I didn’t start any formal undergraduate education until I was 30. I missed out on wild parties and setting the toaster on fire at 3am. When I decided to get a degree I started by studying psychology and then after a year I decided to go on a course on Lean Manufacturing at Cardiff University. It was only supposed to be for a few months and I was a get a grounding in how to transform manufacturing businesses, which given the high proportion of manufacturers in Scotland seemed like a good idea. However two things quickly became obvious:
- Many of the bad work design principles now in use in service organisations had originated in the old steel and automotive industry. Not only were they killing our manufacturing sector, these same principles were being adopted by service businesses and doing similar damage.
- The lean principles which had done so much to fix many industrial plants were now also being blindly adopted in the service sector without the knowledge that certain conditions (such as standard times to complete a job) would not fit in the highly variable service sector.
I then got so intrigued by the ideas that many of the principles used in service organisations weren’t working in manufacturing, or were designed to solve a different problem, that when the short course finished I went on and completed the Lean MBA. Maybe, as Deming mused, best avoided…
However there isn’t a day that goes by that I don’t see clients making mistakes that, had they known the origins of the ideas, they surely wouldn’t have applied to their organisations. So finally, and nearly 15 years after finishing my degree, I decided to write up how to learn and profit from the mistakes your counterparts in the manufacturing world are making. I’ve put all the information in a report, originally designed for manufacturing directors, but you can get the short version in this article, with the full report downloadable as a PDF at the bottom of the page.
I think the report will offer service organisations valuable insight into some of the organisational design principles that you may be using, even though they were designed to solve a different problem for a different industry.
The report is titled: ‘7 counter intuitive ideas about running make to order or make to stock manufacturing plants’
- Don’t sweat the assets
Meaning: do not keep machinery and people busy to make your efficiency numbers look good. It’s a common problem. We think that the more we produce the more profit we are making. The assumption being that the product we’ve made will sell and the money will end up on the bottom line. Too often however this way of accounting is a major factor in companies getting into trouble.
- Starting quicker does not mean you’ll finish faster
This problem, again, originates from the management of efficiencies but manifests itself in a slightly different way. In life we’re taught that the quicker we start something the faster we’ll get finished. True – if you have only one thing to do. However if you have two competing priorities and you try to start them both at the same time you’ll start to multi-task. Imagine a huge to do list. And imagine that you’ve decided to get started on the first item on the list, then your boss comes along and changes the priority, now you’ve two items open. Imagine then that it happens again and again, before you know it you’re trying to do work across lots of different tasks and they’re all now taking longer. Even worse you’re getting stressed out and quality is starting to suffer.
- Stop building to forecasts
Forecasts are largely pointless. What happens is that the forecast becomes perceived reality and companies start building products to meet the forecast rather than designing against actual incoming demand. When companies build a lot of products to meet forecasts they often end up gathering dust (and taking up precious space) in storage.
- Avoid doing batch work
In manufacturing the assumption is that bigger batches mean lower costs. And if parts can be sourced cheaper by overbuying them then of course you’ll use them up later, except now they’re here and taking up space so we’ll use them up, it’ll get us ahead, and that translates to higher… yes you got it, batch sizes. But that excess product doesn’t have any orders attached to it, so it’ll go sit in storage. (I’ll leave you to doodle your own cost spiral here).
- Stop selling on cost
Amazon doesn’t make anything right? Except for their Kindle and now the Amazon TV dongle, but apart from that Amazon makes nothing? But they can clearly articulate the answer to the question ‘What makes you different? ‘.The answer is simple – They offer customers the biggest choice for the least amount of effort. In 2010 a ground breaking piece of research was done on how to grow a business. The research asked two very simple questions ‘What is the biggest predictor of a company’s growth and what should organisations do to tap into that predictor?’ Get the information on this in the report.
- Don’t outsource
One of our current clients is in the process of bringing work back the UK. Outsourcing did not give them the cost differentiator they though it would. They are not alone in this finding. In one case 70% of all the work sent offshore was sent back because it was too complex to process…
- Avoid People programmes
Most programmes assume that if people could only learn to get along better and communicate with greater clarity the organisation would work better. They fail to address the issue that performance is mostly a feature of the system design.
In the rest of the report I expand on some of these and lay out what to do differently. I hope you’ll take a moment to read it and reflect on whether these principles are being used in your business. And if you know someone in the manufacturing sector who’d like a copy feel free to pass it on.