Your SlideShare is downloading. ×
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Achieving success in manufacturing through people
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Achieving success in manufacturing through people

107

Published on

Strike season has been in full swing in the South African mining and manufacturing sectors. We have read about the effect it has had and will have on our economy. But what are the reasons for the …

Strike season has been in full swing in the South African mining and manufacturing sectors. We have read about the effect it has had and will have on our economy. But what are the reasons for the flare up in strikes? Yes the cost of living is increasing at a time of poor economic growth. But could we as managers be making the situation worse by the way we are trying to manage our people?

Published in: Business, Career
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
107
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide
  • We all know that times are tough and instinctively we know that what we have been doing up to now has not really worked. For many of us work is not fun any more.Over the last 18 years I worked at Sasol, Nampak and a number of smaller plastics converters. I have thus had a front row seat unto the plastics business and have seen the competitive environment change, with most companies being oblivious to these changes. I have seen companies go under or struggle when there was absolutely no need for them to be in that situation. It was all preventable and yet it happened.As a result of this I published an ebook earlier this year titled “Drawing a new map”. The book attempts to make sense of what has been happening or rather not happening, and puts forward simple and practical steps for changing this reality.Nothing in the book is really new or difficult to understand, I took the thoughts of 10 top business thinkers and combined them around simple real life stories. Stories in which I was a witness or a participant.This is what “Drawing a new map” looks like. It sells on amazon kindle at $10 per copy. You do not need a kindle. Download Kindle for PC to view.
  • So where will we start today and in which direction are we going to struggle through the mud?We will start with- 1)what is happening to us? What are the root causes of our pain2)where should we focus for immediate effect -Finding and doing the right things3)where dowe focus for long term survival- Keeping a finger on the pulse
  • QuestionMay I see a show of hands? “ who here have really enjoyed their jobs the last 2 years?Comment on whether the boss is thereMany years ago I had a life-changing experience which completely altered my view of what constitutes good business and management practice. A manufacturing site for the company I was working for (a few thousand km away from head office) was about to be closed down due to years of poor performance. The sales had been dropping for 5 years in a row. The product quality was so bad and lead times so long and unreliable that the company’s own sales people preferred to sell an in house substitute rather than this product. Head office decided we had a site full of bad apples. They were uncooperative (sales), inefficient (finance). These sentiments were not communicated to staff, but it was known. However, the MD decided that the business was a strategic necessity and one last effort had to be made to save it. As the least loaded member of management I was volunteered for the suicide mission.
  • There would be some constraints: No money available for equipment, no new employment, 2 days per month I could spend on the site. Well meaning advice from many quarters were, “If you want to survive fire as many of those guys as you can”When I arrived on site I found the situation even more desperate.The planner had had a nervous breakdown and had to be off work for 2 weeks, the site manager an ulcer caused by all the stress and one of the members of production told me, “I am in a dark room getting hit from all angles and I do not know where to turn.” Morale was the lowest I have ever experienced in my career. Within a few days I found that reality was very different from what I had believed. Finance wanted costs to be low, so production complied and lengthened runs to have less scrap during changeovers. From time to time stock was too high and a big drive to reduce stock followed. So customers had feast or famine. Customers and Sales would scream when due dates were not met. Even quoted lead times were often 3 or 4 times longer than the customer’s tolerance time. This would cause constant firefighting and emergency job changes on the line.We had the wrong measurements and thus focussed on the wrong things. (Goldratt said: Don’t complain if I behave illogically when you measure me in an illogical way)The site manager spent a full day every week poring over accounts to see where savings could be had. No attention was given to what customers needed. (This was assumed to be a head office function). Cheaper raw materials was one of the first actions, quality suffered and sales dropped even faster.We had the wrong mental models at head office. The customer needs featured not at all.
  • What did we do?Not having much experience in production, no time on site I knew the answer had to come from the managers and workers on the site.Started by giving them purpose and hope. We used TOC to identify customer needs and constraints in factory. (TOC is a condensed form of Strategic Learning) We held 2 day dialogue sessionswith managers and supervisors around strategic Learning processes.My real job? To hide the changes (causing short term cost increases) from Head Office for as long as possible and then to protect the staff from retribution once it was found out. This was the only way to go against conventional wisdom of best practice. Within 6 months this facility had turned around, within two years the staff had the highest morale in the whole of the company. The planner was unrecognisable from the person he had been before. People enjoyed their jobs again for the first time in years. They were still the lowest paid in the company but what mattered more was that they felt valued again.My views on what constitutes good management was forever changed as a result of this experience. It is now my belief that a group of low skilled employees, when given purpose, focussed through Strategic Learning can outperform a group of so called top performers every time. Now I will go into the detail of what I call “our painful reality”
