Business Development Resources and Services

COMPETITIVE KNOWLEDGE NEWSLETTER 

Let's get to it,

Being lean and mean has taken on a "real world" dimension in the past few months. Every time I pick up a newspaper or watch the business news on TV, I read or hear that another company is planning to reduce their employment by a few thousand people. It makes me shudder when I reflect back on some of the manpower reductions in which I had been involved 
during my manufacturing days. The frustration of having to lose some good people in whom we had invested our time and money was not easy to deal with. The questions came from everywhere and everyone. Why couldn't sales see it coming? Why didn't we get better forecasts from our customers? Why did we hire so many people? Why did we build up so much inventory? I thought ERP was supposed to solve our capacity planning problems! What's going to happen to our self-directed teams, kaizen and ISO9000 initiatives? 

On the down side of the business cycle, many CEOs will focus on people reduction and arbitrary cost reductions as their primary actions to combat shrinking profit margins. While these actions may well be necessary to "stop the bleeding," when executed from the top down it tends to create problems that will hinder the company's ability to respond to the eminent business upturn. 

A top down dictate to reduce people and costs can result in the following losses: 

• "Key" management/employees
• Team/kaizen initiative programs
• Crucial business processes
• Critical product knowledge
• Engineering talent
• Manufacturing skills
• Employee loyalty
• Management enthusiasm 
• Company-wide commitment to success

When the business upturn hits, the loss of any one of the above items will cause company recovery problems. The loss of many will present competitors with a great opportunity to increase their market share during the 
business recovery.

I agree that in a rapidly decreasing market, companies must make timely and difficult adjustments to protect their future. People reductions and cost cutting can be essential to survival and I have no problem using them as 
an interim measure, but only if carried out in a "participative" environment where involvement in reductions are from the bottom up. 

Key and crucial elements of the business must be preserved and the best way to do that is to ensure that each is properly evaluated and prioritized. Yes, the final decision should come from the top but not until the top has all the necessary "real world" feedback to ensure that key people, skills, knowledge, systems and processes have been protected and preserved for the future business recovery. 

Today, you should be planning on how you will respond to the business upturn, so I thought this would be a good time for you and your people to review my article on "Requirements Planning." It appears as our lead article in this newsletter. To help you cope with the difficult times that lie ahead, our second article, "Accept Ambiguity and Uncertainty" is a must read article for all your employees. In response to your requests, "Price Trends" returns in this issue, and finally, a little humor, as we recall some of the jokes of Henny, "Take my wife---Please!", Youngman (1906-1998), "Remembering Henny."

Good news, our Balanced Scorecards E-Tutorial was completed and published on schedule and shipments have been initiated. For companies that want to raise their strategic or tactical planning to a higher level of success, this e-tutorial is a must have training tool. To get details,        Performance Management Training

Have a nice day.

Bill Gaw, President
Business Basics, LLC

Business Development Resources and Services

Featured in This Month's Edition of the CKN:

1. RESOURCE PLANNING
2. ACCEPT AMBIGUITY AND UNCERTAINTY
3. PRICE TRENDS
4. REMEMBERING HENNY 

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1. RESOURCE PLANNING
    By Bill Gaw

When shipments can't keep up with an upturn in business, sales people point to production efficiency as the problem, production people point to material shortages as the problem, and the materials people point to poor forecasting and scheduling as the problem. These problems cause
significant negative impact on shipments and usually result in a company's failure to capitalize on business recovery opportunities.

Whenever someone asks me, "Bill, what was your most difficult challenge encountered during your career as a production manager?" Without hesitation I respond, "Convincing our executive leadership of the need to 
increase the work force and then getting their timely authorization to do it!" Early in my career, I watched manager after manager fail to get the job done because 
they didn't have the proper resources in place to deal with the day-to-day challenges of meeting schedules. Most production managers will tell you that all they need to meet their schedules is the "parts" and in many cases they are absolutely correct. However, herein lies a business dilemma---when the "parts" finally do arrive, schedules still aren't met because now the problem is the lack of requisite resources.

