When we think about optimization, we usually think about improving efficiency. In a manufacturing or distribution business, that usually means things like reducing inventory, consolidating suppliers, slimming down teams, etc. Basically, doing more with less.
But as we’re seeing now, getting too lean creates risks. For example, just-in-time inventory only works when you can maintain a consistent supply. That’s hard to do when there’s world-wide manufacturing and trade disruptions.
When something disruptive happens, like a global pandemic, the usual narrative about efficiency shifts focus toward resiliency. The question is, what’s the tradeoff?
If we optimize to be more resilient, how much efficiency do we have to give up? Of course, that depends on how resilient you want to be, and the way that you go about doing it. To help you think about your options, we thought of a few ways to boost resilience without sacrificing (too much) efficiency.
Systems like Chassi will make this easier, but you can often improve efficiency and resiliency at the same time by doing a process audit and mapping out all the steps involved with particular work areas (order processing, for example).
From our work with our initial customers, we know that it’s very common to uncover opportunities for improvement within just about every business process. For example, forms that are being filled out twice instead of being reused within the system. Or duplication of effort by various team members working on a project because there’s no record of progress or work completion.
Removing duplicated effort makes a process more efficient. Creating a map of the process, and complete documentation, makes it easier to run. It also makes it easier for someone to fill in for an absent colleague, to train a new hire, or to duplicate at a secondary location. All benefits to resiliency.
On the topic of colleagues filling in for each other—that’s another area of opportunity. In terms of trade offs, cross-training employees to be able to handle multiple tasks or roles is on the low end of the cost scale.
However, it usually won’t happen without deliberate effort. It’s always easier to just do something yourself than it is to show someone else how to do it (and watch them do it wrong a few times).
Still, this kind of training is usually good for teams. It helps people to understand the value of their colleagues’ work, expands their own knowledge and skills, and creates opportunities for growth. It also makes the business more resistant to disruption.
With quarantine orders in effect practically world-wide, many businesses that are still operating are experimenting with some form of remote work. Remote work may not always be as efficient as a face-to-face office environment—but there are ways that can be improved using technology. And, for some forms of work, it can actually be more productive (fewer interruptions from that noisy open plan office).
Of course, not everything can be done remotely, especially in the manufacturing business. But providing remote options for roles like sales, marketing, admin, IT, etc., can increase your resiliency.
For one, if your team is already set up to work from home, there’s no disruption when they’re suddenly required to do so. Beyond that, it can be easier to staff remote teams (you can get people from anywhere). And, if you’re looking to expand into new locations, managing locally remote staff is an easy way to dip a toe in the water.
Locations, suppliers, approved vendors, sales and distribution channels—you name it, it should probably be more diversified.
Most forms of diversification have clear costs in terms of efficiency (suppliers or manufacturing sites probably being the more obvious cases). It takes time and effort to coordinate multiple suppliers. Beyond the cost, adding manufacturing sites introduces a host of new managerial and logistical challenges.
Working on process, training, and remote management can help mitigate some of the efficiency costs involved with diversification. And some forms of diversification have much lower costs.
Reviewing and approving more vendors provides flexibility and gives your teams options when preferred vendors are backlogged. Pursuing new sales or distribution channels (as many businesses have been doing in order to cope with quarantine restrictions) may require some initial adjustment, but ultimately provide major benefits in terms of resiliency.
Of course, these are just a few ways in which firms can adjust their operations to increase resiliency. Keeping more cash on hand comes to mind as another one, and we’re sure you’ll think of plenty more in the days and weeks ahead.
A recent article in the MIT Sloan Management Review looks at our potential economic future. In it, they mention the changes 3M made to their business after another recent epidemic:
“…following the 2002-03 SARS epidemic, 3M began to prepare for the next surge in demand for N95 masks. It started cross-training workers to step in for colleagues absent due to illness and reconfiguring operations and supply chains with more manufacturing sites, approved vendors, distribution channels, and sales offices so operations could be shifted nimbly when one area couldn’t deliver its part of the business plan.”
Those changes were probably difficult, but they are certainly paying off now.