turn around strategies for industry

Over the last two decades with the falling trade barriers led to massive shift of sourcing and manufacturing from high cost developed countries to China and India. India & China alone have about 2.5 billion consumers – a high potential market with growing amount of disposable income with access to plentiful skilled labor, low cost energy, transportation and labor cost. India become the natural choice for manufacturing hub.

To be successful in today’s competitive markets, business need manufacturing process that care fast and adapt quickly to change. Achieving this objective requires integrated solutions that connect supply chain to factory processes, production equipment, and factory system in a seamless, customer-centric network.

Over the past decade people have worked hard to reduce excess capacity and inventory fat. These initiatives have led to improvements in operational efficiency. They are important steps toward competitiveness.

To create a manufacturing process that is continuously adaptive,companies must –

a) Intelligently leverage applications and technology to connect plan –

execute – sense – respond – learn operation.

a) Seamlessly link factory process, production equipment and factory

system to supply chain operations.

Manufacturing impacts profit margin by helping improve top line sales as well as reducing bottom line costs. It impacts sales revenue via enhanced throughput on the shop floor and faster time to market.There are two types of asset. Fixed asset commonly refer to machinery to equipment variable assets are raw-material, work-in-process (WIP) finish goods (FM) & Stores. Any efficiency achievable in these operations can have significant impact on company’s profitability.

In 1970s was the era of push manufacturing. At that time it was still a sellers market and companies were focused on building capacity.

This push manufacturing decade was followed by team manufacturing. Popularized by the Japanese as just in time (JIT) or pull manufacturing, minimize all waste and produce quality product. Rework was considered as a worst waste.

The last 1980s and early 1990s witnessed flexible manufacturing practices. India was to respond to more volatile market. In manufacturing various options are available. One has to understand how manufacturing evolved and then to make the different manufacturing philosophies to manufacturing methods; namely -

(a) make to stock(b) assemble to order(c) make to order(d) engineer to order

All these methods have value depending upon the needs of business environment.Basic requirements of the companies are -(a) Greater Operational Efficiency(b) Elimination of waste throughout the organization(c) Continuous improvement to achieve following benefits:

• Reduce lead time• Improve delivery performance• Increase Sales Revenue• Lower Operational Cost and profits• Improve customer satisfaction and supplier relations• Increase inventory turn and drastic reduction in inventory• Better employee morale and increase employee retention• Improved quality• Reduction cost of goods sold, including scrap burden and labor• Creation of additional working capital for new projects.• Reduce physical space requirement • Improve safety

There are many business drivers today that put added pressure onmanufacturers to do more business with less overhead and cost.

Today's increasingly competitive and challenging environment onecan adopt following "TURN AROUND STRATEGIES FOR INDUSTRY". This will help us to meet increased global competition more demanding customer, a tighter economy and rising material cost.

Are Transforming Commitments Right for Your Company ?Are Transforming Commitments Right for Your Company ?

BuildBuildAlternativesAlternatives

Focus on Focus on Core BusinessCore Business

Milk core Milk core BusinessBusiness

Company lacks a Company lacks a good alternativegood alternative

SelectSelectTransformingTransformingCommitmentsCommitments

Company has a Company has a good alternativegood alternative

Environmental changedoes not threaten core business

Environmental changethreatens core business

Is your Company at Risk

a) Your company boasts superior performanceb) Your C.E.O. appears on major business magazines.c) Management Guru pronounce your company as

outstandingd) You build monument of your successe) You name monument after your successf) Your C.E.O. writes a bookg) Your top executive look alike

The Seven Deadly sins of The Seven Deadly sins of Transforming CommitmentsTransforming Commitments

1) Delegate the Hard Work2) Do not sweat the details3) Repeat what worked last time4) Half tackles5) Keep past sell – by date6) Fail to run the numbers7) Ignore Core Values

Issues &Alternatives

StrategicPriorities

Implement &Experiment

Define Plan

Vision

THE LEADERSHIP CYCLE

REFLECT

PLANC

ON

CLU

DE

AC

T

LearningLoop

People

Structureand ProcessCulture Change

Leadership

Measures andRewards

Key Changes

SituationAnalysis

ININANDAND

VISION• Vision without situation analysis and system development

ends up painting lovely pictures of future with no deep understanding of the forces that must be mastered to move from here to there.

• The individual vision revolves around the charisma of leader. But when individual vision is translated into genuine shared vision people excel and learn, not because they are told to, but because they want to, this galvanises theorganisation.

