Turn Around Strategies For Industry

Over the last two decades with the falling trade barriers led to massive shift of sourcing and manufacturing from high cost developed countries to China and India. India & China alone have about 2.5 billion consumers – a high potential market with growing amount of disposable income with access to plentiful skilled labor, low cost energy, transportation and labor cost. India become the natural choice for manufacturing hub. To be successful in today’s competitive markets, business need manufacturing process that care fast and adapt quickly to change. Achieving this objective requires integrated solutions that connect supply chain to factory processes, production equipment, and factory system in a seamless, customer-centric network. Over the past decade people have worked hard to reduce excess capacity and inventory fat. These initiatives have led to improvements in operational efficiency. They are important steps toward competitiveness.

To create a manufacturing process that is continuously adaptive, companies must – a) Intelligently leverage applications and technology to connect plan – execute – sense – respond – learn operation. a) Seamlessly link factory process, production equipment and factory system to supply chain operations. Manufacturing impacts profit margin by helping improve top line sales as well as reducing bottom line costs. It impacts sales revenue via enhanced throughput on the shop floor and faster time to market. There are two types of asset. Fixed asset commonly refer to machinery to equipment variable assets are raw-material, work-in-process (WIP) finish goods (FM) & Stores. Any efficiency achievable in these operations can have significant impact on company’s profitability.

In 1970s was the era of push manufacturing. At that time it was still a sellers market and companies were focused on building capacity. This push manufacturing decade was followed by team manufacturing. Popularized by the Japanese as just in time (JIT) or pull manufacturing, minimize all waste and produce quality product. Rework was considered as a worst waste.

The last 1980s and early 1990s witnessed flexible manufacturing practices. India was to respond to more volatile market. In manufacturing various options are available. One has to understand how manufacturing evolved and then to make the different manufacturing philosophies to manufacturing methods; namely (a) make to stock (b) assemble to order (c) make to order (d) engineer to order

All these methods have value depending upon the needs of business environment. Basic requirements of the companies are (a) Greater Operational Efficiency (b) Elimination of waste throughout the organization (c) Continuous improvement to achieve following benefits: • • • • • • • • • • • •

Reduce lead time Improve delivery performance Increase Sales Revenue Lower Operational Cost and profits Improve customer satisfaction and supplier relations Increase inventory turn and drastic reduction in inventory Better employee morale and increase employee retention Improved quality Reduction cost of goods sold, including scrap burden and labor Creation of additional working capital for new projects. Reduce physical space requirement Improve safety

There are many business drivers today that put added pressure on manufacturers to do more business with less overhead and cost. Today's increasingly competitive and challenging environment one can adopt following "TURN AROUND STRATEGIES FOR INDUSTRY". This will help us to meet increased global competition more demanding customer, a tighter economy and rising material cost.

Are Transforming Commitments Right for Your Company ?

Company has a good alternative

Company lacks a good alternative

Focus on Core Business

Select Transforming Commitments

Build Alternatives

Milk core Business

Environmental change does not threaten core business

Environmental change threatens core business

Is your Company at Risk a) Your company boasts superior performance b) Your C.E.O. appears on major business magazines. c) Management Guru pronounce your company as outstanding d) You build monument of your success e) You name monument after your success f) Your C.E.O. writes a book g) Your top executive look alike

The Seven Deadly sins of Transforming Commitments 1) Delegate the Hard Work 2) Do not sweat the details 3) Repeat what worked last time 4) Half tackles 5) Keep past sell – by date 6) Fail to run the numbers 7) Ignore Core Values

THE LEADERSHIP CYCLE

Vision Learning Loop

Situation Analysis REFLECT

Issues & Alternatives

ACT

CONCLUDE

Implement & Experiment

Strategic Priorities

PLAN

Measures and Rewards

Define Plan Culture

Change Leadership People

Structure and Process

Key Changes

AND

IN

VISION

• Vision without situation analysis and system development ends up painting lovely pictures of future with no deep understanding of the forces that must be mastered to move from here to there.

