Dec 9, 2012 | Branding, Change, Lean, Operations
Tim Cook, the Apple CEO has just come out and announced that Apple will restart manufacturing in the US, starting with an unnamed Mac computer model, some time in the near future.
The driver of “offshoring” to sources of cheap labour to escape the high manufacturing labour costs in developed countries, has been a convenient excuse for a lack of ideas by the management of many companies. Virtually all the manufacturing businesses I interact with have an operational labour cost of substantially less that 20% of total BOM and operational logistics costs, so why not work on the other 80%? Often I suspect because it is easier to join the herd charging towards China than do the hard yards on their own business model.
“Outsource the manufacturing, and let the capacity utilisation be someone else’s problem”. Clearly this happened in Apple’s case, as the business tanked in the late eighties, cost cutting led to the closure of factories, and outsourcing of manufacturing and key parts of the technical design, remained the model through the revival led by the ipod, iphone, ipad, and siblings.
However, the competition has now caught up, and volumes are not growing the way they were. Apple may be hugely profitable, but as they no longer ship the volumes, capacity utilisation in their supply chain must now have swung away from over utilised to underutilised in a very short space of time. Android is rapidly becoming the OS of choice in both phones and tablets as Apples share drops, so the Apple profit bubble must be getting a bit fragile.
It is significant (I think) that Samsung is a major supplier to Apple, what a competitive advantage they have been handed by foreknowledge of component specifications, and delivery dates, and now the supplier has become the major competitor, competing on the ground they are in a position to choose.
This boom/bust cycle of manufacturing volumes imposes huge costs on the supply chain. Having too much capacity and carrying the unrecovered overheads is as bad having too little, and chasing output targets that end up in carrying high logistics and operational costs while compromising quality. Weather this is owned capacity, or outsourced, it remains a part of the supply chain, and somebody is paying for it, generally the consumer who has little motivation to pay for stuff that does not add value.
Perhaps I am a cynic, certainly I have no insight into the workings of Apple, but the move to announce the re-opening of manufacturing in the US without any detail at all sounds a bit “iffy” to me, perhaps a PR gesture to deflect some of the odium from the ongoing saga of Foxconn. Just put the word Foxconn into the search engine of a media outlet, this one Huffington Post, and you get over 6000 articles in response, and not one is doing the Apple brand any good at all.
Too little too late, or the beginning of another swing in the cycle?
Nov 23, 2012 | Customers, Management, Marketing, Operations
Sales forecasting is a common activity, you need to know how much revenue is going to be generated in the coming months. Usually it is done by sales, usually by a straight extrapolation with a few adjustments, and the only thing you know for sure is that it will be wrong.
How cool would it be if your marketing people were able to forecast revenue with some accuracy?
Marketing is an investment in revenue generation, which is an outcome of demand, so it would seem sensible to focus attention on demand in the market, not what sales you did last month. Mindset is important. When you treat something as an expense, it is easy to chop and change based on short term conditions, but when it is an investment, it has longer term implications, and what could be more important than an investment in revenue generation???
To truly be treated as an investment, there must be a reliable ROI calculation that can be made, which means the collection of data, and the agreement on a set of metrics to be applied.
There are lots of tools emerging that claim to automate the marketing process, and generally they do it well, using the traditional sales tunnel metaphor connected to the marketing tools of the net. Whilst it is creating another source of operational complication necessary to get the data, it should be seen as a part of the investment strategy.
However, the mindset change is simple. Recognize that the role of marketing is to create demand, and the cost of using all the tools of branding, innovation, channel selections, and all the rest, are the costs implementing those investment decisions.
Nov 20, 2012 | Lean, Management, Operations
Have you ever calculated yours?
It is a pretty simple performance measure that carries a lot of weight, and contains the seeds of success, and destruction. In addition, if you know your industry well, it is pretty easily calculated for competitors, so acts as a useful competitive benchmark.
