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This is an open question.
How often have you heard that changing a manufacturig process will involve so much re-validation that it is simply not worth it?
In the diagnostics field that is familiar to me products ranges have a long live – 10 years of more. It often feels that you are stuck with the decisions made at the time products are first developed.
It was frustrating for me. How about you?
by James La Trobe-Bateman, reMODEL Consultants International Ltd
Why are you more likely to employ a person than use a consultant?
So you want to make a change: maybe you want to improve productivity, maybe you want to give better service, and maybe you are worried about the structure of your organisation.
What are your choices?
- You can read the latest business book, distil its essence and do it yourself.
Quite possibly the best option: you call the shots, you will be showing leadership, and you will be taking responsibility for the risks. How likely is this? If you are a large company, how will you look to your superiors? Aren’t you going to be taking a big personal risk? In a smaller company, this risk is less. However, the fact that you are looking for a solution indicates that you are probably fighting too many alligators. So will you find the time and resources to drain the swamp?.
- You can employ someone to do the job.
This is the ôconventionalö response. Employing people gives you control over them. You will convince yourself that it would be more effective, too, to have them inside the organisation rather than working from outside. But will it be so over time? Often it goes like this: they will get to know your business and become more efficient with time. They will be able to get on with the job leaving you to do what you are doing now. You will have hired someone with the technical skills necessary and at first everybody else will pay attention to them. They will talk about the programs that they know about and relate their past experiences to yours. They will talk to people, listen to them and build plans to do things. Some of this will happen and you will be pleased with progress. However, in some areas they will come up against a brick wall. Some things seem unchangeable. They may fight, but struggle with what seem like difficult odds. Their colleagues become disillusioned; they themselves retreat to rethink and in so doing disappear off the radar. They become absorbed into the mainstream and their moment passes. Now what? You’ve got a skilled, competent employee who is not very effective. You don’t let them go. Where are you?
- You can use an outsider.
How can you get the effect of a new employee without the long term burden? It sounds obvious that once you acknowledge what happens with regular employees brought in to make changes that you will only bring people in for a short while. Or perhaps you hesitated because there will always be more improvements to make. Such people are variously called consultants, contractors or interim managers. What don’t you jump at this? Well, there’s the cost. These people are expensive (you think). Why should I pay a consultant when I can ‘get the same’ by hiring an employee at 1/3 the daily cost? This is certainly the main reason for small companies. The answer is that you should not look at the daily rate but at the total expense. If you hire somebody, they are effective for a year (say). If they then stay for 6 years, you will have paid 6/3 = twice the amount you would have paid for a consultant for a year for the same result. Crude numbers, but they make the point. Of course, you are also thinking that it takes time for an outsider to come up to speed. So isn’t a short term hire going to take a lot of effort from you while you teach them your business? Any more than a new employee? What if they make it their business to come into strange environments, make themselves familiar, do what has to be done and then be gone? Or, at least, gone until you need them again. Next time you use them, you won’t have to wait for them to learn your business again.
- Do nothing.
If doing nothing is really an option, then seriously consider it! It will save you all the distraction and expense. Perhaps, the real business issue lies elsewhere. Maybe your problem is only a symptom of something else. You might need some short term help to figure this out!
by James La Trobe-Bateman, reMODEL Consultants International Ltd
Here’s the story.
A growing diagnostic reagent manufacturing business had a bottleneck in its key manufacturing process. The line was running ‘flat out’ and the production team leader was under pressure to make more to supply a growing market. His boss called in an industrial engineer from the company’s central business services group. He arrived and spent time with his stop watch and notebook. This sounds very ‘60s thinking but it is still worth doing, and by the end of the day had enough data to come to a conclusion. A quick analysis convinced the engineer that there was at least 25% spare capacity. So, why the impression that the line was running flat out?
Coffee was needed with the team leader. What’s going on? Who are the characters? There’s Gareth reporting to the team leader, who has responsibilities beyond just this line. He is experienced, not very opinionated and doesn’t really have any bright ideas. He is a good follower. On the line itself is Martin and some young and eager people, all willing to do what is needed. It’s Martin who really runs this show. The engineer has already been told to “watch him”. Martin holds the key, it seems. Of course, he has been working with Martin while watching what was going on. Martin has said “I’ll eat my hat, if you can come up with anything.”
The engineer has come up with something, but it is actually important that he doesn’t say it. We don’t want Martin to eat his hat; we want him to come up with the ‘something’ himself. The engineer knows about the Socratic Approach, from a training course. You have to ask people questions so that they come up with answers themselves. When they think of the solution, it’s theirs and not yours, imposed on them.
So they arrange a little meeting with Martin and a couple of his colleagues. It’s just the engineer and them: no need for the hierarchy to influence things. First, they do a warm up exercise. They are shown a picture of a highway with a traffic snarl up on it. “Where is the bottleneck?”
“How can you tell?” They get the answers right without prompting. So there is no problem with their fundamental understanding. Now let’s relate it to the problem in hand. “So, where is the bottleneck, exactly?” Answered correctly.
“What do you have to do to maximize throughput?”
The engineer asks. Then shuts up and waits.
Eventually Martin replies. “You have to keep it working all the time.”
Great! Exactly right.
So now together they examine the data recorded in the notebook. “See here: the critical piece of equipment is idle, and then here again and here and here.” In fact, it was idle more than 25% of the time through the day.
