“The members will kindly refrain from picking up “lost” golf balls until they stop rolling.” This sign was spotted at a golf club. In the industrial arena, a similar sign could be erected – “The cost saving teams will kindly refrain from throwing out “unused” tools and equipment until the production workers quit using them.” We all realize that the cost saving pendulum has swung too far. What started out as a targeted focus on JIT snowballed into hoards of hastily trained teams introducing havoc throughout the enterprise. This got combined with a stock market appetite for instant cash returns.
One of my close business associates was relating an illustrative story. He had just completed replacing the brand new PLC (Programmable Logic Control) in the piece of equipment he was commissioning with another brand. It turns out that this historic leader in the European PLC manufacturing industry had succumbed to the chain of cost cutting measures that they had implemented. After they had outsourced manufacturing, outsourcing product design and programming followed. A few rounds of supplier price claw backs convinced their contract manufacturer to release a competitive product of their own. Switching to a cheaper contract manufacturer nailed the coffin. A PLC control product designed in the last century is no longer capable of controlling the latest generation of equipment.
“The electric light did not come from the continuous improvement of candles.” Oren Harari
The survivors will emerge following the methodology of the start-up community. Start-up founders realize that you cannot foment a disruption by implementing a tiny improvement on the status quo. They discovered that cost is still every bit as important to business success. More importantly, a lack of accumulated resources taught them that it is more lean to begin by determining the minimum amount of resources needed to satisfy the customer. If you start at the lowest cost process, there is no need to risk liquidating the company by implementing the latest cost saving fad.