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2014
Resurgence of manufacturing is occurring if we choose to take hold of it!As I recently attended the Manufacturing Summit in the Inland Empire and have been preparing for my Association of Operations Management Inland Empire Chapter's 2nd Annual Executive Panel & Networking Symposium entitled "The Resurgence of Manufacturing & Logistics in Southern CA", it's become readily apparent that resurgence is occurring if we choose to take hold of it!

As most manufacturers suffered during the recession and haven't seen robust growth since, it seemed appropriate to discuss what my best clients and contacts are doing to jump on board the resurgence. There are a few key strategies they have in common: 1) Focusing on the export market. 2) Investing smartly. 3) Leveraging relationships.

 

1. Focusing on the export market: Undoubtedly, the manufacturers and distributors growing most rapidly have export business. It's not required to grow yet it certainly jump-starts dramatic growth. For example, according to one manufacturer with export business, the last two months have been 30% higher than last year. Not too shabby!

 

While listening to an export panel at the Manufacturing Summit, I learned that significant growth is not uncommon especially with Made in the U.S.A. products. This is especially true in industries regulated by the government such as by FDA. International consumers are quite interested in these types of products as they can "count" on the quality.

 

As the vast majority of the world's population resides outside of the United States, it only makes sense to expand internationally. There are programs designed to support companies interested in exporting; thus, the opportunity exists if we are interested in taking advantage of it. Sure, there are additional complexities; however, you can avoid issues with a bit of common sense and research.

 

2. Investing smartly: Certainly during the recession, I had trouble finding companies interested in investing - in anything. No ERP system upgrades. No capital equipment. And in several cases no cash outlays even with huge returns (like 10:1 or 15:1 returns on investment). However, I've found studies from ALL past recessions inclusive of the Great Depression that has proven the opposite - in essence, those companies that invest during these times of crisis leapfrog their competition.

 

Of course, if you took advantage of the recession to make smart investments when your competition didn't, you're likely growing rapidly in comparison. However, if you haven't, all is not lost. I find that although my typical clients have more cash, they are still a bit reluctant to spend it in today's environment of volatility. In general, they are starting to put their toe in the water; thus, if you'd like to join the resurgence, jump into the water for solid opportunities!

 

3. Leverage relationships: It might be hard to understand how relationships can be a key to success yet it has proven time and again to be so! In today's new normal business environment, it is not nearly as simple to grow sales and increase profitability as it was during the boom years and when supply chains were less complex.

 

In my experience, those companies that partner with suppliers and customers to elevate the entire supply chain not only perform far better than the rest but they also generate additional revenues by virtue of a relationship-orientation. People purchase from those they respect, like and trust. How can they do that if they don't know you? Or if their only interaction is when you try to negotiate with a win-lose approach? Additionally, as supply chains are increasingly complex with elevated levels of risk, who will you likely support when issues arise?

 

It is an opportune time to join the manufacturing resurgence. The good news is that it requires working smarter; not harder. Why not put a plan in place, rally your team around it and give it 120 days? You'll be glad you did.

 

 

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© 2014 LMA Consulting Group

Turning data into dollars.Almost every company I work with seems to get caught up in the bells and whistles of their new or upgraded software; however, when push comes to shove, the bells and whistles mean nothing if they cannot perform the basics. One of those basics is to be able to extract the right data at the right time from their system in a meaningful format for decision-making.

Who is able to extract meaningful data to make an informed decisions with minimal time investment - without hiring a data ninja?  By the way, I love that name one of my clients gave to a data guru at their company!  I venture to guess it would be a low percentage.  On the other hand, who needs to be able to make informed decisions rapidly in today's face-paced environment?  100%!  Thus, I thought a few keys to success were in order:

1. Data integrity  - before we move on, it's best to make sure any data used in critical decision-making isn't "garbage in-garbage out".  I've yet to come across a company that didn't need to focus some efforts in this area.

