Success in Operations can lead to a huge pitfall!

One of the major pitfalls in improving Operations is the lack of connection with Sales. I will give you two examples:

Example 1:
Suppose you implement Drum Buffer Rope with Buffer management. During the implementation you decrease your lead-time with more than 50%, you improve your due date performance dramatically and you reveal excess capacity. The Sales department sees the improvement and sells the improvement for free to get more Turnover. What will happen? The customer is used to the shorter lead times and will count on it in the future. Sales go up and suddenly you run into problems because the plant is too much loaded. Bottlenecks will pop up and you are not able to fulfil demand in the new shorter lead times. Customers are dissatisfied and the risk that they will run away is huge. You loose trust in the market and Sales drops down dramatically.

What went wrong? Because you gave away your improvement to the market for free you spoiled your customers. But, with shorter lead times you had less time to deal with disturbance in the system, such as noise and Murphy. When the Sales went up, your load went up and you had also less protective capacity to deal with disturbances. This is a dangerous situation and can bring your company into big trouble.

How to avoid? Never sell your improvement for free! If you are in a market were speed is rewarded, offer to this market different lead times with different prices. Make sure that you do not overload your system, because you can run into chaos. By offering different prices for different lead times you can increase your Throughput without Operational Expenses increase.

Example 2:
Suppose you implemented DBR and Buffer Management. You improved your performance and also revealed excess capacity. Marketing and Sales were not involved in this project. What may happen? When the Sales stay almost at the same level, your efficiency went down because you needed less capacity for the same volume. If you are in an environment that is measured by costs and efficiency, the following will happen.

Because of the improvement in Operation the people who did this will be rewarded with a reorganization, employees will be fired. Motivation drops down dramatically and future improvement will be harder to implement. How to avoid? When you want to improve Operation always make sure that this is a business strategy connected with the other functions in your company. Also make sure that improvement leads to more Throughput with the same amount of employees. Reward the employees for their improvement and never lay off people!!!!. The latter is the killing point in motivation.

Artikeln är skriven av Jan Willem Tromp, partner i GIG och en av våra experter på supply chain och produktion med erfarenhet bland annat från flygindustri, kosmetik och ERP. Han genomförde nyligen Stockholm Marathon på 4.14. Du kan skriva till honom på janwillem.tromp@gig-europe.eu