Tuesday, September 21, 2010

Volume 74 - Four Key Components for Success

While preparing for my recent business trip to Memphis, I put together notes from a decade ago concerning changes at a major Hollow Metal Manufacturer as well as a 'distribution center' concept, since one of my meetings this coming week is 'distribution center' oriented. In reviewing my notes, letters, and outlines for the restructuring of a large Los Angeles Distribution Center it became very clear to me that the Four Major ingredients that I proposed many years ago are truer than ever today and not only apply to a restructure deal but apply to business in general; therefore, worth my 'blog' submittal.

Although these Four Major ingredients or Key Components were first established to clarify and to effectively 'change' the 'front-end' of a major hollow metal manufacturer and subsequently were used to 'change' a large distribution center, a revenue stream of the same hollow metal manufacturer, they are as applicable today as they were successful a decade ago. So whether they are used for a 'total restructure mandate' or simply used to tighten up a companies controls, procedures and quality of personnel or (as in the case of the distribution center) to elevate it to a much more effective facility, with quick ship manufacturing, wood doors, packaged hardware, and joint ventures concepts, the Four Key Components remain the same.

A few months before I took over the Presidency of Amweld (mid-1995), I realized that there were some major changes that had to take place if we were going to be able to handle the internal growth that I had projected through the Sales Department. Having control over Sales and Customer Service and LADC, it was logical that these changes had to be made with or without the input of other divisions within the company, as we all know 'manufacturing people' and 'financial people' live in their own small tightly woven world. Even though under my control, Sales, Customer Service and LADC did not embrace the idea of change, common within most manufacturing based facilities; nevertheless, this was not an option nor was it up for debate.

There had to be a 'reorganization' of the front-end of Amweld Building Products. There had to be a specific plan to reduce 'past dues' (which is the complete opposite of 100% complete and on-time) and at the same time work within the guidelines of a new detailed 'lead-time' document which would tie into the 'front-end' reorganization; at the same time, identifying the 'capability' and 'capacity' in our factories working under present manpower and shifts.

During initial discussions we accomplished two vital objectives: 1. To re-examine and restate the company's business purpose and focus; and 2. to use this purpose to localize people for change. We then proceeded to implement this same 'change' at LADC for we had reached a 'cross-road' (at that facility) and had to decide where we wanted to go.

Did we want to keep it at a four million dollar facility (after growing it from 1) and simply tighten up its controls, procedures and quality of personnel, or do we want to elevate it again to double the sales output with quick ship manufacturing, wood doors, packaged hardware, etc. or something in-between? We made our decision and proceeded with the four key ingredients that I believe are applicable to any business facing a 'cross-road'. These ingredients are not compatible with a 'structured' organization where all decisions run 'down-hill' and decisions are made by 'consensus' (automatic losing situation):

1. The belief that there is a single right way to do everything. Rather, we must keep up with changes in the market place and continuously go after better solutions. There is no single right way to do anything. This is even more prevalent in a distribution center twenty-five hundred miles away where they are dealing with a quicker lead-time/response schedule, stock shipping in hours and fabricated special orders shipped in small weekly schedules, and changes in over-the-counter sales.

2. The sense that authority is tied to an organizational chart. Rather, authority should be distributed among those who can do a better job for the customer. One of the reasons that LADC did not function previous to 1988 is the simple fact that they (LADC) was totally controlled from Ohio by more than one individual. In a service orientated facility 2500 hundred miles away from the corporate office this type of control cannot take place. Autonomy becomes an important key to its success regardless of who has final authority.

3. The view that the value of everything you do must be measured in dollars. Rather, the true value of an activity only counts in what it is worth to the customer. Again, this becomes more important for LADC/GVDC type operations because they are dealing with the customer, a back log that fluctuates hourly, short lead times, stock and non-stock and over the counter sales that make up 50% of the business within four counties (LA).

4. The idea that people have one skill, departments have a single function, and an enterprise has one goal. Rather, we must think in terms of multiskilled people, mutitasked teams, and the all goal enterprise. This speaks for itself. Anytime you have a satellite operation you have individuals doing multitasked functions. They must be able to respond both to vendors and to customers on an immediate basis without going through a long chain of command, especially when there is a three hour time difference and they only have so many hours to 0perate. We never totally understood that simple idea at Amweld; the fact that LADC is our single largest customer (and revenue stream) of the home office. We have had an antagonistic point of view toward that facility, whether it comes from the general sales area, the accounting department or the manufacturing facility.

There are many more layers of the 'onion' to 'peel back' to accomplish the above stated task. Many months were put into 'planners', structured 'payables', staff upgrades, duties and responsibilities, training, flexible stocking programs, reduced fabricating lead-times, sales volume and forecasts, operational daily-weekly-monthly reports, change of 'mind-set', etc. etc. It has been and is now my belief that Market Share and Profitability can be obtained in a satellite operation with Service being the main pillar of stability backed up by a variety of product flexibility integrated with speed, cost effectiveness and total integration with an overall corporate purpose.

One doesn't have to agree with any of the above, as most manufacturing guru's will attest; but the fact that very few successful companies grasp this concept is proven out by the constant closing of satellite operations as well as the loss of manufacturing capabilities within this country. Don't blame foreign countries for taking manufacturing jobs, don't even blame stupid Congress or the Local politicians; rather, look within ones own (manufacturing or distribution) make-up to find the correct blame.

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