Where is the best bang for investing your bucks?
This morning I read a re-post of an interview done a couple of years ago by Karl Forth (CabinetmakerFDM) with Jim Sherbert, CEO of Bush Industries, one of the few remaining RTA manufacturers in the US. The core topic of the interview was, “How did Bush survive the recession?”
Early in the interview, Mr. Sherbert was asked about the investments and productivity improvements that Bush made. The response was, “With the market depressed, there is little need to add capacity, and even enhanced productivity efforts have a limited payback. We have focused technology and software on improving customer and consumer services. This has made dealing with the various Bush business segments easier, quicker and more cost effective. New CRM systems and expanded supply chain support are among the advancements.”
It seems that many manufacturing companies are often focused on just the shop floor, and particularly machinery. However, as Mr. Sherbert’s experience points out, sometimes much higher payback can be had from investments in other processes that improve customer service or the supply chain. Even lean improvement methodologies often measure results based on bringing value to customers, not just productivity. Bush survived not only the US recession, but also foreign competition, which is especially tough in their market segment. Clearly their viewpoint was of the larger picture, which took into account the entire enterprise.
No doubt, incremental improvements in manufacturing throughput should always be worthy of consideration, but it is also important to consider the broader picture. As Eli Goldratt made so clear in his book The Goal, putting big bucks into new machinery is not always the best option, and in some cases can actually be counterproductive.
In today’s economic environment, it is more important than ever to ensure your investments are put to the best possible use. The front office and all the non-production supporting processes are just as critical to your company’s success and your manufacturing equipment. Failure to improve those areas can hold your company back, just as seriously as low manufacturing productivity.