Post Lockdown: How to Survive?
Employees an Asset
Post lockdown, the singular aim of every organization will be SURVIVAL. Large, big, and small. In manufacturing and services. In other words, will we be able to service our fixed costs?
At an individual level (assuming you have a job), the burning concern will be job security. And rightly so.
Organizations claim that their employees are their biggest asset. At such testing times, would you discard your biggest asset?
I wish to add that employees are the only asset that appreciate in value. All others depreciate. Yet we see employees as a fixed cost!
Save the employees. Instead, address your chronic waste that is factored as fixed costs.
Our budgeting process has neatly legitimized chronic waste as a fixed cost.
Let’s start with purchasing as a hatchery for chronic waste. How do we purchase? Lowest cost.
Next, why do we have raw materials / components / sub-assemblies inventory? And a materials department to care for all this? The irony is that the materials department exists because we have suppliers who deliver from incapable processes – poor quality as well as delays in delivery. Inventory absorbs these shocks. A sort of assurance.
Do you relate to this chronic problem? Does it generate wasteful costs? Are these fixed costs?
The remedy: Work with A-Category suppliers to reduce their chronic process waste and thereby improve their process performance. Share the consequential gains as partners. Maruti does it.
Undoubtedly, the materials department will shrink, leading to a substantial reduction in fixed costs.
So what becomes of the redundant employees in the materials department? Simple. Train them on process capability and park them with B-Category suppliers, while on your payroll. Each such employee should deliver 1000 % ROI ….Return on Individual.
There are several more processes that guarantee wasteful costs: maintenance; recruitment; invoicing; etc.
Dr J M Juran referred to these wasteful costs as Costs Of Poor Quality (COPQ).
For post lockdown survival, organizations must halve their COPQ, in 12 months. COPQ is at least 30 % of total costs.
- Purchasing is a much revered department. Even top management keeps an eagle-eye on what we are purchasing, and how?
- We live in a cost-push world. Ultimately, our customer pays for the supply-chain incapability.
- 80 % of wasteful costs are generated by 20 % problems.
- Are we the richest nation in the world? We live with chronic waste in our private and public processes.
- Hospitals must address their wasteful costs.
- 2020 – India can make it. And make it better.