Strategies for Downturns &
Getting Back to Work Fast
“Great managers embrace a recession because of
its opportunities.”
- Atkins & Slywotzky, WSJ article: 'You Can Profit From a Recession,'Strategies
for Downturns & Getting Back to Work
Adrian Slywotzky, writing alone says:
“The best-run companies have always been
relentless in
taking advantage of business downturns and market transitions.”
A theme of Fortune’s cover story on managing for slowdowns was
that “improving
productivity during a downturn puts a company in a stronger competitive position
when things turn up.”
Harvard business professor Donald N. Sull was quoted in Business Week’s
article on investing during Recessions, saying, “Making
a big bet is the thing that allows you to build sustainable advantage – in
technology, manufacturing improvements, or relationships.
The worst thing to do now is
the usual first knee-jerk reaction: "cut cost" by cutting
prices, building inventory to keep people and mschines 'bury," and halting
any "optional" programs. Robert Atkins and Adrian Slywotzky, writing
in the Wall Street Journal, advise against the
"Management 101 arsenal of defenses: cut compensation
and discretionary spending, hoard cash, delay product development, exact
fixed cuts across the board."
DON'T DO THIS !
The best opportunities for going back to work in the Summer of
2020 is:
It is Time to Learn New
Ways* to Design & Build.
* The 590 page 2021 book has 814
topic section
You can start now with these unique web
articles:
Pracctice Concurrent Engineering
of Challenging Products .-
See While-Paper web article
Designing for Lean Production
to make efforts easire to implrment and more effective. This is also the focus
of the new and unique Chapter 4 in the just-published DFM
book.
Pull parts into production with Spontaneous supply chains
without forcasts or inventory
Build
Product Families to-Order, on-demand to avoid inventory and have
the best order fulfillment in your industry, which also covered in the new
and unique Section 4.7 in the 2020 edicion of the DFM
book.
Designing in Quality
Also see book Chapter 10.
Design for Scalability
and Growth . See the new and unique book Section 4.8.
Avoid
9 categories of cost from half
to 1/10 of the usual cost / See the new and unique
Section 3.8 in the never-published-elsewhere DFM book.
Design labor cost out of
new products Design labor cost and high skill demands
out of backward-compatible
replacement subassemblies for near-term cost reduction. ALso see
Section 9.6.
major Implementation Strategy
opportunities:
DFM / Produce
Development Opportunities that can start
now:
Start implementing
DFM. This free article shows Initial
steps that can be started now;
Establish goals (like any cost
goal wanted in half the time to
stable production; Arrange
DFM training to everyone, wherever they are
by webinar- to everyone, wherever
they are. Project teams can hole workshops now remotely
Lean Production Opportunities
that can start now:
Start
Designing
products for Lean Production (book Chapter 4), which will result in the
fastest, easiest, and most effective way to realize the benefits of Lean
Production.
Build-to-Order Opportunities
to Product Families on-demand can start now:
Start structuring
product families that can build on-demand
without setup or inventory for the best
order fulfillment in your market. See
book Section 4.7.
Opportunities for High SKU's and Large
Inventories
Don’t Keep Plants Busy Building
Inventory
One of the biggest mistakes made by mass producers is to keep plants “busy”
building inventory. This is a bad strategy that will have counterproductive
effects because:
• It costs real money now to pay for the materials and pay for the inventory
carrying costs,
• It will be hard to make a good guess of which of the many versions to
build now, leading to obsolescence or expensive reconfiguration,
• Customer preferences may change before products can be sold, thus
obsoleting products,
• The distribution channel may then become clogged with obsolete or
hard-to-sell inventory which may have to be sold first, thus delaying new
product introduction,
Even in good times, same bad results can be caused by the wrong metric:
A Utilization metric can keep production
equipment busy
building inventory that has not been ordered.,- but that can cause all the above problems too. The worst case scenario would have both
of these in effect at the same time!
Eli Goldratt (an expert on bottlenecks) wrote an industrial novel, where a
company was building inventory to meet its utilization goals, but about to go
out of business! See, The Goal, North River Press.
Dedicate all manufacturing lines, no
matter how "full" they are
If enough decision-makers do this and remove
"utilization" as a metric to be strived for at all cost,
then a lot of money and labor efforts can be saved now in a
downturn by dedicating each product of family that it doesn't have
to be changed over, thus :
(a) saving setup labor, which may be subject to labor
shortages
(b) getting those products shipped right away to brig in income
right away,
(c) avoiding building batches for inventory (to amortize the setup
over many products), and
(d) in times of contagious epidemics, this will spread people out to
different lines to avoid close contact in setup changes,
especially if these have been honed in the "pit stop" model
(with some industrial setup crews being trained by real racing pit stop
crews).