2. Data extraction tools - query tools, report writers, business intelligence tools, etc.  Worst case, you're likely to have Sequel or something like that which requires a stronger programming background to utilize.  Simpler is better; however, a simple front end usually requires a more complex back-end.  Invest time to find the "right" one(s).

3. File tables - It shouldn't be an Easter egg hunt to find the right files.  Put together a map/ cross-reference of your files.

4. A business sense - You can hire a data ninja, extra the perfect data and yet still have lousy decision-making abilities if you don't add a business element into the mix.  Does the data make sense?  You'd be surprised how often I've received reports which were millions of dollars off.  No one gave it a logic check.

5. Less is more - This entire process is far from a no-brainer to set up successfully.  Why waste time on developing 25 reports when 5 metrics tell you everything you need to run the business.  And focus your high-skilled IT / business combination resources as they are hard to find.

 

 

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© 2014 LMA Consulting Group

Sales & Operations Planning (S&OP) can give your business an edge over the competition – minimal investment in resources to yield substantial results! Although S&OP which balances demand with supply has been around for a long time, I’ve seen interest in this concept increase as businesses are looking for ways to leapfrog the competition in today’s new normal business environment.

In the new normal, we must be better than we’ve been in the last several decades just to maintain our market position. Customers are demanding more for less with significant improved service levels and quicker lead times. How can we achieve this? Lean? Six Sigma? Sure, all of these types of initiatives are important; however, they have become an assumption – necessary for survival. Instead, we must find new ways to stand out in the crowd. Why not renew an old concept that will give us an edge? A few keys to success with S&OP include: 1) Executive commitment. 2) Collaborate. 3) Simplify.

1. Executive commitment - There is no point in wasting even a dollar or a minute in S&OP without executive commitment as it is cornerstone to success. In the process of balancing demand with supply and syncing up all the areas of your business around one set of objectives, many conflicts and strategic decisions arise. Thus, without executive commitment, you’re bound to dead head right into a wall. And, as I’ve seen multiple times, if you start a major initiative like S&OP, start to gain momentum and then hit a wall, it is worse than not starting at all.

SIOP S&OPFor example, in one mid-sized manufacturer, we implemented a simplified S&OP to better align all business functions. Soon, a key conflict arose between Engineering and Production in terms of which area would have priority in the production schedule. Because we had executive commitment, we were able to get the CEO in the loop and resolve the conflict so that we could achieve significant results – decreased inventory levels and improved efficiencies while supporting the new product launch trials.

2. Collaborate – In balancing demand with supply, the key to success is in collaboration and teamwork. Undoubtedly, there will be several roadblocks to work through in aligning all the functional areas of the business.

For example, typically, production prefers longer runs of the same product. The sales function prefers lots of inventory and variety to choose from. Finance prefers low levels of inventory to free up cash flow. R&D prefers to trial whatever they need whenever they need it. And the list goes on. Thus, it is important to bring all functional areas into the loop upfront and rally everyone around the long term objective to balance demand and supply in such a way to maximize the value of the business.

3. Simplify - In my experience in working with all types and sizes of organizations across multiple industries and globally, the most common roadblock to success is to add too much complexity. Of course, it is tempting to add this feature and that bell and whistle; however, it can lead to a web of complexity that you get lost in. Soon, you’ll see your competition passing you by with a no-frills S&OP process.

For example, in one S&OP implementation, the team got caught up in developing a complex process and system to support the ultimate S&OP theory yet lost sight of the end goal. In the end, we threw out theory and complexity in favor of a pencil and paper and common sense – and achieved vast results! In the new normal, cash flow and customer service are vital to success. There is little else that can achieve as significant a result as implementing S&OP, and it costs nothing. Why not give it a try?

SIOP WEBINAR – FEBRUARY 25 @ 11AM PST

Lisa Anderson presents Sales, Inventory & Operations Planning (SIOP): How to Drive Revenue, Profitability and Cash Flow to give your business an edge over the competition with minimal investment in resources to yield substantial results! Learn how Lisa uses SIOP to balance demand with supply and leapfrog the competition in today’s new normal business environment.

