What every C-level executive must know about operations

Mike Gugger
Tags: business management

OK, so who the heck am I to tell a CEO, CFO, CIO, COO or CMO what you should be looking for in your business. Well, I think what I have to say is of value to you at the top and I think you'll want to know what I have to say. I am a business optimization consultant. Don't roll your eyes, just here me out. Basically, what I do is look at your watch and tell you what time it is. Like Columbo, I am "ignorant and I ask questions." It is the response to those questions that have given me some insight to what issues might be coming your way with regards to your organization and five specific tips to help your organization compete on a global level, become more profitable, and grow.

1) Brain drain
Not new? Well it is going to get worse. Which of the following would you prefer? Manufacturing in China is booming. When you walk into a brightly lit plant in China , it is spotless. The workers are standing in front of very modern equipment. They are all wearing blue smocks and white ball caps. It looks great.

When you walk into an American plant, it is equally well lit. It is clean but does not gleam like the Chinese plant and the workers are dressed significantly more casually – T-shirts, jeans, maybe some ball caps, of the home team The equipment is not as new and the workers are not as young.

So, what's the big deal? First, when you ask the Chinese worker what their machine is doing, they don't really know. When you ask them what their job is, they tell you, "When the light comes on, I push this button and change out the part." When you ask the American worker what their job is, your response is much more in-depth about the workings of the machine, the development of the process, the maintenance of the quality of the part, and what the indications are of when that quality is slipping.

What's my point? The American worker is much more deeply involved with their job. They are an integral part of the operation. It is that manufacturing job that has created a middle class in this country and drives the consumer economy. These people are getting older and there is no one coming up behind them to filling the gaps. Don't believe me? Go and count the grey hairs and bald heads. Retirement, 57+ quarters of job loss in the sector, and fewer going into the trade all add up to loss of process knowledge in your company.

Where is Old Joe – the guy that had been in your shop since Day 1? He's gone. Did you capture his knowledge in any way? Is there another Old Joe to fill in? Is there even a Young Joe? In the end, this is a resource issue. Personnel, particularly skilled personnel are in short supply and that resource must be managed, groomed and optimized.

2) Optimization
You get that big order and the production department is abuzz! Great. They work hard and perform all due diligence to get that job up and running. You made your first delivery and, guess what, you made money on the deal. What could be better? The next big job, that's what! Now they are on to the next one . . . and the next one and hopefully the next one. Here it is a year later and the OEM comes back expecting that 10 percent cost-down on the first project that you agreed to as part of the contract. The problem is that no one has looked at it in a year because it was running fine and they had more urgent things to address. Where are you going to get that cost reduction from? There is no one to put on the job because you are working the next bid and implementing the last order.

Think of all the manufacturing advancements that have come down the pike in the last year. New alloys, new coatings, new fluids, new machine tools, and your staff hasn't had a chance to look at any of them. Yet here it is a year later and you have to pull 10 percent out of that process and give it back to the OEM. Hey, you signed the deal. How are you going to do it? You must be prepared proactively to optimize and continuously improve your operations. Gain business intelligence from your operations and stay ahead – that way, you never have to catch up.

3) Lean
So, you've heard of lean. Great! Where does your lean implementation stand? Have you value-stream-mapped your processes? Where is that 5-S board now? You remember, the one that was such a big deal a year ago when you started on your journey? You delegated that responsibility, you say? Lean in your plant is dead in the water, isn't it? You can’t delegate this activity. If you want lean to stick in your organization, you must be willing to walk that walk.

By delegating the activities, you are sending the message that you have much more important things to work on and this is just something on the side. Lean must be ingrained into the culture and become the way things are done. The only way to get that to happen is to show (don't tell) your people how important this is by living it yourself. Also, when that kaizen event happens, you need to be personally involved. Consider the message this sends: "Wow, our CEO was in our cell with a broom cleaning the place up!" Do you think that they will see the importance of lean to you personally through that action? They most certainly will. How about your personal space? Is your office reflective of a lean approach? When someone walks in, can he or she see the effects of your lean commitment? You need to constantly reinforce that message both in what you do and what you say.