  • This graph shows the net imports of finished plastics such as blown film, sheet, pipes and profiles into South Africa. These trends are true for steel, clothing and footwear also (trade balance in general)This is not an academic problem. With the joblessness and skewed income distribution in South Africa we cannot afford to close larger and larger parts of manufacturing and mining. We need to find the root causes of our lack of competitiveness and deal with them.
  • The Future shows even more problems. The Brics are becoming even more competitive. And we just signed some more free trade agreements with them. So the competitive pressure we face will only increase as time goes by.
  • We all suspect that labour relations in South Africa is not great. The IFACTS survey this year shows…….And this is the scary part. Only 20% believe they are paid fairly and 38% are committed to good customer service.Many people believe we are saddled with the worst workers in the world.This is not my experience- in the last year, after finally upgrading some of the machines in the factory, the workers on the remaining machines begged to have their machines upgraded also. They definitely did not have the right tools. Yes the quality is not always great, but 80% of the time they are producing at the limits of what the machine is capable of. Yet they are blamed when customer returns occur.To maintain their sanity they eventually switch off and the majority start to stop caring about the customer.
  • Does this PBIT (Profit before interest and tax) graph look familiar for the plastics Industry? Anybody recognise this shaped graph?Year 0:Extrutech very successful for 30 years, Barriers to entry based on import protection, Limited competition in local marketHigh margins, substandard quality vs imports, no spare capacity and long lead times.Year 1: Max historical PBIT, Import tariffs start reducing, customers become aware of alternatives Year 2: First quarterly loss, Reaction: equipment upgrades approved, margins raised to what the market will bear, PBIT up, Techniques such as TOC, Lean implementedYear 3: Downward Trend resumes, Cash flow meetings, pressure on Operations, Sales Managers to perform better. FG and RM stock cut to bone, stockoutsYear 4:, poor human relations, no fun at work, resignations and forced resignationsYear 5: Under new management, required changes forthcoming/ or not because by now the banks are not interested in lending money.The rules of the game are changing but management has not noticed.Short term actions seem to be doing the trick and then the market reacts.The rules of the game were changing Customers now had choice/information on price Customers now required smaller orders faster Customers became aware of better quality The customer would love nothing more than Free, perfect and Now. As competition became international it became possible to get closer to this position.Production costs had to come down But costs mainly driven by age of equipment/cycles This was not understood at top level (Machines in books totally depreciated=good)Increasing the sales budget yearly to cover increased cost not sustainableShortcut solutions seemed to work But the market will react after a time lag
  • The cause time delay effect we mentioned is important enough to spend more time on. It has been well described by Peter Senge in the 5th discipline. Lets take a computer manufacturer where years ago, after substantial excess capacity was brought online, the costs exceeded sales revenue. The management now went on a sales drive, sales increased and all was well. Fast forward a few years and the sales are dropping, the belief is that we need to strengthen the left loop. But this increases the orders and the size of the backorders. The belief in management is that lead time does not matter to customers, and they seem to all the evidence for it.But the more we push the left loop the more the right loop, with a time delay pushes back and reduces the order volume. The belief is still that lead time does not matter, we just need more salespeople/or a better sales manager.The company in this example closed down after firing 3 sales managers in a row. On the last day the MD said, “ We had a good run and supplied a niche market. We effectively filled this niche”The culprit here was incorrect mental models and time delays that made it difficult for managers to change these mental models. In reality customers were concerned about the long lead times and as soon as competitors started offering it they defected. No one from management thought to ask the customer what they really wanted as order winning criteria.
  • This summarises what we have been talking about:” hey , I found this under one of the deck chairs” The employee is being efficient in doing the current job well, but not effective. The passengers need to be saved, not have their belongings returned.
  • I think the causes for poor financial results and the pain we exprience are fairly obvious to all of us. We read about it Antagonistic Labour Expensive, underskilledlabour Government not doing enough to support Government interfering too much Unfair imports Administered costsI am here today to tell all of you that this is wrong. We are focusing on the wrong issues. Lets take an example from Blown film manufacturing: I am in the market for making refuse bags. My Gross margins are 10%.I have the choice to buy the coex German extruder at R12 million or the monolayer Italian extruder at R6 million.Which is the most cost effective?And if I tell you that the German machine can hold tolerance of +-5% at 30 micron while the Italian machine can do +-15%?One international study on extrusion has shown: Over 7 years, 70% of cost is raw material, 15% electricity and 15% equipment costs (amortization included)So I can save 7% on raw material costs with the Coex extruder.It is possible to put low cost regrind in center without sacrificing quality.I can put small amounts of expensive metallocene polymers on the outside and downgauge even further .Much better thickness control and thus downgauging possibilitiesSo the cheap machine is the expensive machine!!!!! I have worked for blown film companies growing sales 20% per year every year and for companies losing 10% sales every year. What was the difference? The age of equipment and the mindset towards investment.If we compare our coextruder with a 30 year old monolayer design, as we have in many factories, the cost implications gets bigger.
