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2018

Ponder this question: How do you see your people?  Assets or Expenses?

We all might like to jump to the answer of assets but is it true?

A few questions to consider include:

  1. If sales are down for the quarter, do you think about investing in people to grow the business or cutting back on people to keep margins steady?   What really pops into your mind?
  2. Do you hold brainstorming sessions with just your leadership team or do you actively solicit input from the people on the floor, in the field, on the phone etc.?  If you ask, do you plan to look into it or are you just checking a box that you asked?
  3. When reviewing financials, do you keep them to your leadership team/ inner circle or do you share the main elements with everyone (while explaining the numbers and soliciting feedback).
  4. If you run into cash flow challenges (due to growth, investments in technology, a non-recurring write-off etc.), do you immediately think about who you can cut?  Or do you look at the situation holistically and think through how to address?For example, when I was VP of Operations, we ran into temporary profit issues and the Board wanted to cut people.  However, the largest cost was materials.  We pushed back to keep our people and focused on how to reduce scrap which would provide a 10 to 1 return vs. labor which might actually cost more if scrap went up at all due to the lack of people.

You don’t have to share your answers.  Just think about them.  If you think about people as expenses, even occasionally, somehow they start acting like expenses.  It seems to work that way in every situation I’ve seen.

The Value of Best Practices
Kash Gokli (head of Harvey Mudd's manufacturing and clinic programs) and I led our 12th Harvey Mudd executive roundtable last week on the topic of best practices.  One of the executives from WET (from designer to maker of the Bellagio fountain and many others like it) kicked off the evening by discussing best practices at WET.  Aside from a VERY impressive video that showed their design and water experiences), she talked about the critical importance of human capital.  They have an impressive on-boarding and ongoing emphasis on collaboration, education and investing in talent.  Clearly, with this creative and unique best practice, spectacular water experiences follow......

One tip to implement this week:
Undoubtedly, our long-term readers know I wholeheartedly support investing in top talent.  Whether we are working with an large complex aerospace manufacturer or a rapidly growing food and beverage company or a private equity backed medium-sized building products value-add distributor, our most successful clients have an unrelenting focus on talent.  They start by retaining top talent and expand by developing, training, educating and always being on the lookout for top talent. 

If you are an executive, put aside an hour this week to meet with your executive team to discuss your talent.  Although an hour sounds short, it also probably sounds quite impossible to fit into your schedule yet it is likely to be the most valuable hour spent this week.  Start with your talent and the rest will follow.  Throw a bit of WET's creativity into the conversation and see where it takes you.

If you are an employee, take the proactive approach and seek out your manager to discuss where the company is headed.  Find out how you can add more value.  Think about how you can grow - with or without money invested.  There are many approaches that will not cost a dime.  Think about finding a mentor and offering value to a potential mentor.

Regardless of where you are, best practices are well-worth the investment.

Supply Chain Briefing

Tariff News & Impacts....Whirlpool Adds People; LG Raises Price|
President Trump just announced that the U.S. would impose a tariff up to 50% on large residential washing machines.  Almost immediately, the news started to emerge.

According to an Industry Week article, Whirlpool plans to add around 200 jobs in their Ohio facility and announced plans to increase investment.   On the other hand, according to the Wall Street Journal, LG announced the intention to increase prices and they also plan to open a factory in Tennessee later this year.  No matter the exact outcome, trade decisions are changing our landscape significantly. 

 

Trade Decisions Will Impact Your Business
Assuming you are not in the washing machine business, the key question is how will these seemingly unrelated trade decisions impact you and your business?  Without a doubt, it will impact you in more ways than you can imagine!

What Should We Consider and/or What Impacts Could Arise?
Thinking about some of the more likely impacts to you and your business from this tariff, let's start with people.  If you manage a manufacturing company in Ohio (near Whirlpool), you might be in fierce competition for people. 

Currently, we have many clients struggling mightily to find top talent.  Thus, it would be wise to pay attention and get ahead of this curve.  If you are in Ohio, perhaps you should look at how to retain top talent, as well.  The same holds true in Tennessee - certainly starting a factory will require a ramp up of talent.

Impacts in Addition to human capital
There are vast impacts regardless of your location. 

  • Do you use the same materials in your manufacturing process?
  • Have you checked in with your supply chain lately? 
    • Will they be geared up to support you or have you ignored them and don't know what might happen as production ramps up in the U.S.? 
  • Have you provided a forecast lately? 
  • How about the impacts on your transportation and logistics infrastructure?

Other Impacts
Pull your team together every so often to think about what is going on in your industry and extended supply chain and what is likely to impact your business.

Be proactive to leverage opportunities instead of chasing your tail.

lisaanderson

The Latest Trends

Posted by lisaanderson Mar 14, 2018

I spoke at APICS San Fernando Valley a few days ago on the latest trends and what's in store for 2018.  We had a great discussion on topics ranging from people (or lack thereof) to technology. 

