"Crisis Brings Real Change"

By Lisa Anderson, CSCP, member of the ACA Group

The current recession has thrust many companies and individuals into crisis - at a minimum, plans have been put on hold, and in many cases, it has been the worst crisis experienced since the Great Depression (if the company has been around since then). This crisis has caused many companies and individuals to do the previously unthinkable. The "unthinkable" is significantly different from person to person and company to company; however, it is equally worrisome. Naturally, stress is at an all-time high. So, what can we do productively to deal with crisis?

It brings me back to my HR mentor's advice - typically, people do not make real change until a significant emotional event occurs. If nothing else, this crisis has proven her brilliance, as I see countless examples of the "unthinkable" occurring. In a non-business example, how many times have you or someone you know decided to go on a diet but failed miserably after a brief success or a certain period of time? Probably more than we'd like to count. On the other hand, how many of us know of someone who completely changed their diet and exercise regimen after a health scare? (Of course, it typically doesn't change their family and friends' diets; just the person who had the health scare, right?). The same holds true for business. Therefore, the time is ripe to address crisis from a positive perspective. Remember, it is equally dangerous if not more dangerous in a crisis mode to address it from the negative perspective. After all, it is possible to give up and begin eating ice cream for every meal (after all, it does have calcium). Surround yourself and seek positive yet pragmatic examples and people. Think about thriving, not surviving!

Once you've assumed the positive, proactive approach, transforming crisis into real change boils down to three key concepts:

1. Throw out continuous improvement:

I can hear all the lean experts saying, "What? Is she out of her mind?" No, during crisis, continuous improvement won't achieve the goal. As I was recently interviewed by CEO magazine, I said, "Lean, Six Sigma and the like is no longer progressive; it is an assumption. Instead, radical change is required."

Throw out your paradigms and standard models; instead re-think the situation from new angles, ask people outside of your industry for ideas and best practices, ask your accountants for operations ideas and vice-versa.
For example, instead of continually looking for another 10% reduction in inventory levels, put down your pencil, shut off your computer, bring the team together to brainstorm how to achieve a 50% reduction. For additional information on this topic, read our articles on radical inventory reduction and getting lean to maximize factory resources. In my global experience across multiple industries, a 50% reduction is imminently achievable for the majority of organizations. Consider the cash that would be freed up.

Another example of radical change is to reject the idea of cutting 10% of expenses. Although a 10% reduction in expense could be absolutely critical in terms of cash flow, in many environments, it would throw the organization into chaos, causing it to lose focus. Thus, instead, how about reducing your #1 cost driver (for this example, let's assume it is material cost) by 20% while maintaining or improving the performance of your product? Since materials are your #1 cost driver, even a 10% reduction will like yield a greater reduction than a 10% reduction in expenses while funneling your talent in a positive direction. A motivated team will not stop at 20% materials - once on a roll, they will find and tackle your #2 cost driver, and so on.

2. Relationships are #1:

There has never been a time when relationships are more important - in business, in your personal life, and in your community. In order to drive positive, radical change, it has to start with people. Not only are multiple heads exponentially better than one in brainstorming ideas, developing new paths to success and executing flawlessly, but they are also critical in terms of support and community.

Do not underestimate the power of your relationships. For example, in my experience, developing win-win partnerships with your customers, suppliers, carriers, brokers, etc. can propel results. In conjunction with radical change, forget about your quest to implement a forecasting/demand planning system; instead, get out and talk with your customers. Develop a simple process where you receive closer-to-the-end-user demand (sales) information, which exponentially helps your planning process. And you help your customer manage their inventory so that they have what they need when they need it with less inventory on hand. You've just created a partnership. Now it is far less likely they'll consider a competitor; instead, you will make doing business with you so easy and enjoyable, you'll probably receive additional volume.

3. Ruthless prioritization:

As my 5th grade teacher pointed out to my mom one day, my best skill has always been organization and prioritization (I'll have to pay her later). However, even with this sort of background, I realized recently that I had to adopt a far more ruthless prioritization process to bring about real change. It can be embarrassing that I not only teach operations fundamentals in APICS (the Association of Operations Management) classes, which includes the concept of ABC but I also constantly talk about the "80/20" principle (in essence, both concepts discuss the fact that 20% of your effort yields 80% of your results) yet I found that I had to throw out my old prioritization process - not that I didn't know what to do but I wasn't necessarily doing it.

Become ruthless - what must be done first? What will yield the largest return? Are you even prioritizing or just doing what you enjoy or what can be completed quickly (likely a C item)? In this mindset, why is your company still doing physical inventories instead of cycle counting (typically less expensive and yields improved results)? If you consider ruthless prioritization in conjunction with radical change, are you considering all your options?

Are you wasting time implementing a new expense report program that is valuable under normal circumstances but won't achieve radical improvement? Yes, I realize, no one wants to throw out their pet project. But, we need to put it aside so that we can think about priorities that will yield significant results.

Have you made assumptions based on past data? Re-evaluate everything. Perhaps in-sourcing makes sense and a quick analysis would be worth prioritizing? Perhaps firing a marginally profitable customer would free up 80% of your time and/or eliminate hassles?

It doesn't have to be complex or expensive to transform crisis into positive, lasting change, but it will be inordinately expensive not to.

Lisa Anderson, President of LMA Consulting Group, Inc. is a senior supply chain and operations executive and management consultant. She can be reached at la@theacagroup.com