Jun 10, 2009 | Management, OE, Operations
Most efforts to improve Operational Efficiency (OE) have at their core the elimination of variation in a process. It starts by setting standards, measuring the variations, and then progressively eliminating the causes of the variations, until you have a repeatable process with minimum variation.
Terrific so far.
Change in an organisation, change of any sort, has at its core a dissatisfaction with the status quo, and a determination to change it, not necessarily by the CEO, or anybody with power, but by someone who is dissatisfied with the way things are.
How do these things sit together?
The value of process conformance leading to OE are undoubted, but in gaining the benefits, we eliminate, or at least minimise, the opportunity for change, which flourishes on diversity.
Change, or non conformance, brings risk and growth, high levels of conformance brings a death by boredom, but both are necessary for organisations to flourish.
This is another paradox that challenges the leadership of organisations, one not generally recognised by those who advocate “Lean” thinking, of which I am one, and its cousin “6 Sigma“, but something that leaders perhaps need to consider in the way they go about nurturing the culture of the organisations they run.
Jun 9, 2009 | Management, Operations
Further to the earlier post, “An agile demand chain” that drew the distinction between agility and flexibility, consider the differences between efficiency and agility.
In many plants, efficiency has been built at the expense of agility, as long runs of product dominate the thinking of many operational managements.
Agility without efficiency is a way to a quick commercial death, as competitors will be aggressive with prices once they realise their costs are lower than yours. The leading symptom is high unit costs driven by low machine availability.
Efficiency without agility will take far longer to impact, but ultimately is no less commercially lethal, as consumers will abandon an offering that becomes “stale” in a competitive environment. The symptom is high finished goods inventory to accommodate infrequent but long production runs .
May 27, 2009 | Demand chains, Operations
About the only thing we know about forecasts is that they are virtually always wrong, often drastically. This being the case, the ability to quickly react to short term changes in supply and demand, an advanced degree of agility would be a pretty useful weapon in the survival kit.
Consider the agility in your business, and do not get it mixed up with flexibility, which is the ability to adapt your business to accommodate the longer term structural changes in the competitive environment.
Many of the “lean” tools are designed to assist the agility of a business, as they enable agile response to changes in short term demand.
May 21, 2009 | Management, Operations
In all businesses, the canary in the hole is deterioration in the cash position, and it is particularly important for small businesses to be sensitive to changes in their cash position as they have less “fat” to fall back on when things head for the bin.
The largest variable item in most non service industry businesses is inventory. The usual accounting view of inventory is that it is a current asset, as liquid as cash, and there is little incentive to actively manage inventory to the lowest possible level, as there would be if it was seen as a “partial liability”.
How much better to see inventory as a brick tied to the legs of a swimmer, until such time as it is actually sold. A metaphor like this may encourage a lessening of the weight, rather than accommodating a buildup greater than the immediate demand, usually in the name of manufacturing efficiency, that can lead to drowning.
May 11, 2009 | Marketing, Operations
Feature creep, along with its big brother, range extension, have been mainstays of marketing activity for 50 years.
Marketers should now start thinking about, and asking consumers about the relative value of new features or variants. Ask them what they must have, and what they would like to have, and do some analysis of the purchase intention at different price points, with differing options.
Consumers will make tougher choices in tougher times, are they really prepared to pay the extra for the cosmetic frill, or would they take a less “optioned up” option at a cheaper price.
Marketers should also be asking their operations people and bean counters about the real cost of adding the “frills” and reflect the savings in the price to consumers were the frills removed. In most cases, the savings are far greater than the purchase cost of the added frill, as manufacturing cycle time, labor, inventory, and freight costs, amongst many others, are all reduced, delivering savings that are often hard to see if you are just using the P&L to monitor performance.
Apr 14, 2009 | Operations
As a boy my dad used to say “everybody makes mistakes, only a fool makes the same one twice”
There are now many learned tomes written and sold that offer similar advice, boiled down, “learn from your mistakes”. You do not need a book, it is 5 easy steps:
- Gather all relevant information
- Form a hypothesis
- Test the hypothesis against performance expectations based on steps 1 & 2.
- Understand where and why the actual performance in the test differs from those expected
- Back to step one, and repeat.
If you are a scientist, you will probably call it the “scientific method” if you are a reader of continuous improvement articles you will call it a “PDCA” cycle, if you come from the military, you probably know it as an “AAR”.
Seems to me, they are all synonyms for common sense.