4) Leadership
All of this brings me to my next subject, the responsibilities of leadership in your organization. We have all seen the fall-downs of some of the mightiest organizations in our nation. It is my belief that the actions and attitudes that brought about these implosions were because, at the core, the leaders in the organization either condoned the behavior or actually set the example, indicating to others that it was OK, or even commendable, to act in the unethical ways that brought about their demise.

As a leader in your organization, it is not enough to simply avoid the unethical situation. Your every word and every action in that business sends a message to your company that this is acceptable behavior. You must be consciously aware that you are sending those messages and modeling the behavior for the organization. So again, to simply avoid the poor ethical choice is insufficient. You must actively pursue the ethical and make it known through example and through reward/acknowledgement of the right behavior that this is the way your want your organization represented.

5) Update your equipment
I was in an organization that produced specialty equipment. I was asked to do a manufacturing assessment on the company’s production techniques, looking for ways to help optimize them. When I walked in, I saw the latest World War II equipment in production. It was well-maintained and looked nice. The skill of the machinists was evident. I did my evaluation looking at issues such as tooling, process parameters, technical expertise, systems such as CAD and CAM , and more – it is a detailed assessment.

Our modus operendi in these analyses is to present to the team; i.e. shop supervisors, manufacturing engineering and design engineering, even procurement and executives. Before I did that this time, I pulled the CEO aside because my news was not great. Because of his equipment capability, he was losing money on every part he made. The time to produce on that antiquated equipment was longer and more expensive than if he had outsourced that production.

He could have purchased the parts faster and cheaper outside than he was producing them himself. I told him that I could complete the assessment with his team but that I would be trying to improve the horse and buggy. He was not happy with me, as you might imagine. He spouted the typical accounting line that the equipment had been paid for and was essentially free to use. How could he be losing money? Never mind that his market share had collapsed and his customer scorecard had for the last seven quarters cited delivery time as the primary issue. Don't tell me the equipment was not costing him any money.

I was unable to convince him and was invited to leave. I shook his hand and thanked him for the opportunity. I also made a prediction that he would be out of business within the next 18 months if he did not change is model. Guess what, unfortunately I was correct.

You must be willing to take advantage of what technology can provide. If speed is king in the market – and it is – then you must be willing to invest in speed. New equipment, yes. Lean, absolutely. Training, even growing your own, you had better. Helping them implement the latest and greatest so you can afford to provide that cost-down year on year, you have got to find a way to do this.

One more thing: You are providing a great service to this country. For some reason, it seems the leadership in this country has failed to see for some time now that in order to have a successful consumer-driven economy, the consumers have to be able to afford the products they make. Henry Ford recognized this in the last century. In addition to that, the only way to build wealth in that economy is to add value.

If I am in the service industry, I can cut your hair or represent you in court. You pay me and the economic transaction is done. On the other had, manufacturing is the primary value-add mechanism in this society. Someone takes the ore out of the ground; that is a value-added activity that creates profit, jobs and taxable transactions for the government. That ore is refined again, adding value, building profits, creating jobs and taxable transactions. Raw material is produced. It is machined into a usable part, then assembled, and that product is then sold. All are value-added transactions that create wealth – wealth for the organization, the worker and the government. Heck, that product can be resold and used again or even recycled, extending the value chain even further. Or, I can cut your hair.

Which economy would you prefer to work in?

About the author:
Mike Gugger is the manager of special projects for TechSolve Inc. Gugger's experience has focused on the shop floor. Prior to returning to school for his engineering degree, Gugger gathered more than 10 years of machining experience, assuming greater responsibility up to group leader in charge of set-ups, CNC program verification and training of shop floor personnel. After completing his undergraduate degree, Gugger combined his background and education and applied it to the field of manufacturing engineering. His responsibilities have included CNC programming and software implementation; training of programmers and operators; tooling, fixturing and process development; capitol equipment justification, procurement and implementation; JIT and ISO9000; development of DNC and shop floor communications systems; and management

More recently, Gugger's efforts have been directed toward product development, process development, teams/cellular manufacturing and lean manufacturing. He has served as a manufacturing representative for product development, insuring that manufacturing issues were addressed in the design stages. His cellular implementation experience, including personnel issues, began in his first manufacturing engineering position and continued through his most recent position, prior to joining TechSolve.

TechSolve is a team of business experts and engineers who represent some of the best thinking in the world on how to make your organization more successful. More information can be accessed at www.techsolve.org.


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