Be Succinct

FreeImages.com/sanja gjenero

I recently saw a blog post that discussed taking notes electronically, on an iPad, rather than on paper, in order to reduce handling and administration. I tried that approach a few years ago, but I’ve now found that a simple 3 by 5 note card is even more effective for several reasons.

First, I walk around manufacturing and distribution facilities a lot, and often see things that I want to remember. Carry an electronic note taking platform and trying to actually take the notes can be problematic, but writing down a brief memory-jogger type of note on the card allows me to act on the observation when I’m ready to deal with it.

Second, I tend to restrict my note taking to only those points that drive objectives and change. Even in my interviews with executives during my projects, instead of trying to capture every word, I write down only those points that are highly relevant to the issue at hand. I find now that I’m much more efficient, and more importantly, I remain in the moment and actually hear those few important points that can lead to major improvement.

Stay in the moment, focus on objectives and key points, and only write down those things that really drive change.

© 2019 – Rick Pay – Al Rights Reserved

It Doesn’t Work If You Don’t Do It

FreeImages.com photo by Jennifer Marr

Recently I was working a project for a client and I checked several references I’ve used over the years for manufacturing and distribution improvements. Four of the books I often refer to are:

These books guided many of the World Class transformations I worked on in the mid-1990s and beyond. They’re 25 years old (or more)!

The interesting thing is that many companies still aren’t doing what these books (and others) suggest. The ideas in them are extremely effective and produce extraordinary results, so why aren’t more companies using them?

  1. You can’t learn things by simply reading a book – you need guides to help you along the way and experience from trying things with the resulting mistakes/learning and successes. Would you want to read a book on how to ski and then go hit the black diamond slopes?
  2. It takes intentionality – you have to have a strategy and then execute.
  3. It takes leadership – What all of my successful clients have in common is an upper-middle level manager/champion who is driven to accomplish extraordinary things.

The foundational ideas of process and productivity improvement are immutable, but they only work if you use them.

© 2019 – Rick Pay – All Rights Reserved

How To Jump-Start Improvement

Many companies start Performance Improvement initiatives with 5S, a Lean tool that involves workplace organization. 5S reduces clutter in offices, warehouses and manufacturing floors and creates quick, visible improvements to jump start employee engagement in the process.

The best initial workplace organization projects are designed to:

  1. Be highly visible – people need to see what is going on. This builds curiosity and a desire to become involved, so the effort can easily spread throughout the organization.
  2. Assure success and build support – if you want support for the process, people need to see that it works! Be sure to pick a work location where success is ensured.
  3. Make work life easier – the best projects really make a difference to the people at the point of work by making the process easier and more successful.

For more on how to get more bang for your improvement buck, read more in my latest Growth Accelerator newsletter.

 

© 2017, Rick Pay. All rights reserved.

Choose One: Strategic Drivers in Manufacturing

Strategy is the framework that helps guide the choices company executives make as they move toward their vision. These choices often guide critical decisions relating to capital, capacity, vertical integration, resources, IT and the other components of operations strategy.

The Five Frames

In manufacturing companies, there are five potential strategic frames, and while many companies want them all, only one (with a potential secondary) should be chosen to drive the company. They are:

  • Cost
  • Quality
  • Delivery/service
  • Innovation
  • Agility

Low Cost

Many manufacturers try to become the low cost producer and either sell cheap or force their competitors out of business. Lean initiatives are often driven by cost reduction, and at times purchasing will try to beat up their suppliers to lower costs. Low cost strategy frames drove many of the off-shoring initiatives of the 1990s and early 2000s.

High Quality

Making the best of the best can be a very effective strategy, especially for markets driven by prestige or highly technical products. BMW, Mercedes, Lexus and other high-end car makers developed high quality strategies and used them to approach a higher-priced market.

Delivery/Service

Speed to market is also a key driver in manufacturing. Short delivery cycles, quick manufacturing techniques and high levels of service can drive competitiveness. Amazon, Dell and Federal Express all built highly successful companies using this driver.

Innovation

Companies that can roll out new innovative products can drive competition crazy. The primary example of this is Apple.

