Article

Oper­a­tional Excellence

High per­for­mance busi­ness­es and ath­letes have this in common

September 11, 2019

The flow of infor­ma­tion is as crit­i­cal to a busi­ness as the flow of oxy­gen is to an ath­lete. Infor­ma­tion is what allows busi­ness­es to bridge the gap between sup­ply and demand.

How­ev­er, in the era when man­u­fac­tur­ing ruled the roost, demand was gen­er­al­ly high­er than sup­ply and options for cus­tomi­sa­tion were lim­it­ed. In fact stan­dard­i­s­a­tion was seen as cru­cial in order to max­imise effi­cien­cy. Hen­ry Ford’s famous quote, “Any cus­tomer can have a car paint­ed any colour that he wants so long as it is black”, is a great exam­ple of this approach. This reduced the impli­ca­tion from the organisation’s poor infor­ma­tion flow.

In the cur­rent sce­nario, where sup­ply is high­er than demand, cus­tomi­sa­tion is becom­ing increas­ing­ly com­mon and there is a con­stant tug-of-war between the sales and pro­duc­tion teams. The suc­cess of today’s man­u­fac­tur­ing organ­i­sa­tions depends on man­ag­ing this effectively.

Wendy L Tate, Diane Mol­lenkopf, Theodore Stank and Andrea Lago da Sil­va dis­cussed some of the key traits of com­pa­nies that have been able to suc­cess­ful­ly man­age this peren­ni­al prob­lem in their arti­cle, “Inte­grat­ing Sup­ply and Demand.” The key here is to under­stand how val­ue is gen­er­at­ed in a com­pa­ny and how this flows from the pro­cure­ment of raw mate­ri­als to the end product.

All too often the key per­for­mance indi­ca­tors (KPIs) for pro­duc­tion and sales are not inter­re­lat­ed, so each depart­ment works towards opti­mi­sa­tion but with­out keep­ing the over­all objec­tive in mind.

One of the most com­mon bar­ri­ers that ham­pers inter­ac­tion between sales and pro­duc­tion is the fail­ure of man­agers to under­stand how their area affects the company’s over­all effi­cien­cy and prof­itabil­i­ty. It doesn’t help that man­u­fac­tur­ers often don’t analyse the impact of pro­duc­tion vari­a­tion on a day-to-day basis.

Data, even when it is avail­able, is often not shared across the organ­i­sa­tion. Cross-departmental meet­ings tend to hap­pen, at most quar­ter­ly, but often no more than annu­al­ly. This encour­ages each unit with­in the com­pa­ny to have an insu­lar focus rather than con­cen­trat­ing on the over­all suc­cess of the organ­i­sa­tion and how they can con­tribute to it.

This is espe­cial­ly true in the case of organ­i­sa­tions which are depen­dent on sup­pli­ers for their end prod­uct. Effec­tive infor­ma­tion shar­ing can be the cor­ner­stone to their success.

We came across an exam­ple of this dur­ing our work at a paper man­u­fac­tur­ing com­pa­ny. Once the rel­e­vant peo­ple under­stood the impact of vari­a­tion in pro­duc­tion para­me­ters and it became a top­ic for dai­ly dis­cus­sion, every­one became more aware of the impact of their work on the over­all val­ue to the organ­i­sa­tion. This then became a cat­a­lyst to opti­mis­ing production.

With the rise of retail giants, retail­ers have become a key par­ty in dri­ving organ­i­sa­tion­al effi­cien­cy among man­u­fac­tur­ers. In their arti­cle “Rebuild­ing the Rela­tion­ship Between Man­u­fac­tur­ers and Retail­ers”, Niraj Dawar and Jason Stonel­li looked at how these play­ers con­trol mar­ket access and influ­ence con­sumer behav­iour. With Wal­mart sell­ing 4.5 times more than their largest sup­pli­er, Proc­tor and Gam­ble, it’s easy to see the pow­er retail­ers wield.

How­ev­er man­u­fac­tur­ers could stand to ben­e­fit from this relationship.

Major retail­ers col­lect huge amounts of data regard­ing cus­tomer buy­ing pat­terns. This presents a great oppor­tu­ni­ty for the man­u­fac­tur­ing com­pa­nies, if they could find a way to access this infor­ma­tion and lever­age it to mod­i­fy their pro­duc­tion patterns.

Chang­ing the way your depart­ments inter­act and the way your com­pa­ny inter­acts with both sup­pli­ers and retail­ers requires organisation-wide behav­iour­al change.

At Renoir Con­sult­ing, we work towards iden­ti­fy­ing an organisation’s val­ue dri­vers and cre­at­ing sys­tems and process­es based on these to enable effec­tive shar­ing of infor­ma­tion. Our con­sul­tants work close­ly with teams with­in each client organ­i­sa­tions to bring about a cul­ture of dis­cus­sion and analy­sis, help­ing all depart­ments focus on improv­ing organ­i­sa­tion­al effi­cien­cy and dri­ving cus­tomer satisfaction.

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