For manufacturers and distributors, a few of the highlights included: 

1) The Amazon Effect - the customer experience is the ultimate! 

2) Near-sourcing - I go beyond the mainstream and am boldly saying "Southern California is "the" place to be! 

3) The skills gap - if I could only convey how much trouble several clients are having finding the right fit for open positions.....!!!!! 

4) Technology (with lots of details behind this one!) and a few more. 

Have you thought about what trends are most likely to impact your business?

One tip to implement this week:
I also attended a Board meeting with a client a few days ago, and this topic is quite relevant.  Staying on top of what is likely to impact your business gives you the clarity of priority! 

Start by taking a few minutes with your top team to brainstorm.  Give a few customers a call to find out what's happening with them.  Check in with a few of your key suppliers.  Drop in on your trusted advisors and attend a trade association and/or alumni networking meeting.  You'll soon be well-versed to come up with what is trending AND relevant to you.

Once you have thought through the trends most likely to impact your business, it might make sense to think about how to transform these impacts into opportunities.

Profitable and scalable growth is the common thread among every single one of my clients - how can you leverage these opportunities to aid in creating scalable, profitable growth?  

Take a tip from the LEAN toolkit and involve your people.  You might be surprised how many opportunities will emerge if you put ALL the brain power in your company on thinking about how to do this.

According to a Wall Street Journal article, Kroger (#2 grocery chain in the U.S.) and Walmart are ramping up pressures on food suppliers.  There is too much lost money due to shortages!  Thus, the industry is waking up to the critical importance of on-time delivery and customer service especially as they compete with on-line retailers like Amazon. 

Kroger is fining suppliers $500 per order that is more than 2 days late to any of its 42 stores.  That can certainly add up!  And, Walmart is charging 3% for late deliveries.  This could prove transformative. 

What is Your Delivery Performance?

How is your company performing in terms of delivery?   No matter the industry, delivery performance is having a significant impact on scalable, profitable growth - or lack thereof.  My best clients are paying close attention and finding ways to get ahead of this curve.

What Should We Consider and/or What Impacts Could Arise?
Let's start at the beginning.  Do you know what levels of service you provide to your customers?  Is it the same level to your A customers as well as your C customers?  Find out. 

On-time-in-full (OTIF) is rapidly becoming the standard for measuring this performance.  If you don't have a metric, just start with this one as a base.  Or, worst case, start with whatever you can measure rapidly - and evolve over time.  Of course, service alone won't cut it.  Lead times and other factors enter the equation....

Staying Competitive
Clearly, if you are not high performing in the food and beverage industry (and consumer products in general), you will not stay viable anymore.  Amazon will be happy to fill the gap.  However, since I work with small and medium, family-owned manufacturing companies to  private-equity backed firms and large multi-billion dollar enterprises across a wide variety of manufacturing and logistics industries, it is quite clear that food and beverage is not alone! 

Have you been tested yet?

Supply Chain Briefing

According to an Industry Week article, factories across the globe are showing signs of strain in keeping up with demand. China, Germany, France, Canada, the UK and the US all show that capacity might not be keeping up with supply. In fact, the U.S. reading from IHS Markit has reached its highest level since March 2015. Inflationary pressures are surfacing.

Are You Prepared?
This certainly coincides with what we are seeing in the market – if you aren’t preparing in advance, you are likely to be left in the dust. Customers are unwilling to wait or dampen their experience. They’ll find someone who can meet their needs. Are you prepared to meet your demand – and your competition’s?

Details and Planning
I used to work in a paper mill and converting operation like the materials pictured above. Meeting demand is far reaching – just think about the space constraints in storing these materials? Success follows forethought and preparation.

What Should We Consider and/or What Impacts Could Arise?
Do you know your capacity? It certainly seems appropriate to start by understanding your machinery and equipment capacity, your labor capacity, your storage capacity and your suppliers’ capacity to name a few. How much can you increase your volume without running into a wall? 5%, 20% or 50%?

Driving Profitable, Scalable Growth
One of the issues we partner with clients to address is how to drive profitable, scalable growth. Keeping up with growth is one question.  However, perhaps a more important question is whether you can sustain growth and have a scalable infrastructure.

Do you have the people, development programs/skills, processes and technologies in place so that you can grow without adding people at the same rate as your growth?

First of all, with virtually 0% unemployment, it will prove challenging to find good people. Next, even if you are able to find them, think about your ramp up curve for effectiveness. In most manufacturing environments, it can be 3 months to a year to bring a higher-skilled resource up the learning curve. Also, have you thought about what your customers expect in 6 months to a year? Don’t think about their current needs; look beyond if you plan to be their partner in growth.

So the question remains, are you prepared?