  • This is an example from Breyer, a sheet extrusion manufacturer. Over 5 years at 800kg/h: 82% of cost is raw material, 4% Overhead , 6% personnel and 8% machine cost.So where should we focus to make money? On the raw material!And where do we all like to focus? On the labour costs.So our mental model is : The way to make money is to spend as little as possible and to save on costs such as labour.In reality: Our equipment is too old to use raw material effectively. We are not capable of producing at the cost of companies with modern extruders. Underinvestment is killing us.
  • What are the right things.I cant be bothered with new technology, we have a battle to fight. This is the efficiency vs the effectiveness paradigm. We operate as if we just need to do better what we have been doing so far. Implementing TOC, Lean Six sigma, TQM etc will have limited results if we are competing with swords against machine guns. It will make us better swordsman, but still wont stop bullets.We need to focus on gettting proper Equipment that satisfies the market needs at the international cost benchmarkIt is the firefighting that distracts us.
  • But, people say, we do not have the money to buy expensive new equipment. If you do not invest you go into slow death mode. A competitor somewhere in the world has invested and it is a matter of time before your customer finds out and starts buying from there.Are you telling the banks a proper story for the loans? Do you know what the cost reductions will be in production from investing in new equipment? If you do not, why would the bank lend money. What it will investment do to your lead times and overtime? In europe many factories do only day shifts. We run 24 hours. No spare capacity to handle sudden MTO’sI have joined a group called GKA Bayete that facilitates all sorts of financing deals to manufacturers.The DTI and IDC is trying to give away money, but no one seems to be taking it up. I do know that currently their conditions are onerous. Should the effort not be on helping them understand the situation and adjust their lending criteria? A word of caution: If your production people have not had to buy new equipment in 20 years be very careful. I have seen so many examples where suddenly production is given money, they do not have the time or experience to do a proper investigation, and then they buy equipment with catastrophic limitations.
  • “ I get it too Omar, a strange feeling like we have just been going in circles.”To go in a straight line we need to match our equipment capability with the needs of the market segment we want to target better than anyone else.Keeping in mind that the customer wants Free, Perfect and Now.The life cycle of equipment is typically 7 years so that is the period we have to keep in mind. We also need our people to help us do the right things well.
  • Since the advent of the internet and dropping of sanctions and import tariffs the intensity of competition has increased. We thus need strategy to anticipate some of these changes.Q1:The ultimate constraint is managerial span of attention. We thus have to focus on the 20% which will give us 80% of the results. For the next 7 years we need to put a strategy together to see where best we can compete and what we will need equipment wise to provide superior value to the customer. The best way is through the Strategic Learning Process. It needs to be owned by management and employees, consultants can help but should never be allowed to draw it up. The Strategic Learning process, which I discuss in “Drawing a new map” is unique in that it is simple and guides managers and employees along this route. They learn how to do strategy themselves.Q2:And the most difficult part is to align all parts of the organisation towards our goal of satisfying the customer. We have to break our departmental silos and work for the common good. This we can only do with the right intent amongst our people, which brings us to the next slide.
  • We have to change our people’s intent.The Arbinger institute has some excellent techniques for making this happen.The Arbinger Institute describes these two organisations as opposites on a continuum. The one on the left is riddled with what I describe in my book as management traps. Here I see others as objects to be manipulated. Unfortunately people know our intent and react to it. The one on the right- people are seen as people and treated with respect. It is under these conditions that employees will fully commit to good customer service.Organisation 1 is a consequence of the dehumanisation of the workplace. Under the financial stress of the last few years this has become more prevalent.If we want people to change and to start contributing their skills and energy in a selfless manner we as managers have to see them as people. This we cannot fake, we will be found out and workers will react to how they are treated. Story in beginning illustrates this.
  • May I see a show of hands. Does this picture show an organisation 1 or organisation 2? It depends on our perspective. And our perspective will influence the behaviour and performance of our subordinates.
  • Since these issues we discussed today is enough to drive you to drink, I will end with the Alcoholics Anonymous mantra.“God, Grant me the serenity to accept the things I cannot change, the courage to change the things I can and the wisdom to know the difference.”Tonight we dealt with the wisdom part and I think we saw that we need more courage and less serenity, because actually we can control our destiny much more than we think.Underinvestment causes us to incur costs on raw material, until we deal with this nothing will change.Capital investment is the only way in which we can hope to give the customer FREE, PERFECT and NOW relative to imports. The costs of production comes down, quality goes up, and lead times and stock levels reduce.As the Ifacts report shows- our workers are demoralised. With the right tools and involved in giving feedback to the top they will regain job satisfaction and help us do the right things well. Our workers will have a chance to perform and a positive feedback loop will start.
  • So let us enter the race for funding today, Let us meet with the IDC, petition them to change the rules. Show them cause and effect.GKA Bayetecan help you through alternative banking options.Henry Ford said “Whether you believe it can or cant be done, you are right.”So please buy a ticket, enter the race to get funding.
  • I have seen that a company turnaround can be done and I know that you can do it too.Thank You.
  • Transcript

