Are you wondering how to turn a factory around? The more interesting question is, what really drives the company’s overall performance, including profit? Focusing on the key business drivers is the shortest route to a successful turnaround.
Let's take a deeper dive into the 5 issues your China factory turnaround strategy should address in this post...
1. What Indicators Will Support your Factory Turnaround Strategy?
In China, most factory managers work hard to influence certain indicators. Here are some typical examples:
- Prices of components
- Logistical fees
- Canteen cost
- Warehouse rent
- Workers’ wages
Unfortunately, these indicators have a marginal impact on the business. They are the “tip of the iceberg”.
Worse, this type of focus is often counter-productive. Pushing the price of components down, for example by bargaining too hard and ordering very large batches at a time, can increase total costs. Think of the quality and delivery issues one can expect from suppliers barely breaking even, and of the total costs of holding excessive inventory.
Instead, managers should focus on what really drives the company’s performance in the long term. Lean manufacturing consulting firms usually act on the 5 key areas listed below:
- Staff training & engagement
- Process control
- Production planning
- Suppliers’ performance
2. Make Problems Visible in order to Drive Improvement
We see problems being hidden in most factories we visit. Here are a couple of examples:
- Some orders are delayed because sub-assemblies are late or some components are still missing. Root cause: poor production planning. But nobody has a full view of the planning, so nobody knows what the real issue is.
- Operators occasionally pass bad work to the next station and hope no one catches it; quality issues are found after the fact. Root causes: poor training and/or poor process control.
Again, good lean manufacturing consulting firms make problems visible. One key approach here is “visual management” – posting key information on walls or large TV screens, for instance, and acting on them in near-real time.
Again, acting on the 5 key levers we outlined above is essential. Let’s look at a few examples:
- Production planning – buying and making smaller batches makes quality issues easier and faster to find, as well as having a lower impact.
- Process control – measurements of key variables (e.g. heat, pressure…) are placed on graphs that show an alert based on specification limits.
- Staff training – when an issue is found, a standard framework is applied: facts are collected, root cause(s) are analyzed, countermeasures are tested, and so on. Departments and teams work collaboratively and share information, instead of hiding it. Managers and supervisors should have a list of action items to work on, and those lists are often posted on walls.
One last word of caution is to avoid overwhelming people with things to do. Prioritizing, and keeping a view of the overall plan, is key. This is the general manager’s responsibility. He will drive your factory turnaround strategy by harnessing his team’s energy and addressing the key issues.
Have you implemented a factory turnaround strategy for your China operations? How did it fare?
Which areas did you find problems in and act on?
Please share your experiences and any questions you may have by leaving a comment below.