Break your P&L up into a few categories:
Ingredients
Direct labour
Administrative Overheads,
Divide the results by sales, and you have the value adding ratio. Just ask your customers what parts of your cost base they are happy to pay for to get the product they buy, unlikely many will answer with a positive to the fancy headquarters building, the boss’s new car, or the off-site strategy meeting at the Casino in Hobart.
To be fair, there are many costs that are necessary, but do not necessarily add the value that consumers are happy to pay for at the supermarket. Things like R&D spending, market research, IT expenditure, freight costs, and many others fall into these categories, but a debate about how they can be reduced, and how the productivity of the expenditure can be increased, is extremely valuable to have.
Pretty basic management stuff, but so easy to ignore. It is also very easy to produce an infographic that everyone can buy into, by simply breaking up a picture of the end product into its percentage categories. This has an enormous visual engagement value for anyone embarking on a Lean initiative.
Oct 30, 2012 | Change, Innovation, Operations
Remember when there was a market for only 5 computers in the world, then a few thousand appeared in governments, huge corporations, and a few big R&D labs, then suddenly along came the PC, and there were millions of them in our homes, then hundreds of millions of “devices” in our pockets, seemingly almost overnight?
It is happening again.
Coming to a desk near you is the personal machinist, the 3-D printer that will do for small scale manufacturing what the PC did for personal information management and communication.
This post from Mitch Joel has a link to a video interview of Chris Anderson on his new book “Makers – The new industrial revolution” which should blow away a few intellectual cobwebs.
Theo Jansen whose Kinetic models have been a youtube hit has had miniatures produced, working models of astonishing intricacy produced by Shapeways technology, one of the revolutionaries.
This stuff is coming to a desk near you, soon, and the only limitation is your imagination.
Oct 24, 2012 | Leadership, Management, Operations
Culture is elastic, it is the hardest thing to change in any organization, the ‘way people do things around here” to quote Michael Porter, is a powerful organiser of behavior.
Changing culture by decree from the corner office simply does not work, all it does is depreciate the credibility of the person issuing the decree.
Often the decree is associated with some mandated behavior changes, they can be imposed, but once the pressure comes off, and in the absence of the changed behavior being well bedded in, it reverts to the old models as soon as the mandate is not aggressively enforced, just like taking away the stretching device in a length of elastic.
The only way to eliminate the ‘elastic effect” is to cut it, by encouraging employees to change their behavior because they see the sense in it, and the change is consistent with their own best interests.
Four ways to make it a bit easier:
- Don’t try and change everything at once by decree. Instead, pick a few critical behaviors, and demonstrate a determination to change them, and articulate the reasons why they must change.
- Recognise that not all the behaviors of an existing system will be bad, there will be good elements that warrant retention, even prominence, so highlight them.
- Ensure that the behaviors you are seeking are consistent with the behavior demonstrated by the senior management
- Ensure that the behaviors required are consistent with the strategy, business model selected to deliver it, and the metrics by with performance of the business and individuals is measured.
If this seems simple, don’t be fooled. Changing culture is the hardest task any leader has, Rosabeth Moss Kanter’s list of the 10 reasons people resist change is a great one. Most “leaders” are not up to the task, and then they are called Managers.
Oct 18, 2012 | Lean, Management, Operations
Of all the resources we have, time is truly the only one where there is no chance of technology making it replaceable or renewable. We all know that, so why do we continue to waste it so indiscriminately?
Seems to me the answer is that we cannot see it messing up the floor, count it as it comes back as rework, or feel as engaged as when something tangible disappears before our eyes. The passing of time is usually only noted in the past tense.
It makes sense therefore to manage time obsessively, simply because it is so hard to do so, and if it was easy, everyone would be doing it. This simple observation implies that time management may be the source of real advantage.
If you just take inventory for instance.
Inventory and WIP is a tangible measure of the time you have to pay somebody for the failure in your demand forecasting, and extended process times. If there is any truth at all in the cliché, “if you cannot measure it, you cannot manage it” then the greatest opportunity for improvement in most operations I have seen is in measuring, and as a result improving, the productivity of time that has already been paid for.
