Turning Caution into Profits

Published on: June 5, 2019
By: Murray Sittsamer

The stock market is up, manufacturing orders are strong and we continue to see capital expansion but many manufacturing companies in Michigan are holding back on discretionary expenses. There is concern about recent state legislation, challenges finding talent and caution about the economy overall.

When there’s caution in the air, management looks to find ways to preserve cash and assess risks facing them. But risk management should not focus only on minimizing and mitigating potential risk. A well-managed, ongoing manufacturing company will also look at risk taking as a path to growing revenue, profits and value in the future.

Nothing Risked – Nothing Gained

Risk-taking can take many forms. One way is doing something you have not done before in order to gain a return. But doing something totally different might have too large of a downside; e.g.: starting a new product line or entering a new market. More conservative risk-taking could be building on, or improving, what you have in-place.

Manufacturing clients we work with and other companies we visit have in-place some form of a structured operating or production system. These include systems that comply with Standards such as ISO 9001, IATF 16949, and AS 9100; systems for Advanced Quality Planning, and management of the factory floor. There’s little risk in implementing these methods because they have been tried before, and generally yield good results. Unfortunately, they are often seen as costs of doing business, and not drivers of process excellence.

Can You Get More Things Right the First Time?

From my view working with clients and potential clients over the past 25 years, most companies adapt those methods and tools, but rarely do they step back to assess if there are better ways to regulate their engineering and manufacturing operations. Is there something beyond satisfying customers’ needs and meeting the fiscal year budget?

Pat Riley, former basketball champion and coach has a great quote, “A champion needs a motivation above and beyond winning.” Are your employees motivated to get to zero defects? Not just zero defects out the door, but every action right the first time? Or is it more like “if we make a profit, it’s good enough”? Or “let’s fill all the open orders, and we’ll have a good month’?

Death by 1,000 Cuts

I’ve come to realize that quality systems, manufacturing methods and quality programs; are often not aligned with the ultimate business objective… every action right the first time. Without that, problems are caught down the line, or at the customer. The cumulative impact of small errors and missed opportunities to get things right is like death by a thousand cuts… each are very small — maybe even unnoticed — but together they’re a killer.

Excellence Drives Profit

Customer scorecards for quality and delivery are important indicators, but they barely touch the surface of assessing the full, deeper picture of operational performance. Internal metrics (macro and micro), Internal Audits and Operational Assessments are better indicators of if and where losses occur.

Try it yourself. Consider the cumulative costs and consequence of many small actions not done right the first time, and inspire your team to strive for excellence in everything they do. It does not cost much to empower a passion for excellence and the improvement to your profits and cashflow could be significant.

The Luminous Group wants to make it easier for companies to achieve better results. If you’d like to learn more, please contact us.