in Vol. 12 - May Issue - Year 2011
Be aware of the recovery
For many companies it is both a blessing and a curse to suddenly face full order books and high capacity utilization rates after a period of economic depression.
In times of non-existent warehousing and lean company structures high demands are placed on all areas when it comes to increasing production volumes almost overnight. Once a company has found out whether it is well prepared for this and up to the task, it is often too late. And although it is very important that companies regularly check all areas to see whether they can cope with sudden and major growth situations and to uncover weaknesses, still only very few companies simulate emergencies. What does this mean in practice?
Is purchasing up to date?
When buying material, machines and equipment, it is a good idea to maintain close contacts with the most important suppliers and to be well-informed and ready when it comes to ordering more quickly than usual or much larger quantities. Is the supplier still capable of delivering in exceptional circumstances? Is his delivery capacity flexible and is he ready to help when things are not going to plan? Is the supplier a manufacturer (who is usually more flexible) or is he a dealer who cannot act independently? Does it perhaps make sense to have a second supplier so that there is an alternative during an emergency thus having purchasing flexibility? In times of major expansion, these questions become more pertinent and in-depth analysis of management is unavoidable.
What about production capacity and technical equipment?
During a depression, little investment is made in new technology, modernisation and building capacity. Many companies resort to patching things up so that the machinery is at least fairly up to scratch. When the economy suddenly and without notice begins to boom, extreme austerity policies take their revenge and it becomes apparent that important potential is lacking because machines suffer outages, are no longer up to date or are not suitably dimensioned. Production flow can be interrupted because of such outages and poor technical planning, which in turn may mean losing important capacity.
So when it comes to production, it also makes sense to critically analyse the situation on a regular basis and to ask the question: "What if things suddenly pick up?"
What response times do we need to adjust production capacity and to satisfy customers? What are the delivery times for new technology and how long does it take for a production area to be able to work to full capacity?
This requires close coordination between a company’s technical management and the purchasing department, so that, if necessary, the company is able to act and respond optimally.
Has the quality assurance department had a good night’s sleep?
As a rule, production ramp-up is accompanied by difficulties in many areas. In this phase, particular demands are placed on quality management. Process and results monitoring, coordinating with production management, being forward-looking and systematic all require a well-rested quality assurance team. And a critical look at yourself can also help prevent nasty surprises. Is the department well-staffed and well-qualified? Are the tools of the QM system well under control even when the going gets tough? Was the depression used to train quality assurance managers and to prepare them for a possible major period of growth?
How good are the company’s employees, and are there enough of them?
If you take a look at the aspects described above, it quickly becomes apparent that tasks are carried out well only if the company has a sufficient number of well-qualified staff. However, one of the side effects of a depression is that a company’s staffing structure changes significantly. Management now has to answer a number of critical questions: How much knowledge and experience is left and how much has been gained? What changes to staffing and what adjustments are necessary when there is a sudden period of growth, and how soon can the necessary measures be implemented? Is it possible to quickly and successfully mobilize good specialists in the region? Does the company have contacts with well-functioning employment agencies? Are the job specifications for vacant positions well-defined? These and other important questions have to be answered and the current situation must be analyzed. Possible scenarios have to be considered to find out where there is a need for action and which measures have to be taken.
In summary, it is safe to say that the current state of all areas of the company has to be critically analyzed. Only if this is done carefully and consistently, will you have an idea about whether a sudden boom can be absorbed successfully and without major disruptions in all areas. Instead of "careful; boom!", we can then say: "boom, dealt with successfully!".
by Dirk Gather
Contributing Editor MFN and General Manager of GZO GmbH, Germany