Preparing for the Next Recession?
Feast or Famine – The Choice is Yours
Despite many challenges, for the most part we have had a strong economy for quite a while... BUT, it’s only a matter of time before that changes.
There’s Always a Choice
Whether the economy stays strong or not so much, there are actions that can be taken now that will have benefits now as well as when heading into the next downturn.
It is important to gain insight and take actions to minimize weaknesses, risks & threats as well as capitalize on strengths & opportunities during good times as well as tough times. This is the best time to act.
This is a great time to attain strategic insights into the market and supply chain. Take actions to gain customer satisfaction now. Consider Blue Ocean Strategies as well as competitive advantages in the Red Oceans. While others are managing by knee jerk reaction & shooting from the hip heading into the downturn, you will be gaining profitability, morale and momentum.
5 Main Focus Areas
1. Internal Operations
Most operations have at least 40% waste in their production time, meaning there is plenty of capacity to discover and harness for additional sales volume with your existing resources.
Develop & Execute a Strategic Improvement Plan NOW!!! Doubling profit is not unrealistic if using a proven systematic approach.
Start by identifying your current constraint
Maximize its utilization & throughput by eliminating wastes there first
Next prioritize & eliminate defects and waste at other areas in a logical sequence for the most impact
At some point, the constraint will shift... Repeat.
(Note that you can decide where the constraint is by the sequence & extent of improvements)
The rapid effects will be:
Quickly driving up accounts receivable as you chew through the backlog
Reduce work in process (WIP) inventory
Improve lead times & on-time delivery
Reduce and possibly eliminate overtime
Be proactive by:
Stockpiling some reserves
Securing financing prior to the downturn
Be prepared to purchase equipment for additional capacity or capabilities at a bargain when some companies fold or sell it off
Be prepared to vertically integrate some of the outsourced processes making use of excess manpower capacity uncovered while improving
Be prepared to purchase (or consider joint ventures with) suppliers, competitors, or distributors that have failed to prepare to maintain supply chain strength
2. Human Resources
People are your most valuable resource. Treat them right to keep them & attract the best ones from the competition, your local region, and other industries due to your stellar culture & reputation.
Engage employees in improvement efforts to assist in streamlining operations NOW!!!
Cross train employees and utilize cross-training matrices
Know who the best employees are for performance, reliability, and ability to train others
Know the types of employees & skills that you want
Be prepared to hire the best talent when others are laying off
Watch for major layoffs from large companies and recruit the best talent that fits your culture
Create an environment where people want to come to work… Best employer in the industry & in the region
Support community service activities with paid employee volunteers rather than layoffs
Be prepared to let attrition take care of headcount reduction to lower expenses rather than layoffs
Have some infrastructure & improvement project work lined up for slower volume times
Don’t reduce hours below 32 hours or reduce benefits
Become legendary as the best and most secure place to work in the area!
Some customer market segments are more resilient to recessions than others. Find out the factors that are early warnings in the markets of the customers and those that affect their buying patterns.
Anticipate the behavior of customers and end customers as a recession sets in
Identify the market segments of the product mix that are likely to remain active
Foster the relationships with customers and niches that will remain strong
Make the most of your enhanced performance to become the preferred supplier to key customers
Keep an eye on factors and scenarios indicating a shift in purchasing downstream is coming
Secure some long-term contracts with desirable, solid customers
Consider providing some key customer Quality & Continuous Improvement support resources to reduce risks
Find some ways to differentiate to offer more value for specific desirable segments
4. Supply Chain
Organizations live and die by the strength, capabilities, and reliability of their supply chains.
Understand Supplier product mixes and the potential impact of lower sales in key segments
Consider providing some key supplier Quality & Continuous Improvement support resources to reduce risks
Find & qualify alternative suppliers in case some go out of business (Watch for Signs)
Develop an Inventory Flow Plan to ensure lead times & on-time delivery remain solid and minimize the inventory carrying costs
Consider some long-term contracts for price and lead time preference where it makes sense
You're only as good as your supply chain!
5. Distribution Channels
You can get a black eye with customers from distributors. Performance for quality, lead times, on-time delivery, & service don't just affect products and info flowing into your organization from suppliers. If a distributor is struggling, your sales and reputation (future sales) will be impacted for their region. It may be difficult to recapture market share lost if a distributor flounders or closes completely.
Again, understand distribution channel product mixes and impact of potential sales reductions of vulnerable key segments
Consider providing some key distributor Quality & Continuous Improvement support resources to reduce risks
Find & qualify alternative distributors in case some close shop (Watch for Signs)
Develop an Inventory Flow plan to ensure lead times & on-time delivery remain solid and minimize the Inventory carrying costs
Consider some long-term contracts for price, volume, & lead time preference where it makes sense
Consider strategic vertical integration
If your organization does these things to prepare now, you will be much more prosperous and secure both before and when the downturn arrives.
At Elevate Coaching & Consulting, we use a systematic approach to gain insight & understanding into organizations in order to make rapid improvements where it will have the most impact.
You can think of us as strategic problem solvers. We utilize a combination of Lean Six Sigma & Theory of Constraints to improve organizations quickly.
Think of TLS (Combined LSS & TOC) like combining a Grand Slam with a Slam Dunk to get a GRAND SLAM DUNK!
We really enjoy developing and executing strategic rapid improvement plans for organizations. It is great to see bottom line results come to fruition!
Schedule an initial consultation to find out how TLS can drive Rapid Improvement in your organization!
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North Carolina, United States