• The individual vision revolves around the charisma of leader. But when individual vision is translated into genuine shared vision people excel and learn, not because they are told to, but because they want to, this galvanises the organisation. •

Shared vision involves the skills of unearthing shared "pictures of the future" that foster genuine commitment and enrollment rather than compliance.

VISION Building Shared Vision : "Service" "Instant Photography" "Public transportation for the masses" "Computing power for the masses" All above organisations managed to bind people together around a common identity and sense of destiny.

SITUATION ANALYSIS • Market • Technology • Lean organisation • Productivity • Quality • Learning organisation • Innovation • Human resource • ROI • The likely impact of take-overs on customers, suppliers and competitors.

KEY STRATEGIC ISSUES

TO IMPROVE OPERATIONAL PERFORMANCE

New Product

Strategy

To continuously upgrade, design & develop New Products

Direct Material Track Manufacturing Cost

Indirect Material Power & Fuel Employee Cost Scrap (In value)

KEY STRATEGIC ISSUES

TO IMPROVE OPERATIONAL PERFORMANCE

Inventory reduction in RM, WIP, Stores on RM consumption Line setup time reduction Job Innovation

Manpower reduction (Nos.) Production Increase (at constant value) Education & Training

Strategy

5 'S' Quality Management System Quality Improvement

Bench Marking & Continual Improvement Customer Returns & C.S.I.

ALTERNATIVELY

ISSUES & ALTERNATIVES Key Strategic issues 1. Marketing 2. Finance 3. People 4. Cost reduction 5. Process innovation 6. Quality improvement

Key Strategic issues MARKETING • Managing customers • Managing competition • Managing sales and service • Managing marketing

Key Strategic issues FINANCE • Cost of finance (WACC) • Working capital turnover ratio • Recovery of doubtful debt

FINANCIAL RATIO (BALANCE SHEET) EPS

NET PROFIT AFTER INTEREST AND TAX/NUMBER OF SHARES ISSUED

HIGHER SIDE IS BETTER

ROI (RETURN ON INVESTMENT)

NET PROFIT BEFORE INTEREST & TAX BUT AFTER DEPRECIATION/ CAPITAL EMPLOYED FIXED ASSETS + CURRENT ASSETS – CURRENT LIABILITIES

HIGHER SIDE IS BETTER

CURRENT RATIO

CURRENT ASSETS / CURRENT LIABILITIES

HIGHER SIDE IS BETTER

LIQUID RATIO

CURRENT ASSETS – INVESTORS / CURRENT LIABILITIES

HIGHER SIDE IS BETTER

DEBT / EQUITY RATIO

LONG TERM DEBTS / EQUITY CAPITAL + RESERVE

HIGHER SIDE IS BETTER

DEBT COVER RATIO

PROFIT AFTER TAX + INTEREST DEPRECIATION / INTEREST + INSTALMENT OF TERM LOAN DUE IN 1 YEAR

HIGHER SIDE IS BETTER

Key Strategic issues PEOPLE

• Recruitment Process • Employee Turnover • Average Age • Attitude or mind set • Job Empowerment • Skill (Education & Training) • Job rotation

Key Strategic issues COST REDUCTION • Direct material • Indirect material • Power & Fuel • Employee Cost • Scrap / Rework

Key Strategic issues PROCESS INNOVATION •

Outsourcing

•

Inventory reduction in RM, WIP, Stores, Finish Godown

•

Line setup time reduction

•

Natural grouping

•

Productivity

•

Production Increase (at constant value)

•

5 'S'

Key Strategic issues QUALITY IMPROVEMENT • • • •

Continuous Improvement Bench Marking Single piece flow (SPF) system Cost of Quality

PLAN KEY CHANGES

HOW TO DO IT ?

CHANGE LEADERSHIP

CHANGE LEADERSHIP Initiate actions in following areas : • Structure and process • People • Culture / Values • Measures and rewards

• Mobilising 1. Organisation and its people are brought to the point where they accept the changes willingly. 2. People quickly respond to changing markets, changing technologies, changing competitors and demanding customers. • Enabling (Empowerment) Empowering people to do the new operational work and to do whatever it takes to serve the customer's needs. • Placing Right people at right place.