What to do with Existing Inventory
Use Rationalization
technique to identify the following categories:
1. Money-Losers; identify with:
- Total Cost measurements; See Chapter 7 of all
editions of the DFM book
- Manual computations
- Set-up and other costs
What to do with inventory: for SKUs that are suspected
of losing money, where there will be no way to “make any money on it.”
and each year it sill loose another quarter of its own value, so
therefore the Sales Force and Marketing must
do whatever it takes to unload it from inventory!
2. Slower-sellers’ identify with:
- Sales histories
- How many buyers are left
- How many times has it cost 1/4 of its own value, which automatically
happens every year!
What to do with inventory: For all SKUs
that have been there too long, do
whatever it takes to unload them, from inventory!
3. Obsolete or Legacy SKUs; Identify
and discounted SKUs
- Find buyers who want an “end of life buy”
- Find buyers who sell to collectors
Don't hang on to any
of this inventory just because it is there.
If it is a lot, then
it shows how bad your forecasts are, and
how important it will be to use this opportunity to learn how
to eliminate inventory.
Don’t Cut Prices on good inventory or products
that deserve to be built
Downturns usually result in excess capacity, so it may be tempting to cut
prices to improve sales and market share -- and sacrifice profits - – but this
book, and many other leading management books, strongly advises against this
even in good times!
The opening chapter in Slywotzky & Morrison’s The Profit Zone
which is titled: “Market Share is Dead.”
The only exception would be if your company used all the principles of this
site and had a real cost advantage.
Rationalize Products to Get Rid of Money
Losers
Rationalizing product lines can
cut costs, raise profits, and support advanced initiates like
Build-to-Order and
DFM and Advanced Product Development programs
by reducing product and part variety.
Some companies are reluctant to prune back on any products for fear of
decreasing revenue, which many people are pressured to do and rewarded for.
However, if the company is going to take a temporary “hit” on revenue anyway, a
downturn may be a good time to do rationalization since revenue drops are
already expected by investors and have probably been explained away to other
causes. Further, during downturns, or interruptions, companies have people available to perform
the rationalization.
Doing this during a downturn will set up the company for a stronger recovery.
Planning
to pursue Build-to-Order of families can enable you to build high-variety at low
volumes now!
When intending to structure product lines into product
families, future Build-to-Order intentions can "save" all SKUs that will
probably fit into some family some day.
So, during a recession now, the company should learn all they can about setup reduction, even it would be too expensive
in yesterday's inflexible factory. This would allow the company to expand sales today to include those
salvable low-volume/high mix products.
If the company does follow-through with BTO of families
with advanced
setup principles , then historic, expensive setups would not be charged
products or overhead, but would just be an investment until BTO of families are
implemented. This would also give the company a preview of the value
of profitably broadening sales to include lower-volume, higher-SKU sales.5
CROSS-TRAINING
Cross-training is a Lean Production technique that, once done, will
ensure that product lines and cells will continue
building high-quality products without delays, even if some skilled aworks can
not come to work for quite a while.
This avoids situations where one worker, who has a unique skill, can shut
down a line or cell as long as that necessary worker can not come to work.
Value of cross training to maintain worker
spacing and "distancing"
Cross training can enable plants to operate in three
shifts per day even through a downturn, thus providing three times
the worker distancing when that is important to protect them through a contagious
epidemic.
This can even more effective when all
lines are operating, as proposed in the above discussion:
"Dedicate All Lines, no matter how full they are."
Prerequisites
Cross-training is an excellent activity that can be done during
a downturn or full factory interruption or any time workers can not come to
work. This is easier to do when the training can be dome remotely. This is
especially valuable during any situation that might keep key workers from
coming to work
Concurrent Engineering
can ensure that the product itself is designed so that all the
workers can do all the tasks to build it.
These are the general principles. Pass
around this article or URL to educate and stimulate interest
In customized seminars and
webinars, these principles are presented in the context of your
company amongst designers implementers, and managers, who can all discuss
feasibility and, at least, explore possible implementation steps
In customized workshops, brainstorming sessions
apply these methodologies to your most relevant products, operations, and supply
chains.
If you want to discuss Strategies for
downturns, what to do with inventory, and getting back-tyo-work by phone ot e-mail, fill out this form:
Call or email
aout how these principles can apply to your company:
copyright ©
2021 by
David M. Anderson
Book-length web-site on Half Cost Products:
www.HalfCostProducts.com
[DFM Consulting]
[DFM
Seminars] [DFM Webinars]
[DFM Books] [Credentials]
[Clients] [Site Map]
[DFM article]
[Half Cost Products site] [Standardization
article] [Mass Customization article]
[BTO article] [Rationalization
article]
| 
