the board table, often heated, as most still see the two as a trade-off, the better the quality, the higher the cost.
How much better to beat the bean counters at their own game by quantifying it:
Quality cost = the number produced outside specification X the total cost of rework & disposal.
Simple. The cost of quality calculated, and how often will you find any added short term cost during production will be dwarfed by the costs of managing the out of spec production.
Sep 30, 2011 | Change, Leadership, Management, Operations, Personal Rant, Small business
The news that Fosters will be sold to SA Miller Brewing represents almost the last Australian food and beverage business with a global brand has now disappeared. I say almost, as I can think of no other, but some may argue that a few sales in Fiji or NZ constitutes global. To my mind, it does not rate.
Why is it that we seem to be unable to build and sustain food businesses from this country?.
Australia is now a net importer of packaged food, according to the AFGC 2010 report, and yet we are an abundant producer, particularly of broadacre commodities, grain and meat. Most people when told we are a net importer go into a state of disbelief, and yet the march of imported food, and the decline of Australia’s manufacturing base has been happening slowly over a long period.
It’s pretty easy to blame the evolution of globalisation of supply chains, the domination of Woolworths and Coles, regulation imposing costs overseas competitors do not have, the geographic spread and relatively sparse population denying the economies of scale, but the reality is that it is a management failure. The failure is shared by boards and shareholders who have tolerated a complacent management, discouraged long term strategy in the chase for short term returns, and simply disengaged with the basic drivers of competitiveness over a long period.
The only hope left is that a few SME’s will emerge from the heavily culled pack that remains, but it seems to me that they have missed the boat, and the barriers that the businesses that existed 30 years ago, and should have breasted, are now simply too high for the small guys to tackle without the scale and capital resources necessary. Our one hope is that there is a processing breakthrough, technologies like the CSIRO High Pressure Processing technology offer some hope, but they are unlikely to be the savior by themselves.
Almost gone, down to the last gasp, what on earth will we do then? Or don’t we care?
Sep 22, 2011 | Leadership, Management, Operations, Small business
One of my clients, a modest sized business inhabiting a narrowing but quite deep niche of manufacturing, has over a period of time put considerable resources into training their essenial technical people to be expert in the fields vital to their success.
A topic of discussion and concern has always been, “how do I get my investment back when I train them, and they leave?”
Perhaps the better question to ask is “what happens if we do not train them, and they stay?”
Sep 19, 2011 | Demand chains, Operations, Strategy
People routinely forecast optimistically, they under-forecast costs, and over-forecast outcomes. We have all seen it happen repeatedly in businesses and the public sector, most of us have seen it on personal level.
Demand planning is the core of effective operational optimisation, and differs from simply sales forecasting, in that it looks at the drivers of demand, rather than drivers of sales, often a big difference, and it is free of the bogy of just assuming the past will be repeated, even if massaged by some fancy algorithm.
Demand planning has been enhanced by the developments in what are in effect benchmarking of similar situations, collectively called Reference Class Forecasting by its Nobel prize winning proponents, Daniel Kahneman and Amos Tversky.
Demand planning is hard to do well, but most useful things are.
Sep 8, 2011 | Customers, Management, Marketing, Operations, Small business
The mulitnational Heinz has been in the news a bit recently.
First, they announce a restructure, which means closing plants, and consolidating production, in this case to NZ, and to a remaining Australian plant that will get a bit of a kick-along. Wonder how long that will last?
Then the worldwide CFO Art Winkleblack took aim at the retail duopoly in Australia, citing it as a reason for the difficulties Heinz has had, and as a basis of the restructuring decisions. I bet the local sales management loved him for it, the next time they had to front Coles and Woolies!
In a short period, the challenges of the industry are laid bare, the $A making imports cheaper, the power exercised by the retail duopoly, and the necessity of manufacturing and marketing scale to counter it.
If Heinz, a global business turning over close to a billion dollars in Australia, and many more globally has these problems, put yourself in the position of the SME, with little marketing leverage, a plant that needs capital, banks that are so risk averse, and so stripped of people who understand small business they simply choose not to engage, how can the little guy hope to sustain his business?. Pure bloody mindedness and determination is about the only answer you will come up with, mixed in with a spirit of being prepared to really have a go, and screw the buggars!.
We wonder why we have more imports of packaged food products into this country than we produce, the position Heinz finds itself in demonstrates why.
Sep 5, 2011 | Innovation, Management, Operations, Strategy
Googles purchase of Motorola poses an interesting management challenge.
To date, Google has been a producer of software, an intellectually intensive activity that can be accomplished anywhere the brain is located.
Manufacturing is a different beast.
Suddenly you have factories, supply chains, unions, fragmented regulatory regimes covering OH&S, environment, waste, and a myriad of other stuff that sometimes seems designed to ensure you drown in red tape. What a difference!
This will stretch Google’s leadership and culture, as any manufacturing executive will tell you, it is not as easy as it looks.
