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Just for the thought
Five Steps To
A Prosperous Recession
Recession is said to be in the air. How can producers
of precision machined products ensure a profi table
performance during a possible recession, when
Tier One buyers are squeezing their suppliers for price
concessions?
A recession normally means fewer sales (auto sales are
predicted to fall in 2008, down 7% from last year). But an
alert precision products manufacturer can still manage to
turn a profi t even on a lower volume. A shop’s profi t level,
in booming times or bad times, is a result of management
pushing for a high level of continuous improvement. This
requires a steady attention to what’s going on inside the
company in manufacturing, sales, marketing, fi nance and
human resources.
As Socrates said to Glaucon in Plato’s “Republic,” “The
stars are worthy guides in perilous travel, but on shorter
trips at home we need more earthly guides.”
I have taken the liberty of summarizing the experience of
my study at the IPMI University and more than 10 years as
a company observer for many major companies to provide
more “earthly guides.”
These experiences have led to my identifi cation of the
essential fi ve steps (questions), which deal with factors at
ground level, and are most helpful not only in meeting a
recession but in prospering in such a climate.
Here are the questions:
Are you instituting incentive employee programs to boost
productivity, thereby chopping unit costs and elevating
profi t margin on sales?
Since hourly employees are closest to daily work, do you
have a method to obtain workplace information from them,
such as suggestions on how operations performance can
be improved on the plant fl oor? This requires some special
interviewing techniques.
Have your supervisors been given any special training on
how to improve production, particularly in managing not
so initiative-workers, who may require different kinds of
motivation than regular workers?
Have you explored the reduction of investment in inventory
by shifting inventory responsibilities to suppliers?
Are you continually leaning on department managers to
awaken them to improve profi table operations in their
areas?
These key questions are of special importance for
manufacturers with plants of 50 to 1,200 employees,
which collectively account for 40 percent of Indonesia
manufacturing employment.
To ask these checklist questions is only the beginning. The
answers require an organized and persistent effort, so as
to build your strong defense during a recession.
Executives of companies producing precision machined
products are sometimes bored by internal plant operations.
Typically, they are inclined to give most of their attention to
the world outside, where they can ferret out any increased
sales and profi table opportunities. As a consultant, I
typically insist on asking questions about the prosaic
elements in plant performance. Leaders in business
should determine company goals and priorities and give
their achievement a sense of urgency in protecting against
the strain of a recession.
Many executives settle for the modest results reached
because improvement requires considerable effort and
sweat.
Leadership is not to be confused with affability, nor
perhaps popularity. As reported in the Business Weeks,
Jack Welch, then the president of General Electric, was
quoted in commenting on “leadership” as follows: “I guess
one thing I’ve learned is that with leadership, if everybody
waited until everyone agreed on everything before one did
anything, there wouldn’t be such a thing as leadership…”
Similarly, leaders determine goals and priorities and give
their achievement a sense of urgency. The presidents of
companies producing precision machined products should
exhibit a perpetual drive to improve. Concentration on
digging out answers to the fi ve key questions cited is a sure
method not only to staying alive, but staying alive well
indometalworking news Vol. 2 / 2008 59