“Great managers embrace a recession because of
- Atkins & Slywotzky, WSJ article: 'You Can Profit From a Recession,'
Adrian Slywotzky, writing alone says:
“The best-run companies have always been
taking advantage of business downturns and market transitions.”
Fortune magazine’s cover story on “Managing for the Slowdown,” recommends the
“A strategy we’ve seen work well, though
it’s still not prevalent, is reviewing the total needs of your existing
customers and imagining how you can satisfy a larger proportion of them. You’re
no longer focused on taking business away from competitors; you’re focused on
getting a larger share of your customers’ wallets.”
Another theme of Fortune’s cover story on managing for slowdowns was
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.
Conclusions of these learned quotes: companies contemplating the
most effective product development,
Spontaneous supply chains improvements should
use slowdowns as an opportunity to start implement the, or mat least start on
the prerequisites, such as Designing
products for Lean Production ,
and Product Families.
Here are some major opportunities with links to articles on how to take
advantage of them.
DFM / Produce
Development Opportunities that can start
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
Project teams can hole workshops now remotely
Lean Production Opportunities
that can start now:
products for Lean Production , which will result in the
fastest, easiest, and most effective way to realize the benefits of Lean
to Product Families on-demand can start now:
product families that can build on-demand
without setup or inventory for the best
order fulfillment in your market.
Opportunities for High SKUs and Large
Don’t Keep Plants Busy Building
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
• It costs real money now to pay for the materials and pay for the inventory
• 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
• The distribution channel may then become clogged with obsolete or
hard-to-sell inventory which may have to be sold first, thus delaying new
Even in good times same bad results can be caused by the wrong metric:
A Utilization metric can keep machines busy
building inventory that has not been ordered. 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 in 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
(b) getting those products shipped right away to brig in income
(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
What to do with Existing Inventory
technique to identify the following categories:
1. Money-Losers; identify with:
- Identify with total cost measurements
- Manual computations
- Set-up and other costs
What to do with inventory: for SKUs that are suspected
of losing money, 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 market 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 s; 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 “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 – at the cost of 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
Rationalizing product lines can
cut costs, raise profits, and support advanced initiates like
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 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 go rationalization since revenue drops are
already expected by investors and have probably been explained away to other
causes. Further, during downturns, companies have people available to perform
Doing this during a downturn will set up the company for a stronger recovery.
to pursue Build-to-Order of families an enable you to build high-variety at low
When intending to structure product lines into product
families, future Build-to-Order companies can "save" all SKUs that will
probably fit into some family some day.
So, during a recession now, the company can
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
setup principles , then today's 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 lower volume, higher SKU sales.
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 works 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
Cross training can enable plants to operate in three
shifts per day even through a downturn, thus providing triple the
worker spacing when that is important to protect them through a contagious
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."
The 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
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
If you want to discuss Downturn Strategies by phone ot e-mail, fill out this form:
Call or email
aout how these principles can apply to your company:
David M. Anderson
Book-length web-site on Half Cost Products:
Seminars] [DFM Webinars]
[DFM Books] [Credentials]
[Clients] [Site Map]
[Half Cost Products site] [Standardization
article] [Mass Customization article]
[BTO article] [Rationalization