How to: Operational Transformation Workshop

June 3, 2016 12:32 pm
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Operational Transformation is the process of streamlining a business’ existing operations to make them more efficient. It is often a recipe for short-term survival since it drives a leaner business but, fundamentally, the same business. In this way, it differs from Operational Model Transformation, which involves redesigning the operations to do what you’re doing in a fundamentally different way.

Operational Transformation Mapping incorporates a degree of Operational Innovation, which is the invention and deployment of new ways of doing work. Operational Innovation means coming up with entirely new ways of doing any of the activities that an enterprise performs. Cross-docking is a typical example in which goods trucked to a distribution centre from suppliers are immediately transferred to trucks bound for stores without ever being placed into storage, leading to lower inventory levels and lower operating costs.

However, an Operational Transformation exercise is less about striving to become a thought leader and more about reviewing the existing operations in their entirety, in order to gain visibility of where established best practices can be applied. It is interesting that, time and again, this forum and approach throws up straightforward solutions to issues that have been walked past day-after-day without ever being challenged. An example we recently identified was the switch to loading directly from production line to container, thus avoiding multiple pallet movements and unnecessary storage costs.

Carry out your own workshop

Think big. A3 won’t cut it – get the brown paper out and stretch it 4 metres wide by a couple deep. Avoid being waylaid with textbook symbols and theory, this isn’t a Value Stream Map flow which would typically involve more thorough investigation to include systems and information flows. The point of the exercise is to consider every step of your operational supply chain, from field to fork. Understand what the steps are. Divide the map by product groups and lines. Include all movements. Don’t miss out any steps. It is tempting to skip the tedious, obvious steps. However, Unload – Forklift – Store – Forklift – Store – Forklift – Load is the sort of detail which identifies waste.

At the outset this might seem like an easy exercise, but I have yet to find an individual who can identify all the steps and truly understand the complete picture. Challenge the need for each step – is it adding value? Even if the answer is yes, can it be conducted another way? How could it be avoided or completed differently, and what are the alternatives? This exercise is not about designing a pretty picture (anyone who has seen my artistic merits can audibly hear my sigh of relief!), but about transforming the business, leaving the room with a new perspective and a clear list of opportunities to evolve the current model. Challenge. Challenge. Challenge. On that note, ensure you have a scribe and a white board to note the ‘no answer is the wrong answer” list of challenges.

It is critical to have people with 3 distinct skills involved in this exercise: creative thinkers who can generate new ideas; those versed in the principles of lean operations who can contribute their knowledge of best practice, and experienced employees who have a thorough understanding of that particular business. Long service alone inevitably makes it difficult to obtain a holistic view and change paradigm in a half-day session. However, experienced insight will be critical in understanding the process and can avoid chasing too far down a rabbit hole. An experienced voice often holds the key to a gem.

I have been fortunate to facilitate four such activities in recent weeks in different businesses. Each revealed a raft of opportunities with a value in the region of eight figures and have thus been a catalyst for significant change. Not bad for less than a week’s work.

It should be noted that execution is the hardest task. It is too easy to create a roadmap based on the identified opportunities, and then let them fault or fade into the background as today’s burning platform takes precedent. An Operational Transformation Map Exercise is the first but vital step in Operational Transformation.

References: https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company

http://www.mckinsey.com/business-functions/organization/our-insights/what-successful-transformations-share-mckinsey-global-survey-results

 

Written by Leon Chandler, Coriolis Consulting Pty Ltd

Are we about to enter another reintegration cycle?

June 1, 2016 1:22 pm
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After a decade of outsourcing and selling off ‘non-core’ functions, it looks as though leading profit-chasing companies are beginning to reverse the trend. While this would not be surprising as a cycle of integration and divestment applies to most industries at different frequencies, the correct picking of the change enables positioning for optimal profitability globally and locally.

Amazon recently signalled it may be ending its long-standing partnership with FedEx by mobilising its own fleet of Boeing 767s and labelling UPS’s North American hub-and-spoke network ‘outdated’. When a $100bn company makes such bold moves, the world pays attention. Most likely the consequences of any major change will be felt (and followed) beyond the marketplace in which the initiator operates in.

Amazon CEO Jeff Bezos is known for an intense customer-centric philosophy and the highly-publicised service failures of Christmas 2013 would not have sat well. An underlying factor may be the reliance on UPS freight by e-commerce competitors eBay and Alibaba, and the effect Amazon’s volumes is likely to have on competitor’s costs and market access.

Shipping is big business and could certainly be seen as a potential source of growth or at least an opportunity to maintain revenues and margins. There is no question as to whether Amazon has the scale and business model to operate in this space, with potential to provide the service externally.

Lastly, the supply chain model is unlikely to follow any that is current and widely used. Where will the differentiator lie? The hub-and-spoke model has been a mainstay of high-service commerce for decades, and Amazon itself operates more than 150 fulfilment and warehousing centres globally. Perhaps Amazon is ready to take its Kiva Systems robotics out of the incubator and go ‘ultra-high speed and unmanned’. Now that would be a game-changer and a huge transformation to execute. One to follow closely.

References:

https://en.wikipedia.org/wiki/Amazon.com

http://www.forbes.com/sites/forbesleadershipforum/2014/09/22/alibaba-vs-amazon-who-will-win-the-global-e-commerce-war/#23964885202c

http://www.ecommercefuel.com/alibaba-vs-amazon/

https://au.finance.yahoo.com/news/ups-ceo-very-comfortable-amazon-153311071.html

https://heizerrenderom.wordpress.com/2015/12/24/om-in-the-news-amazons-relations-with-ups-are-showing-strain/

https://en.wikipedia.org/wiki/Amazon_Robotics

 

Written by Jeremy Hudyma, Coriolis Consulting PTY Ltd