The U.S. economy will not see the other side of current challenges in the supply chain, labor shortages, and chaotic demand fluctuations until well into next year and possibly well beyond. But, there are steps you can take right now to overcome the ongoing supply chain challenges and skilled labor shortages in manufacturing while shoring up your business, improving performance immediately, and creating and sustaining competitive advantage and value over the long haul. But all of this depends on how quickly you take action.
Historic shortages of raw materials and inputs, container ships stacked miles out to sea waiting to unload, worker shortages in logistics and transport, and skilled labor acquisition and retention on the shop floor are all pushing down manufacturing quality, productivity, and time to market.
At the same time, market demand is pressing the curve upward and masking many of these issues in sheer gross revenue. So it’s a perfect storm of upward and downward pressures force-fitting production through the value chain. But at what cost? And what are the short-term and long-term implications on your business’s competitive advantage?
First, Let’s Examine The Short-Term Challenges For Your People, Systems, And Processes.
- Employee burnout. To keep up with a seemingly unending upward demand curve, manufacturers are running full throttle to keep up. At the same time, the manufacturing sector is facing one of the most significant skilled labor shortages in history. As a result, more stress and demand are placed on your existing frontline leaders and workforce to make up the slack. Working extra days or extending shifts cannot go on forever. At some point, even you key leaders run the risk of burnout and could be looking to make a change.
- Finding new people. Acquiring and retaining the talent you need to operate and grow your business has never been more challenging. As a result, many organizations resort to “out of the box” recruiting methods and creative compensation and benefits packages to entice new hires and decrease turnover.
- Training and onboarding new hires. When you do attract new people, onboarding and getting them up to speed during the short-staffed, ramped up, pressure cooker production environment you’re experiencing is challenging to say the least. So how do you make time to train new people in a way that they stick around and make a difference?
- Maintenance performance. Running wide open virtually nonstop to meet demand is likely going to lead to mechanical failure. The typical scenarios are unexpected failures when critical assets go down without warning (we’d argue there’s always a warning) and unforeseen failures, when necessary support equipment (transport, locating, software, maintenance tools, etc.) goes down and causes a ripple effect throughout production. A “run until it breaks” operating mentality is a ticking bomb waiting to go off in your production line. It’s not a matter of “if” something will break, but “when.”
- Quality. Maintaining quality standards during these unprecedented demand spikes is challenging. Reducing expectations and tolerances that creep their way into quality standards is a slippery slope. In the short term, you risk higher rework, spoilage, waste, and dissatisfied customers. But, in the long term, reduced quality standards, even for a short period to make up production slack, can cause long-term damage to your customers’ perceptions and hurt your competitive advantage.
Again, gross revenue can mask a lot of these challenges. These short-term issues are reflected in the numbers we pay attention to, like employee turnover, overtime hours, capacity utilization, yield, waste, spoilage, rework, maintenance utilization, downtime, ROA (Return on Assets), and much more. Knowing which levers to pull to optimize short-term productivity while building a workforce culture and MOS (Management Operating System) to sustain competitive advantage and build value over the long haul is critical.
Now, Let’s Look At The Long-Term Challenges With The Current Realities In Manufacturing.
- Supply chain challenges. The widely-reported global supply chain issues aren’t going away anytime soon based on all credible accounts. But, most likely, you are already taking steps to adapt your supply chain to this ever-changing environment. The best advice we can give right now is to get as creative as possible and be tenacious in finding new ways to source materials and other inputs. CFO Magazine goes into tremendous detail on vertical integration as a solution to supply chain challenges. It’s definitely worth a read.
- Labor shortages. The “Great Resignation” continues. And manufacturing is getting hit pretty hard with this workforce reality. Recent articles on CNN, Reuters, and many more confirm the labor shortage will continue and possibly worsen. As a result, employees become more selective in their job searches and carefully choose where and with whom they dedicate their work lives. According to a recent NAM (National Association of Manufacturers) article, 77% of manufacturers report difficulty attracting and retaining workers in 2021 and beyond. The article says that as many as 2.1 million jobs could go unfilled in manufacturing by 2030, costing as much as $1 trillion in 2030 alone.
