Operational Excellence in Recessionary times – An imperative or a distraction?
Tough times call for tough measures and that is what companies today are doing as a reaction to the recessionary conditions that have hit economies the world over. Every other day, newspapers and newscasters greet us with layoffs, impending bankruptcies, bailouts and other such grim news. Manufacturing companies, naturally, are not immune to the crisis afflicting financial companies. They are being indirectly hit by shrinking consumer demand and non-availability of easy sources of funding.
Should manufacturing companies in such times focus on operational excellence? In the best times, when meeting increased customer demand is the priority, operational excellence measures such as reducing waste, tend to take a backseat. The focus is simply on shipping out as many goods as possible. People get rewarded for shipments and not for increasing inventory turns. Is a downturn then the right time to focus on operational excellence?
In my opinion it is! While drastic measures such as reducing work shifts and laying off workers tends to produce the easiest and the most obvious cost reduction, it has repercussions on the companies relations with unions, future workforce and governments, among others. Also, one needs to keep in mind the cost of re-hiring when the demand picks up. While some of such measures can be unavoidable, this might also be the most opportune time to implement philosophies such as lean that one might have been dithering on or completely ignoring under the pressure of meeting on time shipments. Fortunately or unfortunately, a downturn allows time for some introspection. If successful, a company can gain competitive advantage even in a downturn and emerge as a more agile player when the upturn comes. Needless to say, these measures will also produce the cost reduction that companies are seeking in these uncertain times.
So what are some measures that a company can adopt? The answer is no different from what I would have given in any other time. Identify the inefficiencies whose elimination can make the most impact, be it inventory, overproduction, rework, product proliferation, lack of real time information, duplication or inaccuracy of data in ERP system…. Have your best people tackle them; they have some time on hand and their time is going to be well spent.
While focusing on the tactical is the response of most in such times, forward looking measures will help a “best in class” organization emerge when the times do get better.
