Sunday, November 22, 2009
Planet earth is on the path of rejuvenation after the battering effect of the sub-prime crisis; a type of recession which hit the world and badly affected the fundamentals!
The time tested theory of Darwin –‘survival of fittest’ – again held good and only the fit companies survived the storm.
General tendency is to react to the ever changing environment. However, being reactive will be less helpful than being responsive. If any company which is stock rich and fat (instead of being fit), it losses the ability of responding and in turn compulsorily has to react to the changing markets. This dynamic behavior can be attributed to the amount of stocks lying in the supply chain.
Essential point to appreciate here is that companies don’t compete but the supply chains do. Higher the amount of inventory in the supply chain, lesser responsive the companies are. In turn, such situations led to the downfall of the companies during the tough times of recession which called for immediate change in the prices and orders which inevitably forced the companies to alter the manufacturing and supply chain practices.
Those companies which managed to adapt to the change survived. Operational Excellence (OE) / LEAN is the foundation for Business Excellence (BE). OE ensures the basic stability of the working where the health of machines, continuous flow of material, short throughput time and excellent quality ratio are the parameters that determine the competitiveness of the organization as well as decide customer satisfaction. Needless to say, customer is king and it is essential to heighten his/ her satisfaction levels to delight stage to survive in the market.
The strategic parking position of the inventory decides the responsiveness of the supply chain. Now, to maintain optimum inventory at the upstream levels is the key. If the inventory is upstream that is at the raw material form (towards supplier end) is good. Best would be just in time! Concepts of producing to takt time (customer demand rate) and shortest throughput times (time to manufacture) are not mere concepts there but real requirement.
Readers will appreciate that concept of JIT is very glitzy. However, to reach the stage of Leanness, parameters quoted earlier should be considered. And one can reach this destination of LEAN by a structured program for continuous improvement. It is known by different names; some call it TPS (Toyota Production System), others WCM (World Class Manufacturing), some call it KAIZEN – all world class companies have different names for the structure. But as it is said, ‘All roads lead to Rome.’ All systems lead to one destination of world class performance.
And, at the cost of repetition, I would like to mention that world class performance was necessary just to survive the storm of the situation. Many organizations resorted to cost cutting initiatives and in turn cut the muscles and not the waste. What we intend to say is rather than attacking the muscles, one should hit the fat – the waste in the system by cost management and not cost cutting.
Identification of bad actors quickly is important and cost – benefit and time – benefit analysis of the problem solution holds key. One should start from the low hanging fruits and keep moving towards tougher targets. Now is not the time to get lost in semantics, one has to identify where the value is lost, identifying their causes and rapidly acting to fix them. Problem solving capability at all levels is vital for the above mentioned points. If we relate this further to the culture of the organization, it should be conducive to highlight problems which lead to improving the current situation.
Hence, the fundamental principles of operational excellence program, as mentioned below, should be adhered to.
i. Process & Results: Focus on processes along with results, instead of results only approach, if the processes are right then results will follow automatically!
ii. Total Systems: Entire value stream should be considered vis – a – vis local island of excellence.
iii. No Blaming: Organizational culture should nurture open environment which enables the value builder to highlight the problem without any fear. Employee empowerment leads to a situation that every new problem identified is celebrated.
To conclude this article, I would like to quote Benjamin Franklin. As he rightly said “Watch the little things; a small leak will sink a great ship!” So, watch out for waste and sail smoothly even in stormy weather.