Cliche #11 - It isn't the customer who yells the loudest who gets their parts, it is the one who gets into the schedule first.

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Explanation:
It is no secret that vendors often play favorites. The customer who gives them the most money, or they have the strongest relationship with gets preferential treatment. If you are not that customer, how do you make sure that you get your parts when you need them? The answer is simple. You must be faster and more diligent with your suppliers to make sure they don’t push your parts aside in favor of their bigger customers. It is not uncommon for several customers in the same industry to have the same suppliers, especially if the supplier has a specialty that everyone needs. Sometimes the whole industry heats up at the same time and all of the customers get busy and need the specialty supplier’s products or services.

The best way to deal with this is not to recognize when there is an increase in business, but to have it built into the companny's routine processes.

For example, make sure there are goals for how long it takes to place an order with suppliers for components when an order from a customer is received. This begins with how long it takes to enter a received order into the company’s ERP (Enterprise Resource Planning) system. A good goal is the same day that the order is received. This should be monitored closely. If this data isn’t available, just visit the customer service department and ask each person to show you all the orders they’ve received, but haven’t entered into the computer yet. The customer service personnel may have many good reasons why the orders haven’t been entered, which include pricing issues, technical questions that need to be answered by the customer, credit issues, etc. The bottom line though is that if the order from the customer hasn’t been entered in the computer, your purchasing department, and therefore your vendors don’t know anything about the order. Don’t be surprised to find orders that have been in the customer service department for days, or sometimes weeks without being entered.

The next question to ask in determining how long it will take to get into the vendor’s schedule is how often your company runs its MRP (Material Resource Planning) software. This normally happens every night, but sometimes it doesn’t. The MRP is what crunches the data to determine when to place orders with suppliers for components. If the MRP doesn’t run every day, you will lose time before the purchasing department sees the requirements and can place orders with suppliers.

Next it is important to know that as soon as the purchasing department sees the requirements from the MRP system, they place orders with suppliers. The goal should be that every part that is needed is ordered on or before the lead time of the supplier. This will vary based on how much liability you are comfortable with because once you place an order, as it can be hard to cancel later if your customer order changes. When a customer has an urgent requirement, it is usually already inside normal lead times, so the order needs to be placed immediately. How long it takes a buyer to place an order once the computer says it is needed is actually pretty easy to monitor, but most companies don’t do it. Again, just like the customer service person, the buyer may have many reasons why they have not placed an order with a supplier as soon as they need to do it. They may be negotiating for a better price, answering questions from the supplier, or they may just not get to it because of their other work load. It is not unusual for a buyer to take an entire week to get through all of their buy signals from the computer.

It is easy to see how time is lost at every step in the process. The goal should be that for an urgent customer requirement, their order is entered into the ERP the same day it is received, the MRP runs that night, and the component orders are placed with suppliers the next day. If that happens, it will be your competitor's challenge to unseat your order from the vendor’s production schedule. If the buyer is diligent about checking periodically on the progress of the order, the vendor will be very reluctant to push it out in favor of another customer.

Ops #6 - Can this plant be saved? Part III

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I remember waking up in the middle of the night with my stomach in a knot. Everything that anyone could think of to turn the plant around had been done and it simply wasn’t working. People seemed happier and were working well together, and we were producing a lot of components, but lights weren’t being shipped. After four weeks we hit $850,000 past due. At this point everyone was really questioning the approach because we should have been shipping better, but we weren’t. In the end the only thing to do was to stay on course. Fortunately, the next week we started to ship at a tremendous rate. It was like a dam breaking. At week five we were down to $650,000 and by week six we were down to $300,000. By week eight we were below $50,000. The plant stayed current for at least the next year. There was always the specific customer issue to solve, but the plant was essentially healthy.

Once the customers stopped complaining and the customer service people from the company stopped complaining, the heat was off the corporate execs to do something about the plant. They found other headaches to focus on and talk of closing the plant just went away. There was still a lot to do, but the plant was well on its way to healthy production and much better financial performance.

