Tag Archives: customer

Manufacturing: Worst Offenders

A colleague recently asked me what I would look for if I were to evaluate a manufacturing plant (unspecified industry). My immediate response was to initially look for what I call the “Worst Offenders”. Here they are along with the rationale for why to correct them:

  • No safety program: Do not blow up anybody or anything!
  • No connection with customers: Everyone, including manufacturing personnel, should know what value the firm delivers to customers.
  • Equipment out of calibration: Get what you expect out of your machinery and tools. This includes production, QC, test, and facilities equipment.
  • No preventive maintenance program: “If it ain’t broke, fix it anyway.”
  • No standard operating procedures: Eliminate the human and machine variations from the manufacturing process.
  • Non-integrated planning: Synchronize demand-supply, production schedules, machine usage, workforce schedules, maintenance, logistics, and other plans in order to minimize planned and unplanned downtime.
  • Lack of employee training and development: Get the most out of people.
  • Poor labor management relations: Avoid strikes, showdowns, slowdowns, and other impacts to output. And employee satisfaction is a key driver of quality and productivity.
  • No quarantine for discrepant material: Don’t mix the bad with the good.
  • Inefficient layout: Avoid suboptimal flow of material and wasted time.
  • Sloppy and slow changeovers: Prevent material contamination and achieve speed.
  • No performance measures and targets: Need to evaluate performance and know what “good” is.
  • Costs required for financial reporting do not reflect the true costs to manufacture: Need to know costs to understand product profitability for effective product portfolio management. Historical costs are also required for more accurate projections during product development.
  • No continuous improvement program: Always strive to do better for competitive advantage.

There are obviously more problems that can be present in a manufacturing operation. But these are what I consider the worst offenders and what I would use as an initial set of diagnostic tests for a manufacturing operation.

Ever-Improving Competitive Advantage: Hitting the 5 Dimensions

Mario Andretti Watkins Glen 1974A firm exists in competitive environments along several key dimensions. Each dimension (or metaphorically, a competitive marketplace) has its own set of competitors acting in their own self-interests. In each dimension, the players compete for scarce resources (customers, marketshare, industry profit share, people, investments, etc.). A firm improves by increasing its competitive advantage along each dimension. These 5 key dimensions are:

  1. Customers
  2. Financial capital
  3. Talent
  4. Extended value chain or value network
  5. Community

A modern approach to improvement:

  • Covers all dimensions simultaneously.
  • Is integrated, holistic, sustainable, high impact, and a whole slurry of other buzzwords
  • Allows improvement ideas from everyone within a firm to fit somewhere, which draws in full participation (“Full Force Improvement”)
  • Has a goal to enable a firm to constantly ever increase its competitive advantage (as in any Olympic athlete who continually strives for better performance)

To gain ever-increasing advantages, a firm must be, or must be perceived to be, more attractive than the competition.

  • Customers
    • This is what people usually think of when they hear competitive market.
    • A firm competes with other firms in the same industries.
    • More attractive offerings (products, services, innovation)
    • More attractive value proposition (benefits versus cost)
    • More attractive long term relationship
  • Financial capital
    • Here the firm competes for limited investment dollars from investors and creditors
    • Competitors include those seeking any number of investment alternatives for investors: stocks, bonds, commercial paper, cash, etc.
    • Gain advantage by providing more attractive financial returns than alternative investment vehicles available
    • Being more attractive in the stock market drives up stock price
    • Being more attractive in the credit market increases access to capital and lowers the cost of capital
  • Talent
    • The competitors are other employers that require the same skills, experience, and knowledge that a firm requires.
    • The other employers can be from similar, adjacent, or different industries.
    • Competitive advantage includes providing a more attractive work environment, richer total compensation (salary, benefits, wealth creation), and other elements that make a firm a “great place to work”
    • For example, firms like NetApp (Fortune’s 2009 “Best Place to Work”) have an advantage in attracting the best talent.
  • Extended value chain or value network
    • The extended value network includes business partners on both the supply side and the demand side: suppliers, service providers, channel partners, and so on.
    • Good partners are in short supply and a firm gains advantage by being a more attractive partner than other players in the market.
    • Example, Dell is one of the leading channel partners for hard disk drives. Drive manufacturers constantly compete to have their drives picked for the next PC that Dell assembles.
  • Community
    • A firm can gain competitive advantage over others by demonstrating stellar corporate social responsibility.
    • Communities desire firms with a strong sense of CSR.
    • Firms can realize significant tax benefits from state and local governments.
    • CSR also impacts other dimensions such as talent (the feel good factor).

An effective and sustainable improvement approach must be directed towards continually gaining competitive advantage along the 5 key dimensions. A firm can never rest nor ignore others in its ecosystem. The firm must marshall its employees and those in its extended value network to execute strategies for Full Force Improvement.