A couple of weeks ago, I received a call from a large manufacturer preparing for their annual sit-down with their suppliers. They were concerned about their suppliers’ ability to keep up with demand. I’m paraphrasing, but they essentially said, “We just know that when we grow, some of our suppliers will hit the ceiling and break.”
I’ve seen this phenomenon throughout my career – good events happen, and there is an inflow of orders. The plant responds by pressing the gas pedal to make more stuff, and it works for a while. However, just like a redlining car, it overheats and starts breaking down.
I have found that weaknesses in 10 core systems are the root cause of most “ceilings” and “redlines.” If you are in the enviable position of expecting growth this year, consider reviewing these 10 core systems and ask the question, “If our volumes increase by 10%, 20%, or 30%, will the performance of these systems impact our ability to meet our customer’s expectations?”
The 10 Core Systems
- Talent System
The talent system is responsible for ensuring that there is a correct number of fully qualified people needed to meet production goals.
Redline conditions: High number of temps, inadequate staffing, high overtime
- Clean and Safe Factory System
A clean and safe factory is a requirement for modern factories. A factory that is not clean and safe will struggle to hire and retain enough people. It is also a strong indicator that management is lacking disciplined processes.
Redline conditions: Low acceptance rate of offers, high turnover of new hires, high injury rates
- Management System
The management system is the leadership structure from the plant manager to the workers, and it ensures adequate management resources and robust management processes to run operations.
Redline conditions: Leaders immersed in getting product out the door and not doing essential activities like training employees, safety audits, planning, coaching
- Equipment Reliability System
The equipment reliability system is responsible for ensuring that critical pieces of equipment have high uptime and consistently produce quality products.
Redline conditions: Machine breakdowns affecting production throughput, delayed maintenance
- Quality System
In this context, I am not referring to the broad context of a quality system, such as ISO 9000. I am speaking of merely having processes that ensure that acceptable materials are received, produced, and shipped.
Redline conditions: Rework and remakes are impacting production throughput, on-time delivery, and management attention
- Supply System
The supply system is responsible for getting the right materials to the shop at the right time. This covers areas like supplier selection, purchasing transaction flow, supply-side logistics.
Redline conditions: Supply shortages impacting production throughput and schedule adherence
- Inventory System
The inventory system ensures that inventories are well-organized, transacted accurately, and stocked with appropriate quantities.
Redline conditions: Order points not adjusted to new volumes, inadequate space for increased inventory, staffing not prepared for increased flow of material, inventory accuracy increasing.
- Sales and Operations Planning System
The sales and operations planning system ensures alignment of the sales function and operations function concerning forecasts, production targets, and scheduling priorities.
Redline conditions: Orders placed on the factory above capacity. Operations not adjusting capacity in anticipation of future demand.
- Data and Measurement System
The data and measurement system is a broad category that refers to the measures used in operations. It ensures that the right things are being measured and that the data is accurate. The intent is to ensure that facts, rather than opinion, drive decisions.
Redline conditions: Key measurements affecting the customer, such as on-time delivery, quality, and production throughput, are not accurate, timely, or used as part of daily management
- Operating System
The operating system is the holistic system that ties everything together across the business. The Entrepreneurial Operating System® (EOS™) is an example of an operating system.
Redline conditions: Lack of alignment and focus among the leadership team, infighting, and finger-pointing
When a factory struggles to keep up with customer demand, the natural reaction is to press the gas pedal further. It often starts with overtime, which may lead to hiring people or offering incentives. These measures push the existing systems harder, but it won’t be effective if there are significant issues in one of the 10 core systems. I encourage you to take time with your team and take stock of the readiness of your 10 core systems.
If you’d like to discuss the 10 core systems, please reach out to me at 651-398-9280 or firstname.lastname@example.org.