- Labor shortages and supply chain issues are positively correlated. In other words, as labor shortages worsen, so do the current supply chain issues. They significantly impact each other. Dockworker and truck driver shortages compound transportation and logistics challenges and drive up costs. Deficits in all manner of skilled labor jobs from line workers to frontline managers to maintenance technicians, impact capacity utilization, yield decreases, increased downtime, lower overall productivity, and negatively impact the supply chain and create resource shortages.
- Sustaining competitive advantage. Suppose your business was known for delivering lower cost, higher quality, quicker time to market, shorter lead times, and more. In that case, those competitive advantages may have all suffered significantly in the current manufacturing climate. Even if your market demand and gross revenue are climbing during these challenging times, those numbers may be hiding deeper, more fundamental performance issues that are critical to sustaining your competitive advantage and creating long-term value for your business.
What Can You Do Right Now To Have An Impact?
- Don’t panic. As head of operations, manufacturing, production, or a specific plant, you face tremendous daily challenges. Hitting capacity and yield numbers, reducing waste and spoilage, managing your frontline leaders and workforce, and much more can seem like you’re constantly fighting fires. You often have little time to plan and may make most decisions on the fly without enough accurate information or data. If this sounds like your day, first, don’t panic, these circumstances are true for many businesses right now.
- Make a daily plan and prioritize issues. Digging your way out of overwhelming circumstances doesn’t happen overnight, but you can take steps right now to take back control. First, start with a plan, including priorities and milestones. The Plan Actual Variance Analysis (PAVA) model works well in this situation. What was your intended result? What did you actually achieve? What is the difference or variance? What can you do to improve the result closer to the plan? Even a simple, handwritten plan can change how you feel about your day and give you a better sense of control. Next, work with your frontline leaders on their daily goals. Help them prioritize issues and see past the day-to-day firefighting. Then, even if the wheels come off your plan, you have something to go back to when you’re able.
- Keep training and developing your frontline leaders. Your frontline managers and supervisors are often the glue that holds your workforce together. During these challenging and stressful times, pay close attention to their ongoing development and wellbeing. Touch base with them daily. Collaborate with them to help solve issues they’re facing. And above all, listen to them. Two of the top reasons valued employees leave businesses are because they felt they were not heard and their opinions had no value.
- Lean into Lean. The basic tenets of Lean Manufacturing can help your organization outperform rivals no matter how many challenges your business faces. Lean manufacturing principles help companies increase productivity, reduce costs, improve quality, and increase profits by following five fundamental principles: identify value, map the value stream, create flow, establish pull and seek perfection.
- Seek an experienced, outside perspective. This is why we do what we do. Sometimes you’re so entrenched in your business and workplace circumstances that it’s hard to see the real issues and respond with productive steps. An outside but experienced perspective can make all the difference. Management consultants often get a bad rap, but their real value comes from providing deep analysis of performance issues based on firsthand knowledge and a plan to overcome those challenges and improve in the short term and over the long haul. Carefully choosing a firm to partner with you to improve performance immediately while focusing on value creation over the long term is imperative.
Conclusions
By most accounts, the US economy will not see the other side of our current challenges in the supply chain, labor shortages, and chaotic demand fluctuations until well into next year and possibly well beyond. But, there are steps you can take right now, even basic ones, to shore up your business, improve performance immediately, and create and sustain competitive advantage and value over the long haul. But all of this depends on how quickly you take action.
The POWERS Difference
POWERS is a management consulting firm whose unique approach aligns company culture to optimized business performance outcomes. POWERS has helped global leaders across many market sectors to operationalize their culture for rapid and sustained performance improvement, ROI, competitive advantage, and greater value.
Our new exclusive partnership with CultureWorx further solidifies our position and Culture Performance Management approach by empowering your workplace culture to deliver sustainable performance improvement now and over the long haul.
Learn more about our operational and cultural optimization methodology by visiting us online. To schedule an initial discovery and analysis with our dedicated management consulting team, call us at +1 678-971-4711, or email us at info@thepowerscompany.com.