The problem is that although most production managers see the need for adding resources earlier, they are unable to persuade their executive leaders to authorize additional labor. "Why add to your team's unfavorable labor variance ---first resolve your 'parts' shortage problem and then we'll talk about adding people!" was the standard executive rebuttal. Overcoming this "parts vs. resources availability" dilemma is a prime responsibility of all production managers and, the inability to do so, is a common cause of their downfall.

To deal with what I call the capacity planning "Delayed Reaction Syndrome" production managers must become experts at Resource Planning. Not in the overly sophisticated computer modeling type, but the practical short-term, "typical units vs. requisite resource analysis" type. Production managers will never convince executive leadership of their resource requirements based on standard ERP and financial data---because it is always "too little, too late." They must gain a time-phased, in-depth understanding of their resource and capital equipment requirements and develop programs and systems that will help them convince executive leadership that they are in control and timely action is essential.

Credible, short-term Resource Planning requires that production managers take control of their own destiny. They must work with their financial and sales people to develop unsophisticated, high integrity processes to monitor, forecast and control four primary Resource Planning activities:

SALES FORECASTS: One thing we know about forecasts---they're always wrong. Production Managers must be fully aware of how their portion of the forecast is generated and be cognizant of past performance to plan. There are two primary techniques to help improve the integrity of forecasts: 

1. Establish time fences to control when products can be added and when they must be dropped from the forecast and 
2. develop forecasted Bills of Materials commonly referred to as planning BOMs to provide sales with the booking and scheduling flexibility they require.

PEOPLE SKILLS: General Motors taught me early in my career that people are a company's most precious resource. Production Managers must ensure that their people are on a continuous learning curve or they will become complacent and their skills will become obsolete. A sound approach to 
developing and increasing people skills is to continuously perform technical and professional skills "needs vs. availability" inventories and establish an aggressive program to achieve compatibility. The goal --- workforce flexibility.
(Such human resource inventories are crucial in protecting core competencies and high achievers during business downturns.)

CAPACITY PLANNING SYSTEMS: Long-term capacity planning is normally accomplished by Enterprise Requirement Planning (ERP) and Capacity Planning (CP) computerized systems. The results can be used as an 
input to strategic planning activity. Short-term capacity planning is usually a home grown manufacturing "spreadsheet" system that uses a laborized "typical unit" method of forecasting that produces real-time labor and 
skills requirements.

WORKLOAD OUTSOURCING: Manufacturing flexibility, production agility and reduced product costs are challenges that must be met and achieved by manufacturing managers. Effective outsourcing of processes that focus on company non-core business can be a worthwhile program. To be successful, the program should consist of a target pricing strategy, special material handling techniques, product focused logistics and strong supplier chain partnerships. 

Business Development Resources and Services for Winners 

2. ACCEPT AMBIGUITY AND UNCERTAINTY
    By Price Pritchett

Pinning down your job during change can be like trying to nail Jell-O to the wall.

You're faced with new expectations, shifting priorities, and different reporting relationships. Your role may be vaguely defined, and your assignments may get altered constantly. Usually there are more questions than there are answers.

People who have a high need for structure simply hate this kind of situation. After a while it even eats on employees who have a high tolerance for ambiguity and uncertainty. Sooner or later, people like closure. They grow weary of having to endure open-ended issues, unanswered questions, and a fluid set of responsibilities.

As Woody Allen once said, though, we live in a world with "too many moving parts." So work roles will be a little out of focus much of the time. Careers won't be as cut-and-dried as they used to be. And this is not really happening by choice. The world is forcing our hand.

A rapidly changing world deals ruthlessly with organizations that don't change, and people are coming to respect that fact. For your part, you need to respect the fact that the blur of ambiguity is actually in the best interest of your career. Perpetual change will be crucial if the organization is to survive in the years to come.

This suggests that you should learn to create role clarity for yourself. Take personal responsibility for figuring out the top priorities, then point yourself in that direction. Don't pull back, waiting for someone else to happen along 
who can frame out the specifics of your duties in painstaking detail. Chase down the information you need. Fast. Show initiative in getting your bearings, and in aligning your efforts with the organization's larger plan. Then give yourself permission to attack the job, as best you understand it.

