Build Muscle, Not Fat!

Build Muscle, Not Fat!

The right kind of change is key for the manufacturing sector, writes Vishal Kulkarni, founding member and director, Faber Infinite Consulting.

Manufacturing has emerged as one of the high growth sectors in India. Prime Minister Narendra Modi had launched the Make in India programme to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. India’s ranking among the world’s 10 largest manufacturing countries has improved by three places to sixth position in 2015.
The Government of India has set an ambitious target of increasing the contribution of manufacturing output to 25% of Gross Domestic Product (GDP) by 2025, from 16% currently. India’s manufacturing sector has the potential to touch $ 1 trillion by 2025. There is potential for the sector to account for 25-30% of the country’s GDP and create up to 90 million domestic jobs by 2025. Business conditions in the Indian manufacturing sector continue to remain positive.

The manufacturing sector is an ever changing sector and each year the industry faces new challenges. To be at par with the changes in the industry, organisations need to be highly proactive. On a simple note, organisations can be classified into two categories, namely, good or bad. Good companies are proactive, bad companies are reactive. One builds muscles, while the other builds fat!

Recession or no recession, good companies are those who have focused on cutting fat and strengthening their muscles (read as internal processes). They do this by sustaining a structured programme, focused on building operational excellence.
On the other hand, reactive companies are left clueless in dealing with the changes. The general tendency is to react to the ever changing environment. However, being reactive will be less helpful than being responsive. If any company which is stock rich and fat (instead of being fit), it losses the ability of responding and in turn compulsorily has to react to the changing markets. This dynamic behavior can be attributed to the amount of stocks lying in the supply chain.

The essential point to appreciate here is that companies don’t compete, but the supply chains do. It was found that all those manufacturing companies that had, over the years, worked on making their supply chains lean, survived or emerged stronger. They were capable of being flexible with delivery times and batch quantities as they were lean and nimble. Interestingly, the higher the amount of inventory in the supply chain, the less responsive the companies are.

In contrast, manufacturing companies that had not worked on going lean witnessed more intense problems. During the tough times, they had to drive immediate change in the prices and orders deliveries, which inevitably forced the companies to hastily alter the manufacturing and supply chain practices.

Those companies which managed to adapt to the change survived. Operational Excellence (OE) is one of the cornerstones to organizational success and transformation.

OE ensures the basic stability of working where the health of machines, continuous flow of material, short throughput time and excellent quality ratio are the parameters that determine the competitiveness of the organisation as well as decide customer satisfaction. Needless to say, customer is king and it is essential to heighten his/ her satisfaction levels to survive in the market.

The strategic parking position of the inventory decides the responsiveness of the supply chain. Now, to maintain optimum inventory at the upstream levels is the key. If the inventory is upstream that is at the raw material form (towards supplier end), this is good. The best would be Just in Time (JIT)! Concepts of producing to takt time (customer demand rate) and shortest throughput times (time to manufacture) are not mere concepts, but a real requirement.

And one can reach this destination of lean by a structured program for transformation. It is known by different names; some call it TPS (Toyota Production System), others WCM (World Class Manufacturing), while some call it Lean – all world class companies have different names for the structure. But as the saying goes, ‘All roads lead to Rome.’ All systems lead to one destination of world class performance.

And, at the cost of repetition, I would like to mention that world class performance was necessary just to survive the storm of the situation. Many organisations resorted to cost cutting initiatives and, in turn, cut the muscle and not the waste. Rather than attacking the muscles, one should hit the fat – the waste in the system – by cost management and not cost cutting.

Identification of bad actors quickly is important. One should start from the low hanging fruits and keep moving towards tougher targets. Now is not the time to get lost in semantics, one has to identify where the value is lost, identifying their causes and rapidly act to fix them. Problem solving capability at all levels is vital for the above mentioned points. If we relate this further to the culture of the organisation, it should be conducive to highlight problems which lead to improving the current situation.

As Benjamin Franklin rightly said, “Watch the little things; a small leak will sink a great ship!” So, watch out for the waste and sail smoothly.

Categories: Case Study