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Strategies for Downturns & Getting Back to Work Fast


“Great managers embrace a recession because of its opportunities.”

- Atkins & Slywotzky, WSJ article: 'You Can Profit From a Recession,'Strategies for Downturns & Getting Back to Work

Adrian Slywotzky, writing alone says:

“The best-run companies have always been relentless in
 taking advantage of business downturns and market transitions.”


A theme of Fortune’s cover story on managing for slowdowns was that “improving productivity during a downturn puts a company in a stronger competitive position when things turn up.”

Harvard business professor Donald N. Sull was quoted in Business Week’s article on investing during Recessions, saying, “Making a big bet is the thing that allows you to build sustainable advantage – in technology, manufacturing improvements, or relationships.

The worst thing to do now is  the usual first knee-jerk reaction:  "cut cost" by cutting prices, building inventory to keep people and mschines 'bury," and halting any "optional" programs. Robert Atkins and Adrian Slywotzky, writing in the Wall Street Journal, advise against the

"Management 101 arsenal of defenses: cut compensation and discretionary spending, hoard cash, delay product development, exact fixed cuts across the board."

DON'T DO THIS !

 

The best opportunities for going back to work in the Summer of 2020 is:

 

It is Time to Learn New Ways* to Design & Build.

* The 590 page 2020 book has 814 topic section

You can start now with these unique web articles:


Pracctice  Concurrent Engineering of Challenging Products .-   See While-Paper web article

  Designing for Lean Production  to make efforts easire to implrment and more effective. This is also the focus of the new and unique Chapter 4 in the just-published DFM book.

Pull parts into production with Spontaneous supply chains   without forcasts or inventory

  Build Product Families to-Orderon-demand to avoid inventory and have the best order fulfillment in your industry, which also  covered in the new and unique Section 4.7 in the 2020 edicion of the DFM book.

   Designing in Quality Also see book Chapter 10.   

 Design for Scalability and Growth .   See the new and unique book Section 4.8. 


Avoid 9 categories of cost from half to 1/10 of the usual cost See the new and unique Section 3.8 in the never-published-elsewhere DFM book.

Design labor cost out of new products   Design labor cost and high skill demands out of backward-compatible replacement subassemblies for near-term cost reduction.  ALso see Section 9.6.

major  Implementation Strategy opportunities:

 

DFM / Produce Development Opportunities  that can start now:

Start  implementing DFM.  This free article shows Initial steps that can be started now; Establish goals (like any cost goal wanted in  half the time to stable production;   Arrange DFM training to everyone, wherever they are by webinar- to everyone, wherever they are.  Project teams can hole workshops now remotely

 

Lean Production Opportunities that can start now:

Start  Designing products for Lean Production  (book Chapter 4), which will result in the fastest, easiest, and most effective way to realize the benefits of Lean Production.

 

Build-to-Order Opportunities to Product Families on-demand can start now:

Start structuring product families that can build on-demand without setup or inventory for the best order fulfillment in your market.  See book Section 4.7.

 


Opportunities for High SKU's and Large Inventories


Don’t Keep Plants Busy Building Inventory


One of the biggest mistakes made by mass producers is to keep plants “busy” building inventory. This is a bad strategy that will have counterproductive effects because:


• It costs real money now to pay for the materials and pay for the inventory carrying costs,

• It will be hard to make a good guess of which of the many versions to build now, leading to obsolescence or expensive reconfiguration,

• Customer preferences may change before products can be sold, thus obsoleting products,

• The distribution channel may then become clogged with obsolete or hard-to-sell inventory which may have to be sold first, thus delaying new product introduction,

Even in good times, same bad results can be caused by the wrong metric:



A Utilization metric can keep production equipment busy building inventory that has not been ordered.,- but that can  cause all the above problems too. The worst case scenario would have both of these in effect at the same time!

Eli Goldratt (an expert on bottlenecks) wrote an industrial novel, where a company was building inventory to meet its utilization goals, but about to go out of business! See, The Goal, North River Press.

Dedicate all manufacturing lines, no matter how "full" they are

If enough decision-makers do this  and remove "utilization" as a metric to be strived for at all cost,  then a lot of money and labor efforts  can be saved now  in a downturn by  dedicating each product of family  that it doesn't have to be changed over, thus :

(a) saving setup labor, which may be subject to labor shortages  

(b) getting those products shipped right away to brig in income right  away,  

(c) avoiding building batches for inventory (to amortize the setup over many products), and 

(d) in times of contagious epidemics, this will spread people out to different lines to  avoid  close contact in setup changes, especially if these have been honed in the "pit stop" model  (with some industrial setup  crews being trained by real racing pit stop crews). 