• Shared vision involves the skills of unearthing shared "pictures of the future" that foster genuine commitment and enrollment rather than compliance.

VISION

All above organisations managed to bind people together around a common identity and sense of destiny.

Building Shared Vision :

"Service"

"Instant Photography"

"Public transportation for the masses"

"Computing power for the masses"

SITUATION ANALYSIS

• The likely impact of take-overs on customers, suppliers and competitors.

• Market• Technology• Lean organisation

• Productivity• Quality

• Learning organisation

• Innovation

• Human resource

• ROI

KEY STRATEGIC ISSUESTO IMPROVE OPERATIONAL PERFORMANCE

To continuously upgrade, design &develop New Products

Direct Material

Indirect Material

Power & Fuel

Employee Cost

Scrap (In value)

New Product

Track Manufacturing

Cost

Strategy

KEY STRATEGIC ISSUESKEY STRATEGIC ISSUESTO IMPROVE OPERATIONAL PERFORMANCETO IMPROVE OPERATIONAL PERFORMANCE

Inventory reduction in RM, WIP,Inventory reduction in RM, WIP,Stores on RM consumptionStores on RM consumption

Line setup time reductionLine setup time reduction

Manpower reduction (Nos.)Manpower reduction (Nos.)

Production IncreaseProduction Increase(at constant value)(at constant value)

Education & TrainingEducation & Training

5 'S'5 'S'

QualityQualityImprovementImprovement

Job InnovationJob Innovation

StrategyStrategy

Quality Management SystemQuality Management System

Bench Marking &Bench Marking &Continual ImprovementContinual Improvement

Customer Returns & C.S.I.Customer Returns & C.S.I.

ALTERNATIVELY

6.6. Quality improvementQuality improvement

Key Strategic issuesKey Strategic issues

ISSUES & ALTERNATIVESISSUES & ALTERNATIVES

1. Marketing1. Marketing2. Finance2. Finance

3. People3. People

4. Cost reduction4. Cost reduction

5. Process innovation5. Process innovation


•• Managing marketingManaging marketing

MARKETINGMARKETING

•• Managing customersManaging customers

•• Managing competitionManaging competition

•• Managing sales and serviceManaging sales and service


•• Cost of finance (WACC)Cost of finance (WACC)

•• Working capital turnover ratioWorking capital turnover ratio

•• Recovery of doubtful debtRecovery of doubtful debt

FINANCEFINANCE

HIGHER SIDE IS BETTER

PROFIT AFTER TAX + INTEREST DEPRECIATION / INTEREST + INSTALMENT OF TERM LOAN DUE IN 1 YEAR

DEBT COVER RATIO

HIGHER SIDE IS BETTERLONG TERM DEBTS / EQUITY CAPITAL + RESERVE

DEBT / EQUITY RATIO

HIGHER SIDE IS BETTERCURRENT ASSETS – INVESTORS / CURRENT LIABILITIESLIQUID RATIO

HIGHER SIDE IS BETTERCURRENT ASSETS / CURRENT LIABILITIES

CURRENT RATIO

HIGHER SIDE IS BETTER

NET PROFIT BEFORE INTEREST & TAX BUT AFTER DEPRECIATION/ CAPITAL EMPLOYED FIXED ASSETS + CURRENT ASSETS – CURRENT LIABILITIES

ROI (RETURN ON INVESTMENT)

HIGHER SIDE IS BETTERNET PROFIT AFTER INTEREST AND TAX/NUMBER OF SHARES ISSUEDEPS

FINANCIAL RATIO (BALANCE SHEET)


•• Recruitment ProcessRecruitment Process

•• Employee TurnoverEmployee Turnover

•• Average AgeAverage Age

•• Attitude or mind setAttitude or mind set

•• Job EmpowermentJob Empowerment

•• Skill (Education & Training)Skill (Education & Training)

•• Job rotationJob rotation

PEOPLEPEOPLE


•• Direct materialDirect material

•• Indirect materialIndirect material

•• Power & FuelPower & Fuel

•• Employee CostEmployee Cost

•• Scrap / ReworkScrap / Rework

COST REDUCTIONCOST REDUCTION

Key Strategic issuesKey Strategic issuesPROCESS INNOVATIONPROCESS INNOVATION

•• OutsourcingOutsourcing

•• Inventory reduction in RM, WIP, Stores, FinishInventory reduction in RM, WIP, Stores, Finish GodownGodown

•• Line setup time reductionLine setup time reduction

•• Natural groupingNatural grouping

•• ProductivityProductivity

•• Production Increase (at constant value)Production Increase (at constant value)

•• 5 'S'5 'S'


QUALITY IMPROVEMENTQUALITY IMPROVEMENT

•• Continuous ImprovementContinuous Improvement•• Bench MarkingBench Marking•• Single piece flow (SPF) systemSingle piece flow (SPF) system•• Cost of QualityCost of Quality

PLAN PLAN KEY CHANGESKEY CHANGES

HOW TO DO IT ?