    • 1. Achieving success in manufacturing through people www.stratflow.com
    • 2. A Painful environment www.stratflow.com
    • 3. Constraints • No money • No replacements • No time
    • 4. Imports increasing exponentially www.stratflow.com
    • 5. Deloittes Manufacturing Competitiveness Index 2013 Position 2013 2018 No 1 China China No 2 Germany India No 3 US Brazil No 4 India US RSA 24 RSA 25 www.stratflow.com
    • 6. The labour situation in RSA IFACTS survey 4000 SA employees • 30% - speak truth to power • 38% - right tools • 30% - treated with respect And therefore….. • 20% - paid fairly • 38% - good customer service www.stratflow.com
    • 7. The Extrutech story P B I T Year1 Year2 Year3 Year4 Year5 www.stratflow.com
    • 8. The fifth discipline Cause- Time delay- effect www.stratflow.com
    • 9. Overlooking the changed environment www.stratflow.com
    • 10. What are the root causes?      Antagonistic Labour Expensive, underskilled labour Government Unfair imports Administered costs www.stratflow.com
    • 11. What is the biggest cost in plastics manufacturing? www.stratflow.com
    • 12. Focus for immediate effect •
    • 13. www.stratflow.com
    • 14. Focus for longer term www.stratflow.com
    • 15. Strategic Learning Owned by managers Q1: What are those few things the organisation must be able to do outstandingly well? Q2: How can the organisation implement these things in practice? www.stratflow.com
    • 16. Doing the right things WELL Arbinger Institute Organisation 1 Organisation 2 How can I get ahead? look good? get the boss to like me? get someone else to do this? How can I not be a problem for others? be helpful to others? help to make things go right? www.stratflow.com
    • 17. Arbinger www.stratflow.com
    • 18. Conclusion • Stop abdicating responsibility • Capital investment • Energize employees www.stratflow.com

    ×