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Second quarter earnings have been released and the numbers aren’t impressive. The Board of Directors isn’t looking forward to tough shareholder questions, which will undoubtedly focus on what appears to be a lackluster return-on-investment and results from what upper management 24 months ago pinpointed as the panacea for the Company’s competitive struggles – corporate standardization of several large new information systems. Based on specs, the new systems are on target and gathering data, exactly the function they were designed to do. In addition, the Company has invested in top-notch, experienced personnel from the shop floor to the top floor at all of their facilities. They embrace training and value their employees. But the income statement doesn’t lie – despite all of these good decisions the Company is still struggling with erratic production rates, often trailing similar competitors. And despite recent high margins, they’ve missed out on some large profit opportunities. And, why is it that the Company consistently has higher costs, principally maintenance costs, so that even in leaner times they are still less profitable than their competitors? And the pain spreads. The VP of Operations gathers his data and notices that Plant E has higher erratic production rates and maintenance costs than the Company’s other seven facilities. The Plant Manager of Plant E calls a meeting with his senior staff and shares the news that they need to pinpoint the source of their production problems and maintenance costs and fix them, or face a possible plant shut-down. Avoiding Checkmate So how should Plant Manager E react to this situation? A good first step would be to have his managers perform an assessment of the existing production and maintenance data. In doing so, they may discover that while the data clearly documents a pattern of erratic production and high maintenance costs, it unfortunately doesn’t pinpoint the source of these problems – CHECK. What’s your next move? Click here to download What Your Income Statement Won’t Tell You - Why Do We Continue to Have Erratic Production and Higher Costs After All the Changes and Investments We’ve Already Made? to compare and contrast two scenarios for finding the answer to this big dollar question.
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