• Defining •

Ask the most frightening and fundamental question to define the organisational goals. e.g. not just the usual questions about how we can do this operation better, but whether we should be doing it at all. e.g. outsourcing.

•

Define the standards and objectives from customer's point of view.

•

Define products and services from the point of view of what the customer wants, not from the point of view of what the company can do.

• Productivity • • •

Reduction in manpower. Increase in production. Plant layout change to minimise material handling.

• Outsourcing • • • •

Non-productive activities e.g. distribution, cleaning, gardening, security etc. Finish components. Tool Room activities. Semi-finishing machining operations.

• New Product Development •

Developing new products as per market demand.

• Bench Marking •

Setting world class standard in manufacturing.

• Continuous Improvement •

Adopting mistake proofing techniques.

•

Improving machine conditions by Kaizen, retrofitting, changing hydraulic circuits, converting the machine in NC / CNC controlled.

•

Increasing Ppk.

• Recruitment Process • Campus interview from reputated Institutions. • Succession planning. • Job Empowerment • Delegation of authorities. • Job rotation. • Average Employee Age

FINANCE • Minimise cost of finance • Increasing Working Capital Turnover Ratio. • Recovery of doubtful debt. COST REDUCTION •

Motivate and actively involve all employees for cost reduction.

MARKETING

Managing Customers •

90% of customer are reasonable; Only 10% require tactful handling.

•

Business exists only to create customers, more customers and many, many more customers.

•

Satisfied customer become your salesman forever.

•

It costs many times as much to get a new customer as to keep a customer you already have.

•

No amount of advertising - leaflets, hoardings, newspaper etc. - have the credibility which a satisfied customer has.

•

There is no such thing as "soft sell" and "hard sell". There is only "smart sell" and "stupid sell".

MARKETING

Managing Competition •

If we cannot stand the competition, we should get out of the business.

•

Our policy should be not to compete in price with any competitor. We manufacture quality product and sell them and not the price.

•

Competition is not an enemy, which has to be feared. Meet it half way and accept the challenge.

•

One way to beat the competition is to serve your customer better.

•

We have strength and we have weaknesses. But so have our competitors. And, if we sell our strength against their weakness, we will win.

MARKETING

Managing Sales and Service •

The best way to increase the sale of a product is to improve the service.

•

If your costs are going up, try lowering your prices by selling more.

•

Out of the small orders of today grow the big orders of tomorrow.

•

Listening to a customer's complaint is 90% of the job, taking necessary action is another 7% and 3% is following up with him to ensure satisfaction.

•

A business is like a game of tennis and the one who serves well, seldom loses.

MARKETING

Managing Marketing • Business is like riding a bicycle - either you keep moving or you fall down. The name of game is growth. You are either growing or giving out of the business. • There is new business out there, no matter how depressed the market. • Better cash management means better profits.

Employees with integrity are the ones who build a company’s reputation Without customers’ trust the rest doesn’t matter We have got a business principle that says “our assets are our people, our capital are our reputation.” And if any of these are dismissed the last one the hardest one to regain. When customers are loyal to our brand [have trust] they are more apt to listen to your message, read information from your organization more carefully and be more willing to accept calls marketing new products and services. Trust is a key building block in the creation of a company’s reputation, and as a direct result, its shareholder value

The quality of a business's pool of managerial talent is a critical driver of its ongoing success. In these challenging economic times, companies need to have in place a strong cadre of managers, and they need to make tough decisions about performance.

MANAGING THE TALENT • Very few organizations have a rigorous and consistent approach for managing managerial talent. • Most companies struggle, with even the fundamental task of assessing the relative performance of their people. • They are worse at taking appropriate actions based on such assessments. • The shortcomings are particularly acute when it comes to managing underperformers.

WORK LESS, EARN AND ENJOY MORE

Lazy

Hard working

Leave alone

***** Stars *****

Fire Immediately

Excellent staff Officers

Stupid

Intelligent

WHO ARE

C MANAGERS

• Managers who deliver acceptable results just barely. • They scrape by , and perhaps even progress incrementally, but they rarely create anything bold or innovative. • They don't inspire others. Note that the 'C' refers not to the person, but to the individual's performance in a given job.