Since you'll be going on guesswork to some extent, your ability to tolerate ambiguity and uncertainty will still stand as a "critical skill." So learn to loosen up. Prepare to feel your way along into the future. Be willing to "wing-it." Develop your ability to improvise---even reduce it to an art form. And simply accept the fact that your work life is going to be fuzzy around the edges.

Indeed, trying to mange your career will resemble E.L. Doctorow's description of how it feels when writing a book, "It's like driving at night in the fog. You can only see as far as your headlights, but you can make the whole trip that way." 

Business Development Resources and Services for Winners 

3. PRICE TRENDS
    Adapted from Bottom Line Business

MIXED OR WEAK

Industrial controls: Excess capacity and rising imports point to price weakness---enough to reduce average prices by 2% to 3% by year-end.
Linerboard: More declines are likely to occur as demand slackens, with prices expected to fall $25/ton---to near $400/ton---by summer.
Printer cartridges: Browse comparison-shopping sites, such as www.shopper.com and www.computershopper.com ---and save as much as 25% off printer manufacturers' Website prices.
Chemical feed stocks: Expect to pay as little as 29˘/LB. For spot ethylene in coming months---off 7˘/LB. From a year ago. Spot benzene should be down to $1.32/gal---off 40˘/gal.

NEW PRODUCTS/NEW PRICES

Computer software: Microsoft's new Windows XP---which offers easier playing of DVDs, downloading music and editing of digital photos---will debut this fall. Cost: $110 to $150.
Airfares: Press for bigger corporate discounts---now ashigh as 35%---to offset still-rising travel tabs (see below).

HEADING HIGHER

Hand tools: Rising costs point to a 2% to 3% increasethis year---with most of the boost coming from high-end products.
Newsprint: Budget for new increases as supplies tighten. Likely: An average 2001 price of $627/metric ton---up 12% from last year's level.
Travel: Overall business-travel costs will be up by 4% to 5% this year. That's slightly more moderate than last year's big 6% increase.

Business Development Resources and Services for Winners 

4. REMEMBERING HENNY

Henny Youngman has been dead now, a little over three years. He died on February 24, 1998, of complication from the flu, only a few weeks shy of 92 years of age.

When he died the world of standup comedy lost its King. His "shtick" was snappy one-liners, delivered in a rapid-fire, shoot from-the-hip style.

For example:

Take my wife---Please!

My doctor grabbed me by the wallet and said "Cough!"

The doctor called Mrs. Cohen saying "Mrs. Cohen, your check came back." Mrs. Cohen answered, "So did my arthritis!"

The doctor says, "You'll live to be 60!" "I AM 60!" "See, what did I tell you?"

A doctor says to a man, "You want to improve your love life. You need to get some exercise. Run ten miles a day." Two weeks later, the man called the doctor. The doctor says, "How is your love life since you have been running?" "I don't know, I'm 140 miles away!"

The patient says, "Doctor it hurts when I do this." "Then don't do that!"

A man goes to a psychiatrist. The doctor says, "You're crazy!" The man says, "I want a second opinion!" "Okay, you're ugly too!"

A drunk was in front of a judge. The judge says, "You've been brought here for drinking." The drunk says. "Okay, let's get started."

A bum came up to me saying, "I haven't eaten in two days!" I said, "You should force yourself!"

Why do Jewish divorces cost so much? They're worth it.

Why do Jewish men die before their wives? They want to.

A car hit a Jewish man. The paramedic says, "Are you comfortable?" The man says, "I make a good living."

There was a girl knocking on my hotel room door all night! Finally, I let her out.

You have the Midas touch. Everything you touch turns into a muffler.

During the war an Italian girl saved my life. She hid me in her basement in Cleveland.

I've been in love with the same woman for 49 years. If my wife ever finds out, she'll kill me!

My wife and I have the secret to making a marriage last. Two times a week, we go to a nice restaurant, a little wine, good food. She goes Tuesdays, I go Fridays.

I take my wife everywhere, but she keeps finding her way back.

I asked my wife, "Where do you want to go for our anniversary?" She said, "Somewhere I have never been!" I told her, "How about the kitchen?"

She got a mudpack and looked great for two days. Then the mudpack fell off.