Agility

The ability to quickly customize products can also drive competitors crazy. Toyota says it can deliver any car, customized to your liking (from their assortments of accessories) in twelve days or less.

For strategy to be useful, it has to provide the clarity and guidance that people need for decision making. The five frames can prioritize activities in a way that’s more influential than the rest of your business. Picking more than one (or two) confuses the issue and often results in lack of implementation, which is why strategy fails.

© 2017 – Rick Pay – All Rights Reserved

Finding Skilled Labor is Top Challenge for 2017

I’ve been interviewing company owners and CEOs for my next book, Moving Into The Express Lane: How to Rapidly Increase the Value of Your Company to learn about their concerns for the coming 12 to 24 months. Almost unanimously, the answer is the ability to find skilled workers. Many companies have had long standing employees running CNC machines, screw machines, wood products mills, conducting maintenance, and doing skilled work, but unfortunately these are often baby-boomers and many are approaching retirement.

There is a big gap to be filled and our schools and social environment aren’t encouraging younger people to prepare for these well paying jobs. I was walking through a metal fabrication shop recently with the owner and noticed that most of the workers appeared to be over 50 years of age, and some well beyond that. I asked the owner if he was concerned about that and he said, “I’m scared to death!”

Business needs to work with the community to develop public/private partnerships to train our youth to take these jobs. Reinforcing vocational training and community colleges to prepare people for these positions is critical for the future of our manufacturing base. I hope our politicians and school leaders wake up to the opportunity.

© – 2017 – Rick Pay – All Rights Reserved

3D Printing in Wholesale Distribution?

3D printing is rapidly changing the manufacturing landscape. Companies are using it not only to speed up new product development by allowing engineers to print prototype parts on demand, but also for lower volume production. The technology is moving rapidly in both plastic and metal applications.

I wonder if 3D printing might be a disruptive technology for wholesale distribution as well. Perhaps it’s the ultimate in Just-In-Time fulfillment for distributors. They could have printers right in the warehouse and when they get an order for a lower volume part, just print and ship. Inventory would be low or perhaps at zero stocking levels. As part specifications change, distributors could update the program and not worry about obsolete parts.

Going one step further, what if wholesale distributors or manufacturers provided 3D printing as a service directly at the customer location. They could lease the machines, keep them programmed and maintained, and provide the raw materials as needed on a Vendor Managed Inventory basis. This reduces the inventory in the total supply chain, provides the shortest possible materials lead-time and is a win/win for customers and suppliers.

Developing a supply chain framework using 3D printing could transform your business model. Using disruptive thinking is key to accelerating profit and growth. Are you considering disruptive ideas?

© 2015 – Rick Pay – All Rights Reserved

Surprising Ways to Get the Best Pricing From Your Suppliers

Many companies start a supplier relationship with tough negotiating, driving down the price and asking for “give-aways to sweeten the pot,” like free freight. In my role as VP, Operations at a manufacturing company, our goal was to be our key suppliers’ most profitable account. But wait, isn’t that giving away money?

Not at all. Our suppliers gave us world class pricing, often much lower than our competitors. Here’s how we did it…

1) We researched industry cost structures to understand the components of cost – materials, labor, overhead and profit. We strove to leave profit alone (and actually added to it over time), but we were relentless in driving down the other costs through concurrent engineering (including the supplier in product design) and detailed understanding of shifts in commodities prices.

When we found savings in the product, or commodity prices moved in the market, we split the benefits with the supplier 50/50, so our profit and theirs would go up while bringing the overall cost down.

2) We required our suppliers to provide detailed cost structure information so we could both work on improving profitability. This required a high degree of trust, which is the foundation for mutually profitable partnerships. During frequent face-to-face meetings, we worked together to reduce total cost of ownership (TCO) of the item, again splitting the benefits between both parties.

Over time, the profit numbers grew while the total cost shrank – a win/win in a true supplier partnership. As a side benefit, when we needed extra effort from our suppliers, they were more than willing to go the extra mile because we were their most profitable account.