WHO ARE NOT

C MANAGERS

•

Grossly incompetent

•

Unethical managers

(Companies need to remove them without hesitation)

'A' PERFORMERS Create significant value for their companies directly and through their leadership of others. The objectives with ‘A’ performers are to accelerate their development and do everything to retain them.

'B' PERFORMERS The solidly contributing majority of a company's managerial force. Collectively, they are critical to the success of the business. They should be developed and affirmed so they realize more of their potential and feel valued for their unique contributions.

EXPLICIT ACTION PLANS FOR EACH C PERFORMER One of three types of actions needs to be taken • Improve the C player's performance in the job to atleast a B level. • Move the C player to a job that better matches his or her skills. • Ask the C performer to leave the company.

START AT THE TOP • Upgrading the talent pool must start with commitment from the top. • The CEO and other senior managers can be directly involved and can ensure the integrity of the process. • Companies should not push the talent review process beyond the top few hundred people until it's working very well at that level. • Decisively dealing with C performers isn't a onetime housecleaning or downsizing. It's about constantly holding the company's performance bar high and making sure that the company's leaders live up to that standard. Nor is it about being tough on people; it's about being relentlessly focused on performance.

WHAT ABOUT 'A' & 'B' PERFORMERS • Accelerate their professional development through a steady stream of challenging job assignments. • Encourage their involvement in tasks outside their jobs so they are connected to a broader network and build a stronger sense of belonging. • Assign mentors to nurture their development and to help retain them. • Offer candid feedback about their weaknesses and praise them for their distinctive strengths. • Recognize and reward their contributions.

CULTURE "The rules of governance (and self-governance) for effective business enterprise are determined by their culture, not their organisational structure." •

Culture of obedience

•

Culture of Authority

•

Relentless pursuit

•

Bottomless resources of imagination

•

Smooth team work

•

Individual autonomy

CULTURE Cultural improvement calls for • Quality of people's attachment to their work and to each other. • Willingness to -•

Perform up to the highest measure of competence

•

Always take initiatives and risks

•

Adopt to change

•

Make decisions

•

Work cooperatively as a team.

CULTURE • Openness, especially with information, knowledge, and problems. • Trust, and be trust worthy • Respect others (customers, suppliers and colleagues) and oneself. • Answer for our actions (accept responsibility). • Judge and be judged, reward and be rewarded, on the basis of performance.

MEASURES AND REWARDS

• Measures : • Identify the process results that we want to measure. This will accurately predict our business performance. Organisation must focus on these key process results. • Measure customer satisfaction - effectively keeping managers in touch with market place. • Performance measurement processes should be designed on the assumption that people have the potential to do the new work. These processes should be supportive not punitive

MEASURES AND REWARDS

• Reward • Promotion. • More authority. • Recognition. • Training

DEFINE PLAN

IMPLEMENT &

EXPERIMENT THE ACTIONS

CONTINUE ON THE "LEARNING LOOP"

TO SUMMARISE FOLLOW "FLAG SYSTEM"

FLAG SYSTEM

Reduce Machining Time

100

1 2 3 4 5 6 20 0 Improve Machine Simultaneously

200 100 0

200 100 0

1

4

1

200 100 0

Improve cutting technology

4

Improve Operation

4

machining 50 methods 0

1

40 20 0 Improve jigs

Change lot sizes 10 5 0 123456

Position workers 10 optimally 5 0 123456

Reduce intermediate stock105 0 123456

100 50 0

4

100 50 0

1

100 50 0

Improve tools

1

Improve machinery

4

Improve machinery jigs and 100 50 tools 0

4

0

1

20

4

40

40

4

60

0

1

80

60

1

100

50

Whenever I interview a manager who made transforming commitments – successful or not – I always close with the same question, “What would you have done differently?”

Almost all

reply the same: I would have started earlier and moved faster than I did.