Bad Things That Operations Managers Do
Many exciting things are happening in manufacturing operations across the world. Lean-manufacturing concepts are taking hold, advanced planning and scheduling systems are improving performance, workers are more empowered to make improvements, and managers are better trained.
Nevertheless, the lessons that many learned long ago have not been learned by everyone.
And truth be told, almost every plant is still employing some of the management no-nos that manufacturing supposedly "got past" long ago. While pursuing the "next big thing" in operations, management must constantly review its performance and management style with respect to the basics. Avoid or eliminate these management no-nos:
- Overproduce to absorb overhead burden instead of producing to demand requirements. This may help short-term cost-per-unit performance, but most of the time the savings are solely a function of accounting. Long-term fixed overhead costs remain unchanged while the costs of incremental product storage and inventory capital accumulate and the risk of product obsolescence soars.
- Plan production based on targeted or budgeted performance efficiencies instead of demonstrated rate. Everybody needs targets and stretch goals, but managers make the mistake of mixing up the expectation for improvement with the planning for improvement. Planners who assume better-than-demonstrated production performance end up with poor service levels, daily scheduling chaos, and a workforce that believes the schedule is merely a goal, not a requirement.
- Make disparaging and polarizing comments about the expectations imposed by sales, marketing, and other "nonoperations" teammates.
- Use a one-size-fits-all inventory policy for replenishment planning. Different products exhibit different demand patterns, forecastability, strategic importance, and customer bases, yet often the inventory policy that governs the replenishment process is undifferentiated.
- Set up performance measures that polarize managerial objectives and encourage conflict among departments.
Outsource processes that were completely uncontrolled when performed in-house, then complain that outsourcing doesn't work when the third-party relationship fails to deliver improved performance.
- Make huge investments in information technology and automation without clear, strategic process design to ensure that the right processes are being automated and streamlined. Too often managers think that purchasing and installing an advanced planning system or information technology tool will solve all problems. The system will provide optimized solutions only if the user properly loads accurate operating data initially.
- Manage purely to EBIT (earnings before interest and taxes) objectives and ignore the impact on RONA (return on net assets) when developing an asset strategy. Organizations focused purely on EBIT will make whatever capital investments they deem necessary to hit the short-term operating budget. Plants full of underutilized equipment are the result when there is no economic-value-added analysis to justify major investments.
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