REGISTER NOW.

 

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© 2014 LMA Consulting Group

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The Amazon Effect

Posted by lisaanderson Feb 11, 2014

amazon_effect.jpgAlthough I’ve been mentioning the Amazon effect a lot lately, I thought it deserved it’s own priority. It’s become the phrase that means “exceptional service” (Sunday deliveries, no-hassle refunds), rapid delivery (same day shipping is becoming commonplace) and the latest technology (drones).

 

It syncs up 100% with what I’m seeing at my manufacturing and distribution clients. Customers are no longer satisfied with on-time deliveries, they want reduced lead times and partnership type service. The norm in several industries such as aerospace is for the supplier to manage deliveries for the customer, keeping the customer at high levels of service with minimal inventory. How can you achieve the Amazon effect?

 

1. 24/7  - e-commerce is an assumption for all types of business. Customers should be able to review products, look up order status etc. anytime.

2. Extra mile service - How special do you feel when you interact with your supplier? Have you ever gone into a high end restaurant and requested an item they did not have in stock? Did someone run to a competitor to get it for you?

3. Rapid delivery - You cannot get much faster than same-day delivery! How about Sunday deliveries? Will your employees answer the phone for the customer that calls after the end of their day?

4. Collaborative programs - What is better than taking over the job for your customer? Keep them supplied with the right product in the right place at the right time and make it seamless to them. What’s not to like?

5. Suggestions of value – Customers think they know what they want but often do not know what they need. How can you give them more than they expect (or a better solution than they imagine) that aligns with their unspoken (or not-yet-thought-of) needs?

6. FriendlyAs obvious as this seems, it doesn’t always occur. Do all of your employees act as if every customer, supplier and colleague is a key customer?



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© 2014 LMA Consulting Group

winning_culture.jpg In my 20 years of experience in working with multiple companies across multiple industries and globally, there is a lot of talk about culture; however, little to no impact – bottom line results. On the other hand, I’ve seen companies with an existing, winning culture and I’ve also seen one built – both types of situations drove bottom line results. The distinction between the so-so (and ugly) cultures and the winning culture is perseverance of implementing and maintaining the core elements of culture.

The reason the ‘talk’ rarely turns into a winning culture is that it isn’t backed by solid fundamentals and hard work. So, how do you and your organization develop or maintain a winning culture? There are three keys to success: 1) Define what you’re known for. 2) Consistency. 3) Involve the entire organization.

 

1. Define what you’re known for.

This sounds simple but it isn’t. It isn’t what you’d like to be known for; instead, it is ensuring what you define is what you are known for or what you’ll become known for. Again, talk is cheap. The key to a winning culture relies on flawless execution – there are no free or easy rides in developing culture! In my experience with cultures ranging from ugly to winning, a few core elements emerge which are common to winning cultures.

 

First, the organization understands its core competence and focuses almost exclusively on it. As a part of this focus, the organization faces reality (one of the most overlooked issues in an ugly culture) but does not overreact to bad news by throwing out the baby with the bathwater (ie. core competencies). Also, it is vital to keep the organization updated and in the loop constantly.

 

Second, the organization is clear on its values and lives by them. It is easy to communicate values; much harder to live by them. Even the easiest-sounding of values such as “do what you say you’ll do” isn’t nearly as easy when it comes to implementation. Be careful to think through your commitments before you make them. Then live by them. If they must change, admit your mistake and ensure it occurs rarely.

 

Third, the organization has a rigorous performance management process. It is amazing how many times I’ve seen organizations not have time for this process yet it is #1 to achieving their goals. The right people are your #1 asset. Thus, it is essential that each person understands his/her goals, how they relate to the organization’s goals (and its core competencies), why their role makes a difference, how they are performing etc.