Final Note:
Some people who have experience fixing underperforming, or disastrous operations, will first fix the problems and then work on the long term health of the plant. My approach is a little different. What I try to do is determine what infrastructure needs to be put in place for the long term, and then put it in place as quickly as possible. With this approach, the manager doesn’t have to change strategies, or have a point where things are going well enough to switch from the band aid to the long term cure. The down side is that sometimes things will continue to get worse while the infrastructure is being put in place. It is imperative to pick the most important infrastructure to put in place first that will have the dual effect of fixing the current problem and creating the foundation for the future. Another reason for this approach is that there is a danger of the band aid becoming the standard routine if it is place too long.

Ops #6 - Can this plant be saved? part II.

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The day after taking over the plant the HR Manager came in to my office and asked if I would like to meet the shop steward. She minded me that the previous plant manager had a daily meeting with the steward and asked if I would be doing that too. I told her that I was aware of the meetings, but no, I did not intend to continue them, but of course I would like to meet the shop steward. We had a pleasant five minute meeting. He asked me how I intended to process the outstanding grievances. I told him that I knew there were problems between the managers and supervisors and the workers and I would be addressing them immediately. I assured him that any time that I was aware of an instance where management did not uphold the contract to the letter, it would be corrected immediately whether or not a formal grievance was filed. I think it was the last meeting I ever had with the shop steward. It confirmed my long held belief that if people are treated fairly and in a way consistent with good management practices, both union and non-union employees will perform at a high level.

My next order of business was to hold a meeting with the managers and supervisors concerning the appalling safety record of the plant. It was literally an unsafe place to work and was running at the rate of several injuries per month, which was far worse than the next worst plant in the whole corporation. I asked each person in the group to tell me what they thought was causing the problem, and to my amazement, every single person blamed the workers for their injuries. They said the people just didn’t care. It was unbelievable to me that they actually thought that workers would hurt themselves on purpose.

I told them that I believed that there were two places a person should be safe and their families could rest assured that they would be safe in those places. The places are at school and at work. I went on to tell them that I took it personally when someone in my organization got hurt. That I had let them down and I had let their families down. Any plant that was unsafe was a failure of management, not a failure of the workforce. So how do we improve the safety of the plant? It isn’t about a Human Resources program, but simply how seriously the managers and supervisors took safety. I told them that the next time a person in the shop was hurt, I was to be informed immediately. If someone had to be taken to the clinic, the person’s supervisor was to go with them. Any safety incident would be investigated within twenty four hours, with containment and corrective actions initiated immediately. Each manager and supervisor would initiate these things immediately and let the paperwork catch up later. The group looked a little embarrassed, but they got the message.

I then moved to the grievances. When I asked about these, the supervisors basically said the rules in the contract were unworkable and mostly stupid. The biggest gripe was with the seniority rules as applied to overtime. The contract stated that the senior person in each classification was to be offered any overtime available and if they refused, the next senior person should be offered the OT until someone accepted. This is a pretty standard work rule in union contracts. The problem for the supervisors was that they didn’t want to follow it. If a junior person was working on a job, they wanted that person to complete it on overtime since the more senior person wouldn’t know anything about the work and would take twice as long to complete it by the time they came up to speed. Beyond that it was apparent that they just weren’t very familiar with the contract language, or how to interpret it. I convened several mandatory meetings with all the managers and supervisors to go over the contract line by line. They were informed that we would only fight grievances where the worker was in clear violation of the contract, or the interpretation of the contract was in question. This allowed for the situation where the supervisor wanted a junior person to complete a job on overtime. The contract remedy for not offering the work and allowing a junior person to do it was that the most senior person had to be paid for the hours worked (in addition to the person who did the work). That might be an acceptable business decision in some instances, so why fight it – just pay it. The education on the contract and the policy that we would follow it to the letter resulted in an immediate reduction of grievances to near zero. When a potential grievance offense occurred, it typically led to a teaching opportunity for the supervisor involved. I was careful to not undermine the supervisor’s authority by allowing the supervisor to be the face of the company in the response whenever possible so that they would gain credibility and not lose it. The last thing I wanted was the supervisor to be viewed as weak by the work force.

