Over the past few years, we’ve worked with two world-class manufacturing clients in two different segments. The first, which we will call PaperCo, was in the paper manufacturing segment and the second, PipeCo, was in pipeline manufacturing.
PaperCo was under enormous pressure with the spread of web-based alternatives, driving a focus on optimizing operations and leveraging accessible techniques to improve efficiency. PipeCo, however, had just commissioned a new facility and was struggling to fulfill orders on time due to substantial demand, which is a good problem to have.
Throughout our involvement, we couldn’t help but notice the striking difference in their efforts to optimize operations. On one hand, every meeting we had at PaperCo and every work product we produced had to be linked to the esteemed internal optimization program in some shape or form. This was the case regardless of whether it was to link our recommendations to in-flight initiatives, assess their impact on existing initiatives, or determine if our recommendations represented a new initiative and how it would fit into the biblical optimization program. On the other hand, identified optimization opportunities at PipeCo seemed to be perceived as a consultant muscle-flex and were rarely taken seriously or received as a genuine consideration. In other words, optimization opportunities were received as a “must have” at PaperCo but a “nice to have” at PipeCo.
By applying reasonably attainable returns from the traditional optimization initiatives (sourcing consolidation, scheduling rationalization, working capital optimization, etc.) that were attained by PaperCo to PipeCo operations, the estimated size of opportunity for year 1 was a staggering 36% of reported operating cost at PipeCo. Simply put, this was money left on the table.
The good news is that in most cases, opportunities for efficiency improvement never cease to exist; so in essence, it’s never too late. Whether you are contemplating at the infancy stages or have already made strides, here are a few considerations as you gear up for greatness:
- Institutionalize optimization policies as part of operational priorities and nominate sponsors from different areas of the business. Set up a program management office to evaluate, prioritize, plan, and track identified initiatives by using leading practices in program and project management. Be mindful of initiative interdependencies and interrelationships.
- Deploy cross-functional hybrid teams of internal and external resources. The synopsis of those teams should clearly identify the external resources’ roles and responsibilities, have built-in mechanisms for skills transfer from external to internal resources, and, therefore, a well-defined and closely monitored timeframe to gradually transition full control to internal resources.
- Design a synchronized and phased target-and-reward system with strategically aligned prioritization of opportunities. Priority should be given to high-impact areas to promote optimization mindset and facilitate leadership buy-in. Targets should be realistic and rewards should be linked to sponsors’ compensation on an exponential basis.
- Leverage existing methodologies and techniques for efficient attainment. Lean Six Sigma and Agile methodologies are common and easily accessible optimization techniques.
- Team up with experts that possess complementary skills to internal teams for effective and successful delivery. Selection criteria should emphasize needed skills over price, you can’t afford waste in the name of savings and value creation.
- Be mindful of the associated cultural change elements. Promote programs as they truly are; opportunities rather than threats, and adopt culture changes that enable contribution and participation across the organization.
- Leverage optimization programs as tools in the development of future leaders and change agents within the organization.
- Reinvent the wheel by overlooking existing methodologies and techniques that can help you achieve results efficiently.
- Pay down the team selection process. Ensure internal sponsors and team members are selected based on the appropriate skill-set and motivation.
- Overlook the anticipated workload. Take into account existing workload and be prepared to invest internal resources’ time while effectively managing impact on productivity.
- Disregard initiative fatigue exposure. Adopt a reasonable roll-out strategy that factors in the learning curve and change management aspects and avoid setting aggressive targets upfront. Start by focusing on high-impact opportunities. Don’t embark on too many initiatives that will stretch your resources thin and command significant upfront investments.
- Fail to motivate your team with both a tangible and intangible reward system. Incorporate performance measures that recognize and reward desired behavior. This is by far one of the most effective tools to institutionalize cultural change.
Regardless of the life cycle stage an organization might be in or the maturity phase an industry or market is in, improvement opportunities never cease to exist and, in many cases, don’t expire either. Strategically mature organizations excel in nourishing a culture of high appetite for efficiency improvement that maximizes shareholders’ value, improves competitive position, and strengthens organizational resilience.