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Current Situation OTD 92% + Driving Forces + New equipment in place Experienced material handlers and machine operators Company Balanced Scorecard goal Company bonus for on-time performance Restraining Forces Recent shop layout change Training needed on new equipment
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Supplier material shortages Change Goal OTD 97% Extremely high fuel costs, multiple daily deliveries in some cases
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Exhibit 7-3 Force Field Analysis for improving on-time deliveries industries such as the automotive industry have placed suppliers at the risk of going out of business Even government bailout help is only a temporary solution Many of these companies find themselves in turnaround situations in which immediate action is required Strategies and contingency plans can be focused on these key areas for immediate improvements Cost-cutting may be effective if the company has high direct labor costs or high fixed expenses that can be trimmed for quick bottom-line results Another approach is to target these efforts toward increasing revenues by expanding products and services into new geographies or markets New product development can help by penetrating existing markets or reaching into new markets Asset reduction is also a method of cost reduction, especially if other cost-cutting methods have been exhausted We will discuss outsourcing as a contingency approach later in this chapter It may be necessary to use a combined approach, mixing all of the above techniques
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Activating Contingency Plans
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The only constant we can depend on is change A mindset of flexibility is a requirement if objectives are to be achieved Dealing with business
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change is not always responding to adverse conditions, but might mean responding to an upside change, such as a large, unexpected order or the addition of a profitable customer from a competitor In any event, contingency plans must be activated to remedy a problem or to seize an opportunity
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Internal SCAN
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A planning and action tool called the SCAN is designed to outline a situation that may be a problem and then to identify the challenges, analyze, and navigate to a successful result This may be a way to develop contingency plans during the business year
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Situation Understanding the business situation is the first step in determining what challenges must be addressed for the business to have a successful year and meet its objectives and plans One way to decide on functions and/or areas that need attention is to look for cues in the environment These cues may signal that improvements are required during the business year, some of which are unforeseen Cues such as loss of a key customer, lower margins, and spikes in costs and expenses will need immediate attention In defining the situation, write a brief paragraph or series of bullet points describing how things actually are today The current situation should be written as a description rather than an evaluation and should isolate a major challenge that needs to be addressed Challenge The challenge selected in the current situation description is then crafted into a problem statement that details what s happening today in terms of specific issues, problems, and concerns When scoping out the challenge, discuss what is or isn t happening and the impact on the business Analyze Once the problem statement is written and clarity around the challenge has been established, apply the tools we present in the Appendix Tools such as cause-and-effect Analysis and Pareto charts can identify the root cause and lead to a determination of a solution Navigation Navigation is the completion of an action plan and the implementation of the action steps designed to solve the problem and meet the challenge identified as critical to the success of the company
Contingency Planning
ENVIRONMENTAL SCAN
As a regular management practice, it s advisable to scan the external environment to identify changes that might have an impact on your business Examples of this include economic, technological, and regulatory changes that require a response, both TOOLS for the short and long term Scanning involves paying attention to the signals and trends and keeping abreast of industry developmentsThis will require the periodic review of trade journals and the Internet It will trigger discussions of this information with colleagues and your teamThis can lead to creative brainstorming and identification of negative or positive trends that will affect business performance A consumer products company that learned about impending laws in California was able to respond to environmental protection legislation that would ban gas-powered lawn equipment in the next few yearsThey were able to shift some of the new product development from gas- to electricpowered products
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