Embracing change

Change is inevitable and manufacturers who resist it will struggle to survive in today’s competitive market.

Somewhat surprisingly, many manufacturers still regard Change Management as just one of those gimmicks thought up by consultants to increase their income.

When in fact the process can often be vital to a manufacturer’s long term survival, especially one presently in the automotive industry.

As most readers would understand, Change management is a discipline that guides how companies prepare, equip and support individuals to successfully adopt change in order to drive organisational success and outcomes.

Mark Philips, Australia’s Head of Manufacturing with Grant Thornton, one of the world’s leading advisory firms, says he is surprised by manufacturing’s lack of enthusiasm and urgency with change management, especially in areas where there has been change.

He says Change Management is critical, but believes the biggest challenge with it is understanding what companies are trying to change to, admitting it’s hard for manufacturers to do what they are currently doing, but differently.

“When manufacturers go to look at modern technology, say additive manufacturing, I don’t tell them to try and create something new, instead I tell them to try and create something they couldn’t do in the past, which they can now do. “That means changing their whole way of thinking.

“For example, metal manufacturers are now able to produce perfectly curved surfaces that they couldn’t do before; that has to be in their repertoire of thinking,” Philips said.

He says the hardest part of getting a Change Management project off the ground is getting people to understand where they need to focus their business.

“The second part is getting them to document it, then it’s about getting them to believe in it. “The fourth part is breaking it up into a number of little achievable steps over a period of time.”

Philips admits Change Management can be a challenge, but says manufacturers who have gone through a structured process of identifying what they can do, how they can get there and have put a plan in place, are far better off than those who rely on a pot luck approach.

He says the first element on the change management journey is understanding what you don’t understand, and understanding what you can’t do. While he describes the importance of listening to customers and stakeholders as the second element.

“It’s surprising how often customers are telling companies that they are not doing certain things, but the companies are not listening.” He says the third element is when companies are looking to move from one opportunity to another.

“Manufacturers should look at the commonalities of what’s involved, because often it’s the same but described in a different language.”

Philips points to car component manufacturers as an example of the first element. “These guys are very bad at distribution, but it’s only because their customers, the car companies, collect their product from them rather than having to deliver the product to the customer, which is the normal situation.

“By default, the car companies have taken away the skill set of how to distribute.” He says the problems start once they leave the car industry, suddenly they are having to package the product to go on the back of a one tonne truck as opposed to a covered semi-trailer.

Then they have the problems of stacking the product on a pallet, organising transport and then getting the product off-loaded at the other end.

“So It’s really important companies look at what they can and can’t do.” He says the second part is understanding how they can use the skill sets they have in different markets. Philips points to manufacturers in the food industry who believe they have a number of unique issues around traceability, validation, delivery times, sequenced inventory and quality.

“However we have found that the car component guys have all these skills and understand all these areas. The problem is they don’t think they can make the transition, when it is a very real possibility.”

Reskilling

Philips says there is a lot of talk around at the moment about reskilling automotive companies. “But I would like to see more people understanding the skill sets already in the automotive industry and working out how they can capitalise on them in other industries.”

“For example, when it comes to cost-down skills, the automotive industry has been producing products year on year at roughly a 3% reduction in price. While food manufacturers are focused on delivering a better quality product to consumers at a lower cost. That’s just a different language for cost-downs.”

Philips says the problem is a lot of food manufacturers see cost-downs coming at a cost of margins.

“However car component manufacturers have already worked very hard to maintain their margins, but still deliver the required cost-downs. This is a really good skill set to have in any industry.

“And at the customer level, the car companies have learnt the language of how to achieve cost-downs without sending the car component manufacturers under, to retain security of supply.”

Philips says there are a lot of opportunities out there for car component manufacturers.

“The problem is, while they know their space very well and know how to produce their components using their technology for their customer, they don’t necessarily understand how their technology, or their skill set, can be adapted to different products and different customers.”

Regarding Change Management Philips says it’s is very important companies do their homework and understand the skill sets of their employees.

“There is also some analytical work needed to know exactly what their capabilities and capacities are, including positives and negatives. Then they can work out how they can position themselves for the opportunity.”

According to Philips, on occasions manufacturers might have to de-skill themselves ready for a new industry. He pointed out that while car component manufacturers can’t afford to deliver components that are under or over weight, it’s not quite the same in the food industry for example.

“While food manufacturers can’t deliver a product that is underweight, it’s OK to deliver a product that is overweight. Consumer don’t get upset if their chocolate bar contains 52g as opposed to 50g.

“So car component manufacturers who are used to delivering products at exactly 50g every single time, have to re-educate employees to think about tolerances and what that means for their equipment and processes.”

To make these changes, Philips says it’s vital to have the CEO and the board very much in support, plus a dynamic CFO who can embrace change. “Unfortunately there are a lot unknowns when going through this change process, with a level of risk and uncertainty.

“The board and senior management need to be prepared for both positive and negative outcomes and timelines that can move.”

Philips admits there is quite a lot of government support for SMEs, noting the Victorian government’s Success Mapping program, but not for mid-size companies. While he admits they can do a lot for themselves, he says most don’t have the financial might to bring in the people required.

Philips says it’s very difficult to take day to day operation people and get them involved in a project. “The problem is they get very excited about the new project and drop the ball on their operation work. Plus the day to day operation skill sets needed are very different from the strategic skill sets needed”

Philips says companies need a different blend of people on a new project with a realistic sounding board.

“A company going through a process of change needs to embrace the negativity along the way in a very honest way. Many companies find it hard to do that.” Philips says he would like to see all manufacturers embracing change management.

“At least that first step of the journey, looking at where the business is at and where it’s going.

“And it’s important they invest some money to do these exercises, because if they just rely on government, or get the service for nothing, they don’t value it and they don’t question it,” Philips said.

Grant Thornton

03 8320 2222

www.grantthornton.com.au

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