“Oh!”
“So what do you have to do to get 25% more output in the day?”
No delay now: “Keep it working”.
“How are you going to do that?”
“Well, the reason your notes show a temporary stoppage is that I have to stop sometimes to do these other things.”
“So, how could you rearrange the work to avoid this?”
“We need an extra person”. “Is it really that easy?” “Yes.” “Let’s try it then.”
The extra person does not need to be recruited: she is already there. We just need to redistribute the work a bit. Agreed. “Can you do it now?”
“Yes”
“Let’s try it then. I’ll go back to head office now and you will do an extra large batch tomorrow – 30% larger, in fact. I’ll call you on Monday to find out how you did.”
Monday came and with it the news that Martin has surprised himself. He is ecstatic to admit that he got 30% more output.
That crew went on to sustain the performance. That meant sustaining an extra $15 million of business without capital or extra revenue expense.
Martin didn’t eat his hat, because he made the change himself. Instead, he admitted, 5 years later, “I take my hat off to you!”
by James La Trobe-Bateman, reMODEL Consultants International Ltd
“Change is the only constant”. We have had it drummed into us so much that we find it very strange to leave things as they are. But just think about the benefits to your organisation of changing nothing:
* Your attention will not be diverted from the daily need to meet customers’ needs
* You will not create anxiety amongst your people that they are about to be “restructured”
* You will save the cost of the project resources needed to make those changes happen.
So why are you hell-bent on throwing it all up in the air and changing everything? The issue is not really changing nothing, but not changing everything. You can be sure that there is something you must do to continue to compete. Have you identified what it is? Maybe you know that you need to change, but are not clear what and why. So you change more than you need in order to be sure that you nail the real problem.
Let’s put this into context. Suppose that your business supplies healthcare equipment across the world. You have to develop products, market, sell, make, distribute, and service them to your customers. You expect to make a profit and you would like to make more. You call for ideas. In a typical organisation this is how different functions might react to such a call.
* Product Development Make the best use of the technology that you have to develop new products with the minimum of effort and risk in the quickest time
* Production Reduce Unit Manufacturing Cost
* Distribution Use the 80-20 rule to sell more to the minority of customers that are most profitable
* Field Service Reduce headcount
* Marketing Seek new high value niches or new markets for existing products
Is this the best approach?
Resource Needed
Whenever you try to do something differently, you must create a ‘project’ to make things happen. Projects absorb effort, even when managed by the existing staff. So, in the case of Product Development, for example, the efforts to work out how to match existing technology to new product needs will actually reduce the resource available to actually develop products. This may indeed pay off, but not necessarily so. Certainly in Production, reducing cost will require teams of professionals (industrial engineers, lean experts) to plan and manage what has to be done. Implementation will absorb the energies of the production staff as well as incur the expense of the change agents. Presumably Marketing will need to research new niches and then fight internal battles (often of a political nature) with their peers and managers to accept their new ideas. This is again resource sapping. Overall, investment of resource (and that boils down to money) is needed to make things happen across all these functions. The more things that you change, the more resource it will consume.
Will it Lead to More Profit?
In principle, all of the above actions could lead to more revenue for less expense, i.e. more profit. In practice, all of the above actions could also lead to more revenue with more expense, or less expense but lower revenues:
Product Development
If the cost structure and performance of your products is in fact largely determined by the current technology (for example, in diagnostics the use of micro-titre wells) then the only long term way to eliminate constraints to cost and performance must be by adopting a new technology.
Production
Suppose that you can adopt a ‘6 sigma’ philosophy. This will involve a large investment in training and staff. Their choice of projects will be compromised by the need to do things that fullfill Black Belt certification timescales (for example). Further, in a highly regulated environment, you will soon find that you need to change things that will involve validation that is expensive or takes too long. At the end of this exercise, you might be lucky to get your money back on the investment.
Distribution
You may decide to promote a current best-selling product to more of your best customers. However, their calculation of “profit” will be based on transfer prices from the factory. The true profit margins may well be completely different. This means that the organisation as a whole may end up making less profit from the change.
Field Service
This department is widely regarded as just expense. The only way to reduce it is to reduce headcount. This could well lead to poorer service to the customer. Eventually you pay the price in losing customers. You reduce expense, but then reduce revenue too.
Marketing
It will be difficult for marketing to assess the incremental operating expense for any new markets that they enter. If the extra revenues are not up to expectation, then profits will not be as good as they hoped.
Could You Do Better?
It is clear that an uncoordinated approach will definitely involve extra expense in the short term and is unlikely to produce the best possible increase in profit for that extra effort. This means that at best you will have improved profitability, but you will certainly have spent more effort than you needed to do so. There is a worse scenario. Suppose the key constraint on profitability lies outside the individual remit of any of the departments, or more probably depends on actions across departments. In this case, you will not achieve any kind of “breakthrough” improvement at all. You will effectively get nothing for your money. Doing nothing in this situation is better than doing a lot that is ineffective.
Of course, you WILL hit the jackpot if you identify just one project that removes the key obstacle to improving profitability and apply resource to making just that happen. Elsewhere you simply change nothing. Is that so outrageous?
by James La Trobe-Bateman, Founder of reMODEL Consultants International Ltd