CHANGELEADERSHIP

CHANGE LEADERSHIP

Initiate actions in following areas :

• Structure and process

• People

• Culture / Values

• Measures and rewards

• Mobilising1. Organisation and its people are brought to the point

where they accept the changes willingly.

2. People quickly respond to changing markets, changing technologies, changing competitors and demanding customers.

• Enabling (Empowerment)Empowering people to do the new operational work and to do whatever it takes to serve the customer's needs.

• PlacingRight people at right place.

• Defining

• Ask the most frightening and fundamental question to define the organisational goals. e.g. not just the usual questions about how we can do this operation better, but whether we should be doing it at all. e.g. outsourcing.

• Define the standards and objectives from customer's point of view.

• Define products and services from the point of view of what the customer wants, not from the point of view of what the company can do.

• Productivity

• Reduction in manpower.• Increase in production.• Plant layout change to minimise material handling.

• Outsourcing

• Non-productive activities e.g. distribution, cleaning, gardening, security etc.

• Finish components.• Tool Room activities.• Semi-finishing machining operations.

• New Product Development• Developing new products as per market demand.

• Bench Marking• Setting world class standard in manufacturing.

• Continuous Improvement• Adopting mistake proofing techniques.• Improving machine conditions by Kaizen,

retrofitting, changing hydraulic circuits, converting the machine in NC / CNC controlled.

• Increasing Ppk.

• Recruitment Process• Campus interview from reputated

Institutions.• Succession planning.

• Job Empowerment• Delegation of authorities.• Job rotation.

• Average Employee Age

FINANCE

• Minimise cost of finance

• Increasing Working Capital Turnover Ratio.

• Recovery of doubtful debt.

COST REDUCTION

• Motivate and actively involve all employees for cost reduction.

MARKETINGManaging Customers

• 90% of customer are reasonable; Only 10% require tactful handling.

• Business exists only to create customers, more customers and many, many more customers.

• Satisfied customer become your salesman forever.

• It costs many times as much to get a new customer as to keep a customer you already have.

• No amount of advertising - leaflets, hoardings, newspaper etc. - have the credibility which a satisfied customer has.

• There is no such thing as "soft sell" and "hard sell". There is only "smart sell" and "stupid sell".

MARKETINGManaging Competition

• If we cannot stand the competition, we should get out of the business.

• Our policy should be not to compete in price with any competitor. We manufacture quality product and sell them and not the price.

• Competition is not an enemy, which has to be feared. Meet it half way and accept the challenge.

• One way to beat the competition is to serve your customer better.

• We have strength and we have weaknesses. But so have our competitors. And, if we sell our strength against their weakness, we will win.

MARKETINGManaging Sales and Service

• The best way to increase the sale of a product is to improve theservice.

• If your costs are going up, try lowering your prices by selling more.

• Out of the small orders of today grow the big orders of tomorrow.

• Listening to a customer's complaint is 90% of the job, taking necessary action is another 7% and 3% is following up with him to ensure satisfaction.

• A business is like a game of tennis and the one who serves well,seldom loses.

MARKETINGManaging Marketing

• Business is like riding a bicycle - either you keep

moving or you fall down. The name of game is growth.

You are either growing or giving out of the business.

• There is new business out there, no matter how

depressed the market.

• Better cash management means better profits.

Employees with integrity are the ones who build a company’s reputation

Without customers’ trust the rest doesn’t matter

We have got a business principle that says “our assets are our people, our capital are our reputation.” And if any of these are dismissed the last one the hardest one to regain.

When customers are loyal to our brand [have trust] they are more apt to listen to your message, read information from your organization more carefully and be more willing to accept calls marketing new products and services.

Trust is a key building block in the creation of a company’s reputation, and as a direct result, its shareholder value

The quality of a business's pool of managerial talent is a critical driver of its ongoing success.

