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Planning in growing KMUs

Planning for increased resource requirements in growing companies
Planning for increased resource requirements in growing companies

Growing companies have several rather pleasant challenges to master. In operations, these challenges primarily involve the issue of how increased demand can be handled within the limits of the existing organization.Which processes need to be adapted? What personnel is required at key points? What are the key points?

 

Why does anything needto be adapted inthe first place if the company is growing?
The fundamental question is whether anything needs to be changed at all. After all, the process organization is so robust and flexible that it adequately supported growth up to this point. The staff members work well together as an experienced, coordinat­ ed team and the entire development organization matches our processes. Bring on the growth! Those who think and act along the lines of the comments above won't be interested in the rest of this article. 1 invite everyone eise to learn about the symptoms of an organization overtaxed by growth, to find out how to remedy this and how a company can prepare for further growth via corresponding transformation.

 

Typical symptoms of an organization overtaxed by growth
This article focuses on the operational processes. Accordingly,the following symp­toms all come from this environment. These are examples we as consultants have experienced as described or in similar forms with our most successful clients.

1. lncreasing inventory values and rising warehousing and logistics costs
lt may sound like a truism: when produc­tion increases, the value of the materials in the warehouse also rises. More raw materials and precursors are required, and more end products go through logistics. lf intermediate phases are then required in multistage processes, the products of which are temporarily put into storage, these also increase the value of the inventory. However, these rises in inventory value are often disproportional to sales growth, i.e. larger than would be justified by the growth alone.

2. lncreased number of analyses (Quality Control,QC) and approvals / releases (Quality Assurance, QA)
As in point 1, these increases seem absolutely logical. However, during growth phases, organizational inadequa­cies quickly become apparent and are manifested as increasing mountains of work at key points that never functioned as bottlenecks before the beginning of a growth phase. lnitially, the backlogs at these key points build up only slowly, but will be difficult to reduce in the future.

3. Higher maintenance and repair costs
lncreased utilization of the machines necessitates more maintenance work. However, these (scheduled) downtimes are even less welcome in the company than before. Thus, maintenance work is frequently postponed to keep things up and running. Predictably, the unplanned downtimes due to malfunctions and machine damage then increase.

4. lncrease in procurement activities
In many companies, growth phases are also phases of increasing requirements and thus increased purchasing. This involves a number of very different phenomena that need to be brought under control, including suppliers that cannot provide the quantities of materi­als required and buyers who cannot get the right quantities into the warehouse due to lack of involvement inthe plan­ning.

5. Deterioration of throughput times and first time right
Both production and all of the processes supporting production (which may include packaging as well) run up against their limits. That increases the processing time. lf management then exerts pressure to achieve the desired quantities, the error ratio rises. Either way, the supply chain and/or sales will be "sur­prised" that production cannot be increased in a linear fashion.

6. Turmoil in planning and production
All of the aforementioned symptoms generate additional stress in the planning department, and due to the increasing number of changes in the planning, in production as well. This creates a self-perpetuating cycle.

 

Individual symptoms may be more or less pronounced and can appear alone or together with others. lt is important to under­ stand that the correlation of growth occurring simultaneously with one or more of the symptoms does not necessarily imply causality. Causality should be proven so that the actual causes of the problems are genuinely disclosed before tackling the causes. To adapt performance to the increased demand, it is essential to identify the key points and to analyze these meticulously. lt is said that Albert Einstein stated that if he had only one hour to save the world, he would spend 55 minutes analyzing the problem and only five minutes developing the solution. To ensure that the SME continues to develop in defined directions, clearly defined targets must be established for the company and communicated internally to focus the employees and prevent unnecessary debates. Subsequently, in the analysis phase all processes and influencing factors such as products, customers and corporate culture will be docu­ mented with the aid of value streams and interviews in order to identify the interfaces and possible obstacles. Once this phase begins, opinions, speculation and unfounded statements will no langer be accepted. All further decisions will be based on facts, figures and data as well as the targets.

At this point, the relevant key performance indicators (KPls) such as quantities, throughput times and quality will be defined in collaboration with the individual departments and subsequently tracked. The KPls are then available to everyone from workers on the shop floor to executive managers and are part of everyone's daily work.

The use of the KPIs makes the processes transparent and deviations visible. The overarching targets are distributed across the individual sub-processes and compared with the ac­tual values from the KPls. The most significant deviations will be determined as key factors and improved with corresponding measures after an analysis of the causes of the deviations. The task is to use this information to define target values for the individual KPls, to track them meticulously and to review the efficacy of the measures implemented based on the changes in the KPIs. The careful definition of the individual target states is extremely important for the sustainable implementation of this system, and must be regularly and critically reviewed and adapted. This structured, fact-based and transparent procedure exposes the real problems and enables the company to seek genuine solutions. Thanks to the resulting transparency and the corresponding understanding of the current situation, jobs can be better planned based on real throughput times, quality figures and utilization capacities and possible delays can be identified early.

 

Planning - the most important component
What does all this have to do with planning? Your planning is the key to your growth. The causes that we all too frequently identify for the symptoms described above have to do with the planning process and its interfaces to other departments. In our experience, planning is the main component in the optimization of your processes and their alignment to your path to growth.

lt you recognize one or more of the symptoms described above in your company, talking to us will be worth your while.

 

Dominik Echtle|Consultant Management Consulting|Chemgineering|The Technology Designers


 

 

 

 

 

 

 

 

 

 



 

 

 

 

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