Positive and constructive feedback shouldn’t be provided once a year in a performance review; instead, provide it daily. Don’t get hung up in complex forms and paperwork. What matters is a simple understanding between the employee and his/her manager. I’ve found the best performance processes to be simple in terms of paperwork, backed by powerful conversations. By asking for their feedback and providing feedback on a continuous basis, you’ll show that you value them. What could be more important?

 

2. Consistency

The quickest way to build a winning culture is through daily consistency – blocking and tackling. Consistency refers to both communication and execution. For example, I’ve seen countless examples of poor cultures where the Executives emphasize communication but not consistency in application. Just as in children, employees listen to what they see, not what they hear. And, this can be much harder than it sounds.

A common example is when leaders say they value people; however, as soon as the numbers decline slightly, their first thought is to reduce headcount (people). It’s not that winning cultures never cut back on resources; however, they review their core competencies, examine profit drivers (which include items other than just people), and then develop solid plans of action. When accompanied by straight-forward communication, a rare headcount reduction aligns with the culture’s expectations. And, on the other hand, many times, the winning culture’s organization finds alternatives that provide an even better financial return and long-term result. One key distinction is that poor performers are continually weeded out of the winning organization, and so it is more efficient from the start.

 

3. Involve the entire organization

A winning culture can only succeed if it involves the entire organization. It cannot be an Executive mandate, and it cannot be a success in the trenches and not in the Executive offices. The only formula for success requires it to become a part of the daily working routine. This daily routine involves not only the people in the organization but it also involves key customers, suppliers, and other partners. To read further about involving your suppliers, refer to “Don’t Forget Your Suppliers” by Jim Strong.

One way to achieve this goal is to involve employees in the change and then monitor progress and refine / adjust as required. Exemplars are critical to success. Who will be most effective as a visible supporter based on expertise, position, respect etc? Identify your exemplars prior to the change, involve them upfront and ensure constant communication. The organization will follow. To read more about empowering your team, refer to “Workcell Empowerment” by Andy Pattantyus, and to read more about managing complex change, refer to “How to Support Change Management” by Carlos Conejo.

Culture can be a significant ingredient to delivering bottom line results and customer loyalty. Take the time to develop a winning culture, and you’ll be surprised by how much your employees enjoy work and the results that follow.

 

 

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© 2014 LMA Consulting Group

lisaanderson

Profit Drivers

Posted by lisaanderson Feb 4, 2014

profit_drivers.jpgWhat business isn't interested in profit? None that I can think of - even non-profit businesses need to be concerned about whether they'll come out "a wash." I find that the key to success isn't to think about profit but instead to think about profit drivers. Not all businesses are the same. Which profit drivers matter in your business?

1. Customer pricing - Of course, customer pricing is always important; however, in a business which is largely devoid of cost reduction opportunities, success will boil down to volume or pricing. Can you add value to your products and services and raise prices?

2. Volume - There are some businesses that are highly dependent on volume. For example, paper mills lose significant money when down. Thus, keeping volumes up to cover fixed costs is essential. Even in less extreme examples, it might make sense to reduce prices for certain key customers which will take you past the break-even point. Contribution margin thinking was one of the keys to success in a healthcare products manufacturer's turnaround.

3. Raw material cost - I used to run operations for a business with a raw material cost driver. It was 70% of product cost; thus, not only purchase price mattered but also product design, scrap etc. Even though the Board of Directors was suspect of hiring when we didn't have money, we had to bring on the right talent to address raw material cost to succeed. Invest $1 to save $1000!

4. Labor cost - Those products with a high labor cost component have likely been outsourced to China, Mexico or another low-labor cost spot. Unless the product is also bulky (leading to high transportation cost) or strategic from a value-add perspective, it wouldn't be competitive to leave in high labor cost areas.

5. Service - Are your customers willing to pay for exceptional service (Mercedes, Lexus) and/or rapid delivery (expedite fees)? There are businesses based on these types of factors that drive success - just think of any of the high end brands. Who needs to pay $1000 for a writing utensil (Mont Blanc pens?)

 

 

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© 2014 LMA Consulting Group