Setting the Course for Recovery
Accepting the recession landscape has been extraordinarily painful. The recovery journey will have challenges that must be embraced to create a sustainable business in the new, post recession landscape.
How do we establish new operational excellence framework in this unsettled landscape?
For the foreseeable future, ERP and Operations Managers will journey through a dynamic business landscape that defies long-range planning. The obstacles to stability in operation planning are many and include dead inventory, customers who have disappeared, customers’ customers that have changed; credit is difficult and key employees have been released. The list can go on, but the resounding challenge is that in recovery a new landscape will emerge and to build a sustainable business on a solid foundation, a back to basics process combined with new tools must be embraced.
Let’s start with a straw man framework that may be familiar to managers. Your surviving customers have customers who have adapted to new realities. Diversification is always essential to business survival; the landscape has changed and the diversity has created new opportunities. However, your inventory may not reflect this environment. Your business processes, your credit situation, your employees may also be out of step with this situation. Standard operating procedures have not been re-engineered to reflect and be accountable to more nimble, shorter-term planning horizons. I have seen people work to exhaustion doing the “old” right thing in a new marketplace and the harder they work the worse the make it for themselves. The new landscape has to be explored, mapped and then communicated so that new processes can be tested and deployed.
From this position, your firm will aggressively segment markets and business models. A one size fits all operational structure leaves a lot of money on the table. The largest customers get the most attention, when they may be the least lucrative while smaller firms may have an urgency or niche that requires special attention and delivers a higher margin.
Being able to identify trends, map possible scenarios and communicate the expectations and then measure the results in a formal workflow provides management the opportunities to enter new markets with less risk. Failures do occur, so the process must be evaluated and the current workflow examined. It could be that once again the failure is due to people doing the right thing in the old landscape and not the new landscape. Employees will do what they are incented to do. There must be a match between the new expectations and how they are measured.
Where are other constraints in the workflow? Once a trend is identified, how does receiving, AP, AR, warehousing and delivery engage with the new landscape? Changes in workflows can be tested with little risk. The number of touches reduced, speed of billing, speed of DSO, etc., would be measured for different client classes and offerings. Again, constraints can be identified and their value determined. Good ideas that don’t work are identified and the next test queues up. No harm, no foul.
Back office workflows must be evaluated to reflect the new efficiency requirements of this landscape. Are the right incentives in place? The right metrics? The proper training? Is there an interactive process to manage up the ladder and deliver tactical insight? What are the operational and true costs of a new market or marquee customer? What is the contribution? Are the correct metrics (KPI’s) in place? Are the support systems credible? Are managers held accountable for their processes?
The old map may need to be redrawn with new routes.
At this point in the quest we are seeing a converging of customer relationship management, supply chain management and enterprise resource planning. Silos are being re-evaluated, but it is not the “toss the salad” management shakeup. It is a fact-driven exploration of opportunities. Processes, customers and inventories are being harvested; sacred cows smell the charcoal.
New Maps:
Managers have a unique challenge to face a new effectiveness paradigm or landscape. Decisions must be based on finding constraints, modeling a decision and taking that strategic position to delivery; otherwise the decision is a good intention, not a decision.
Peter Drucker offers a 6 step framework useful for evaluating SOP’s in his Harvard Business Review article “The Effective Decision” (HBR January-February 1967):
1) Clarifying the problem. Is it unique or systemic?
2) Defining the problem. What is important? What requires action?
3) Specifying the answer to the problem. What are the required deliverables or outputs?
4) Deciding what is right rather than what is acceptable.
5) Building action into the decision. How is the decision rolled out? Who needs to know? What support systemstraining are provided?
6) Testing the validity and effectiveness of the decision. Measure the impacts and refining the criteria of the decision process.
Positioning for recovery in the post-recession landscape will require an intense and challenging evaluation of your business model. Getting by with order taking will not position you for the next recession – about every 7 years, if lucky. A dynamic landscape requires a framework for embracing change at the speed of business.
Gary Wood has had the honor of serving more than 200 clients in industries that include finance, logistics, manufacturing, healthcare, distribution, mobility and IT and in startups, SMB’s and global organizations. Previous published works appear in ASQC.
Contact him at garrywood_8@msn.com
