What are the most important characteristics of the growing pains that follow in the wake of a business boom? Why do they arise and what are their consequences for operations? And what can you do about them? Those are the sorts of provocative questions addressed at an “Experience Workshop” recently organized by ARV Group. Twenty participants, including operations directors, supply chain directors, and plant managers compared their experiences and shared valuable insights during a collective exploration of the possible approaches and solutions.
Flush economic times are the dream of every business. Demand grows, sales increase, and the product range and the number of sales outlets expand. But at the same time, the operational processes become increasingly complex, which can lead to a loss of focus on the primary processes and greater pressure on performance. Sales and operations may no longer be synchronized and the shortage of well-qualified personnel becomes more serious.
This image, sketched out at the start of the workshop, was familiar to all the participants. And despite the great diversity in the companies themselves and the types of business they engaged in, the interactive program that followed the workshop stimulated valuable cross-pollination. When the economy is booming, what does the resulting growth mean for operations? That was the crucial question. Four important themes were identified to guide the subsequent discussions:
In the hectic environment that accompanies an economic boom, performance often does not keep pace. At first, the increased volume compensates for any resulting deficit. But after the boom, performance issues inevitably have an impact on earnings as standards are no longer strictly enforced and operational control is relaxed. What is required is a redoubled focus on processes, quality, performance, and results.
2. Sales & Operations Planning
When the economy is booming, it’s often the case that Sales & Operations Planning feels the pressure. Increased sales lead to demands for higher volume, and new product/market combinations require different processes. These new developments arise outside the framework of established plans and challenge the existing dynamic between sales and operations. The flexibility and capacity that was always a given can no longer be taken for granted, with the accompanying risk that orders cannot be filled and customers are left with empty shelves. The existing Sales & Operations Planning is simply no longer adequate. Accordingly, a focus on “next level” planning is essential, so that the balance between supply and demand can be restored and quality and delivery performance once again adheres to the promised standards and norms.
3. Plan and focus
The focus on the primary process is weakened as growth results in pressure on operations. The attention within operations is diverted from the business at hand because of the hectic pace of day-to-day activities, shifting instead to the consideration of new opportunities, promising business developments, and so on. Increasingly, business is conducted in an ad hoc fashion, responding to the needs of the moment. In particular, the approach tends to be opportunity-driven, resulting in a failure to adhere to carefully developed and maintained standards, processes and methods of working. And that too has an impact on performance and the ability to meet orders. That then is the moment when it is crucial to determine how to respond to increased demand and to identify which opportunities in a booming market are best to explore. A sharp focus and a willingness (and courage) to make clear choices are essential.
A boom almost always occurs in tandem with a tight labor market. Well-qualified workers are in short supply. What’s more, new and different skills are required for the business in general and new business in particular. There is a risk that, under these circumstances, the organization comes to accept unfilled vacancies in the organization and insufficient capacity. It is therefore essential to develop a structural plan with concrete solutions (engaging the services of an external consultant, for example, or introducing a new compensation/incentive system)..
For the workshop, the participants were divided into four groups so that each group could address one of these themes and identify and present the most urgent issues and possible approaches. To effectively deal with growing pains, a company needs to adjust its course, bring a sharp focus to the problem, and make clear choices. Decision makers have to be willing to extricate themselves from the chaos of day-to-day operations. But there is no single miracle cure. At the end of the session, the participants discussed their collective conclusions at length. What is required, they agreed, is the right mix of focus, planning, and decisiveness. In a series of follow-up sessions, we will examine these conclusions in greater depth.
Roelant van Herwaarden
Managing Partner @ARV Group