Once the safety and labor relations were addressed, I moved to the organization and operations. What I found was that there seemed to be no obvious relationship between the experience of the supervisors and the jobs they were performing. This happened because whenever a supervisor left, the plant manager would hire the best supervisor he could find into that position. This seems to make sense until you looked at the plant as a whole. The supervisor in charge of the metal fabrication department had a few years of fabrication experience, but over twenty years running a warehouse. The supervisor running the warehouse had never worked in a warehouse before his current position, but had many years of metal fabrication experience as a supervisor. This was an obvious switch, but there were others as well. The good news was that everyone in management was hungry for a change, and no one resisted efforts to make things better. It took a little convincing, but several job changes, as well as task and responsibility reassignments, were embraced.

I also found that there was mothballed equipment in the plant that could be used in departments that were capacity constrained. The logic was that led to these machines being taken out of service was that they were slow, old, and inaccurate machines. With minimal expense, these machines were put back in operation to handle jobs that did not require the precision of the newer machines. We also revamped the production schedule to make it much tighter and productive. With less time spent on grievances, safety issues, and other personnel issues, and with additional machinery in production, output and productivity began to soar.

I thought the turn-around was going better than expected until I realized the late order number was going up. The plant measured late orders by dollar amount late. This was just one of the problems at the plant, but poor delivery predictability and poor quality were the things that impacted customers most directly. The plant had been running at about $250,000 of orders past due for over a year. When you consider the product was lighting fixtures, with an average price of about $50, that’s a lot of late product! Working with the managers and supervisors, I published a written recovery plan, so that everyone would know what was different and what was expected of everyone. After a week of recovery efforts, the past due hit $350,000. After two weeks it was at $500,000. I knew things would get worse before they got better, so I wasn’t panicking yet. After three weeks, we hit $650,000 and I started to panic.

What would you do here?  Stay the course?  Change everything back?  Try something completely new?
Check in for part III in a few days to see how this saga ends.

Ops #6 - Can this plant be saved? part I.

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I was given responsible for a plant in the mid west that was performing very poorly in virtually every category. The Division GM had asked me to take responsibility for the plant and he, the VP of Sales, The Customer Service Manager, and myself flew from California to inform the Plant Manager and assess what it would take to get the plant back on track. The VP of Sales was there because customers were screaming for something to be done at the plant and she would have to sell any turn-around efforts to them. The plant had been performing badly for over a year and no one could actually remember when the plant performed well. I spent a few days reviewing the plants records and talking to all of the managers. At a wrap up meeting at the end of the third day the Sales VP asked me how long it would take to get the late orders shipped and improve the product quality. I told her that we could be back to the schedule within 5 weeks. After a year of customer complaints I expected her to jump for joy that she could report to customers that we would be back on track that quickly. I actually had my doubts that it could be pulled off that quickly. Her reaction was to literally sit down and put her head on the table and start crying. She said “I can’t take this for another five weeks”.

What I found was a terrible relationship between the management of the plant and the unionized workforce. The relations were so contentious that the plant, of only about 150 employees, was generating several grievances per week. This led to a meeting between the Plant Manager and the Shop Steward every day to discuss plant activities. I was told these daily meetings often lasted for two hours. It was clear that poor leadership was the fundamental problem and I had no choice but to remove the Plant Manager and named myself as Acting Plant Manager while starting a search for a replacement. When the corporate headquarters learned of the extent of the problems at the plant, they informed me that they intended to close the plant. I asked for a chance to turn it around and they basically told me that I could try if I wanted, but they were going to proceed with preparations to close the plant.

A meeting was called for the entire plant to inform them of the change in leadership. I presented to the employees the plant performance scores and how they compared to the company’s other fifteen plants. They were at the bottom of almost every category. I explained some of the things that needed to change and how important it was that the plant improve. In keeping with the environment of animosity between the workers and management, one of the old timers stood up after I was done speaking and said something to the effect of “We’re glad the other guy is gone, but we’ve heard it all before and he’s the sixth plant manager we’ve run off and you’ll be the seventh”. Having some experience with a rough crowd, I had one of my best ever retorts. I calmly responded that I couldn’t guarantee that all the efforts to improve that I had laid out would work, but what I could guarantee was that if they didn’t, there would not be an eighth plant manager. I could tell by the reaction in the room that no one thought I was bluffing.

Yes this really happened.  Check back in the next few days to find out what happened.  How would you handle this situation?