Precision management in a low cost era
Monday, May 21, 2012/
As the rebuilt Aston Martin flew through the bends in the south of France, my colleague John explained precision management.
Having made enough fortune in IT to support almost an assembly line rebuilding classic Astons, John also applies his precise thinking to revamping manufacturing plants.
He sees the era of “so cheap, a few mistakes won’t matter” products as ending. China and eastern Europe are no longer blindingly cheap manufacturing bases, as their standard of living, workplace conditions and environmental issues also rise.
At the same time the very capable US management class has knuckled down to bring new efficiencies to their incredible local as well as increasing global volumes. Much of Europe, especially in the troubled south, like Australia, has not yet grasped the change.
His view, based on his regular assessment of plants on whether they could be turned around, is that much senior and operational management has become sloppy over the last decade. It has been so easy to close rather than rebuild a manufacturing and product development process it has just been outsourced to the cheapest supplier. But retailers in most sectors now carry the similar products at similar price points, with cheap labour suppliers doing the product and market assessment and design innovation. The huge trade shows in China have become product push. No wonder so many companies in wholesale and fragmented retail, and even just starting in dominant retail, are seeing their margins crumble.
So his mission is to take over old brands and plants, introduce his precision management which covers market assessment, design and manufacturing engineering, supply chain and branding.
This is a very numbers based analysis, but also one that has great entrepreneurship in product.
He dismisses the “near enough is good enough” or “whatever” management generation who could make good margins on cheap product and loose consumer spending.
If you don’t get that the world is a global market for sourcing, production and ideas, that’s bad enough.
But you also need to understand most of next decade’s consumers will either be in a tight wallet funk, or be in the developing world growth markets where wallets are still very tight.
At a plant near the French/Spanish border, a new facility is being developed. With 52% unemployment for under 25 year olds, the temptation may have been to hire lots of cheap labour through a middle man.
But precision management means a culture of doing everything right when it gets done. Allow plenty of thinking and analysis time, but every action must be precise.
So instead of a cheap local price for the facility upgrade, through a contractor who thought sloppy, or a cheapish Chinese knockoff production system, John paid five times the cheapest price for a German system.
They demanded precise detail and set up, then promised they needed 17 hours for their crew to install.
After 10 hours on the first day and at seven hours on the second day, the Germans packed their vans and headed north. The facility worked at first press of the button, as it should for 20 years. Precise specification will bring reliability and low maintenance, and zero downtime and repair costs.
That just fits in to the same precision in every part of his management. While competitors can try to flush the world for cheap copycat products, John figures demanding consumers of the next decade will require true low cost – a product that matches low costs, but has been developed and manufactured smarter so it lasts longer.
At that, we put Matt Munro belting out On Days Like These on the tape deck and pointed the Aston Martin precisely through the bends of the Languedoc wine country.