 

What to do with Existing Inventory


Use Rationalization technique to identify the following categories:

1. Money-Losers; identify with:

- Total Cost measurements; See Chapter 7 of all editions of the DFM book
- Manual computations
- Set-up and other costs

What to do with inventory: for  SKUs that are suspected of losing money, where there will be no way to “make any money on it.” and each year it sill loose another quarter of its own value, so therefore the Sales Force and Marketing must do whatever it takes to unload it from inventory!


2. Slower-sellers’ identify with:

- Sales histories
- How many buyers are left
- How many times has it cost 1/4 of its own value, which automatically happens every year!

What to do with inventory:  For all SKUs that have been there too long, do whatever it takes to unload them, from inventory!

 

3. Obsolete or Legacy SKUs; Identify  and discounted SKUs
 

- Find buyers who want an “end of life buy”
- Find buyers who sell to collectors

 
Don't hang on to any of this inventory just because it is there.

If it is a lot, then it shows how bad your forecasts are, and
how important it will be to use this opportunity to learn how  to eliminate inventory.

Don’t Cut Prices on good inventory or products that deserve to be built

Downturns usually result in excess capacity, so it may be tempting to cut prices to improve sales and market share -- and sacrifice profits - – but this book, and many other leading management books, strongly advises against this even in good times!

The opening chapter in Slywotzky & Morrison’s The Profit Zone which is titled: “Market Share is Dead.” The only exception would be if your company used all the principles of this site and had a real cost advantage. 

Rationalize Products to Get Rid of Money Losers

Rationalizing product lines can cut costs, raise profits, and support advanced initiates like Build-to-Order and DFM and Advanced Product Development  programs by reducing product and part variety.

Some companies are reluctant to prune back on any products for fear of decreasing revenue, which many  people are pressured to do and rewarded for.  However, if the company is going to take a temporary “hit” on revenue anyway, a downturn may be a good time to do rationalization  since revenue drops are already expected by investors and have probably been explained away to other causes. Further, during downturns, or interruptions, companies have people available to perform the rationalization.

Doing this during a downturn will set up the company for a stronger recovery.
 

Planning to pursue Build-to-Order of families can enable you to build high-variety at low volumes now!

When intending to structure product  lines into product families, future Build-to-Order intentions can "save" all SKUs that will probably fit into some family some day.   

So, during a recession now, the company should learn all they can about setup reduction, even it would be too expensive in yesterday's inflexible factory.  This would allow the company to expand sales today to include those salvable low-volume/high mix products. 

If the company does follow-through with BTO of families with advanced setup principles , then historic, expensive setups would not be charged products or overhead, but would just be an investment until BTO of families are implemented.  This would also give the company a preview of  the value of profitably broadening  sales to include lower-volume, higher-SKU sales.5

CROSS-TRAINING

Cross-training is a Lean Production technique that, once done, will ensure that product lines and cells will continue building high-quality products without delays, even if some skilled aworks can not come to work for quite a while.

This avoids situations where one worker, who has a unique skill, can shut down a line or cell as long as that necessary worker can not come to work.

Value of cross training to maintain worker spacing and "distancing" 

Cross training can enable plants to operate in three shifts per day even through a downturn, thus providing three times the worker distancing when that is important to protect them through a contagious epidemic.

This can  even more effective when all lines are operating, as proposed in the above discussion:  "Dedicate All Lines, no matter how full they are."

Prerequisites

Cross-training is an excellent activity that can be done  during a downturn or full factory interruption or any time workers can not come to work. This is easier to do when the training can be dome remotely. This is especially valuable during any situation that might keep key workers from coming to work

Concurrent Engineering can ensure that the product itself is designed so that all the workers can do all the tasks to build it.

 

These are the general principles. Pass around this article or URL to educate and stimulate interest

In customized seminars and webinars, these principles are presented in the context of your company amongst designers implementers, and managers, who can all discuss feasibility and, at least, explore possible implementation steps

In customized workshops, brainstorming sessions apply these methodologies to your most relevant products, operations, and supply chains.

 

If you want to discuss Strategies for downturns, what to do with inventory, and getting back-tyo-work by phone ot e-mail, fill out this form:

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Call or email aout how these principles can apply to your company:

Dr. David M. Anderson, P.E., CMC
fellow, American Society of Mechanical Engineers
www.design4manufacturability.com
phone: 1-805-924-0100
fax: 1-805-924-0200
e-mail:
anderson@build-to-order-consulting.com

copyright © 2020 by David M. Anderson

Book-length web-site on Half Cost Products: www.HalfCostProducts.com

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