What kind of partnerships does your company have with its suppliers? Do they give you world class pricing?

© 2015 – Rick Pay – All Rights Reserved.

To Automate, or Not To Automate…

According to an article in Industry Week, The Boston Consulting Group estimates that use of robots will increase by 10% a year in the top industrialized nations. Why? Labor costs. A typical robot costs $4 per hour while a skilled worker runs $24 per hour.

While using robots has advantages such as highly productive repeatable work, there are several disadvantages. First and foremost, any piece of equipment can quickly become the bottleneck. Many companies use automation to increase productivity before removing waste from processes, when in fact the process they’re automating shouldn’t be done at all.

Once a process is automated, it becomes economically and emotionally difficult to remove the automation as part of a waste reduction effort. Companies should always follow this order when trying to reduce waste – eliminate, simplify, automate. In other words, processes should be eliminated or improved first.

The second major disadvantage is eliminating jobs. Most robots are installed to cut labor costs and reduce head count. While a robot makes perfect sense for a repeatable process, there’s nothing more flexible than a human being when it comes to process improvement. If products are new, processes are being improved and supply chains are changing, it’s best to hold off on automation until the process stabilizes and is repeatable.

In today’s political climate, there’s a push to increase the minimum wage. While there may be some social benefit from doing that, increasing the minimum wage has the unintended consequence of encouraging automation that takes away jobs and may be premature within the organization’s processes.

If you’d like to develop a strong strategy for automation in your manufacturing or distribution company, call me to explore the possibilities before you leap.

© 2015 – Rick Pay – All Rights Reserved.

Is Reshoring Reversing the Tide?

The US reliance on offshore supply is growing faster than the move toward reshoring. A recent article in the Wall Street Journal suggests, based on an A.T. Kearney survey, that reshoring is not reducing our balance of trade. More items are being manufactured off shore than are being brought back on shore.  Why? Costs are still lower in Asia, and skilled employees and good suppliers are hard to find. The dollar is currently very strong, as well.

The survey said that some of the reasons companies are moving back on shore are:

  1. Lower energy costs
  2. A narrowing wage gap
  3. Reduced shipping costs
  4. Faster response to shifts in demand

These benefits will lead to even more reshoring in the future. The government can encourage that shift, first, by easing off on the move to sharply increase wages. The government needs to be careful not to reverse the gains we’ve made due to increased wages in Asia. Second, the government can foster public/private programs for skills training. One of the reasons reshoring is slowing is the lack of skilled employees.

If US manufacturers are really going to reverse the tide for reshoring, sound operations and supply chain strategies must be in place to find workers and supplier partners, and to develop winning processes. Are you doing that in your company? Give me a call to find out what you can do to build extraordinary value in your company.

© 2014 – Rick Pay – All Rights Reserved

 

To Centralize or Decentralize – That Is The Question

In the famous soliloquy from Hamlet, Prince Hamlet contemplates, “To be or not to be, that is the question. Whether ‘tis nobler in the mind to suffer the slings and arrows…” Often, when companies are deciding whether to centralize or decentralize supply chain management and operations, one of the reasons it’s so hard is because of the slings and arrows that remote operations fire at the corporate group, wanting more control over their purchasing and materials management.

This issue should be dealt with as part of developing a supply chain strategy for your company. Operations that have multiple locations, be they branches, warehouses, retail outlets or manufacturing plants often wrestle with the issue of whether to centralize or decentralize to reduce costs and improve supply chain flow.

Picture a line with the word Centralized at one end and Decentralized at the other. They represent the extremes of the issue. Operations and management is often centralized to provide efficiency and cost reduction. They are often decentralized to provide local control and greater service to customers.

The optimal result is often somewhere in the middle. There needs to be a balance of cost efficiency with customer service. One option is what I call “central coordination with local control.” This provides for use of common suppliers, customization of local part management reflecting local demand, setting of common policies such as internal controls, and so on.

It‘s not easy to answer the ‘centralized vs. decentralized’ question. It should be a vital part of your supply chain strategy.

© 2014 – Rick Pay – All Rights Reserved