In these challenging economic times, companies need to have in place a strong cadre of managers, and they need to make tough decisions about performance.

• Very few organizations have a rigorous and consistent approach for managing managerial talent.

• Most companies struggle, with even the fundamental task of assessing the relative performance of their people.

• They are worse at taking appropriate actions based on such assessments.

• The shortcomings are particularly acute when it comes to managing underperformers.

MANAGING THE TALENT

WORK LESS, EARN AND ENJOY MOREWORK LESS, EARN AND ENJOY MORE

Leave Leave alonealone

Fire Fire ImmediatelyImmediately

Excellent Excellent staffstaff

OfficersOfficers

Lazy

Hard working

StarsStars**********

Stupid Intelligent

Note that the 'C' refers not to the person, but to the individual's performance in a given job.

WHO ARE C MANAGERS• Managers who deliver acceptable results -

just barely.

• They scrape by , and perhaps even progress incrementally, but they rarely create anything bold or innovative.

• They don't inspire others.

WHO ARE NOT C MANAGERS

(Companies need to remove them without hesitation)

• Grossly incompetent

• Unethical managers

'A' PERFORMERSCreate significant value for their companies directly and through their leadership of others. The objectives with ‘A’ performers are to accelerate their development and do everything to retain them.

'B' PERFORMERSThe solidly contributing majority of a company's managerial force. Collectively, they are critical to the success of the business. They should be developed and affirmed so they realize more of their potential and feel valued for their unique contributions.

One of three types of actions needs to be taken

• Improve the C player's performance in the job to atleast a B level.

• Move the C player to a job that better matches his or her skills.

• Ask the C performer to leave the company.

EXPLICIT ACTION PLANS FOR EACH C PERFORMER

START AT THE TOP• Upgrading the talent pool must start with commitment from

the top.

• The CEO and other senior managers can be directly involved and can ensure the integrity of the process.

• Companies should not push the talent review process beyond the top few hundred people until it's working very well at that level.

• Decisively dealing with C performers isn't a onetime housecleaning or downsizing. It's about constantly holding the company's performance bar high and making sure that the company's leaders live up to that standard. Nor is it about being tough on people; it's about being relentlessly focused on performance.

WHAT ABOUT 'A' & 'B' PERFORMERS

• Accelerate their professional development through a steady stream of challenging job assignments.

• Encourage their involvement in tasks outside their jobs so they are connected to a broader network and build a stronger sense of belonging.

• Assign mentors to nurture their development and to help retain them.

• Offer candid feedback about their weaknesses and praise them for their distinctive strengths.

• Recognize and reward their contributions.

CULTURE"The rules of governance (and self-governance) for effective business enterprise are determined by their culture, not their organisational structure."

• Culture of obedience

• Culture of Authority

• Relentless pursuit

• Bottomless resources of imagination

• Smooth team work

• Individual autonomy

Cultural improvement calls for -• Quality of people's attachment to their work and to

each other.

• Willingness to --

• Perform up to the highest measure of competence

• Always take initiatives and risks

• Adopt to change

• Make decisions

• Work cooperatively as a team.

CULTURE

• Openness, especially with information, knowledge, and problems.

• Trust, and be trust worthy

• Respect others (customers, suppliers and colleagues) and oneself.

• Answer for our actions (accept responsibility).

• Judge and be judged, reward and be rewarded, on the basis of performance.

CULTURE

MEASURES AND REWARDS•Measures :• Identify the process results that we want to

measure. This will accurately predict our business performance. Organisation must focus on these key process results.

• Measure customer satisfaction - effectively keeping managers in touch with market place.

• Performance measurement processes should be designed on the assumption that people have the potential to do the new work. These processes

should be supportive not punitive

MEASURES AND REWARDS

• Reward• Promotion.• More authority.• Recognition.• Training

DEFINE PLAN

IMPLEMENT &

EXPERIMENT THE ACTIONS

CONTINUE ON THE"LEARNING LOOP"

TO SUMMARISEFOLLOW

"FLAG SYSTEM"

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FLAG SYSTEM

Whenever I interview a manager who Whenever I interview a manager who

made transforming commitments made transforming commitments ––

successful or not successful or not –– I always close with I always close with

the same question, the same question, ““What would you What would you

have done differently?have done differently?”” Almost all Almost all

reply the same: reply the same: I would have started I would have started

earlier and moved faster than I did.earlier and moved faster than I did.

turn around strategies for industry

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