As global economies reopen, we are presented with unique challenges and opportunities. It is possible however, to take advantage of the chaos and make positive impacts and a more resilient future.

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In April the US began to emerge from the grips of the pandemic. It’s not so much a slow unwinding but more like an exploding spring. Demand for products and services is intense while companies’ ability to deliver is, let’s say… challenged.

Different parts of the world are coming on line at different rates and in direct correlation with decreasing Covid19 cases. That means for example, that Europe is about four months behind the US. Other geographies are slightly ahead or further back for various reasons, mostly related to vaccine access or acceptance. The demand curve will continue to oscillate up in predictable ways, along with the chaos of restarting literally millions of businesses. This syncopated global start-up means the economic tsunami will be roiling around a while – years perhaps. With that comes plenty of uncertainty, along with now obvious problems in supply chains, human resources and constrained capacities.

Caught Off Guard

Because there was an expectation that the ramp-up would be more gradual, businesses were caught off guard by the demand surge. There was a lot of tinkering during the last half of 2020. Everyone was working on things like line moves and people reorganization, inventory and asset rationalization, ERP implementation, cloud migration, etc. While various projects aimed at fixing things were (and are) underway, the resources required to complete them are trapped in a real-life game of Whac-A-Mole, trying to hammer down the most pressing emergencies as they arise.

When something happens that is a threat to survival or success, there is a strong tendency to react. This is a basic survival behavior – we all do it. Along with everyone else, you’re now operating in reactive mode. The question is, will you also integrate broader, more proactive solutions to drive sustainable, long-term resilience and come out of the current environment better positioned than your competitors?

Let’s take a look at several areas currently plaguing the global re-start, what you’re likely already doing, and what you should be doing to create a better foundation for success.

The Supply Chain is (Still) Broken

No surprise here. Every element of the supply chain from raw materials to sub-assemblies to shipping and warehouses is in recovery mode. Talent and labor pools are dry, assets are in storage, businesses have disappeared altogether or are entangled in mergers and acquisitions. Everything is (dis)connected. Supply and demand will sway back and forth as the recovery unfolds. But one thing is certain – demand will continue to outpace supply. This problem isn’t going away any time soon.

Reactive Mode (You are): Chasing critical part shortages, balancing labor with material availability, over-managing inventory and paying premium freight. And don’t forget time spent dealing with customers who are being shorted by ‘your’ supply chain issues.
Proactive Solutions to Pursue (You should): Rationalize suppliers by category of importance (A-B-C) and build better relationships with critical suppliers. Conduct a real risk-assessment with an action plan and review quarterly at least. Dual source the most critical components and optimize your network to shorten lead times.

Human Resource (HR) – Big Challenges Here

Everyone needs key talent in key roles. It’s not so easy now. People were released, retired or found other things to do. Many remaining workers are in new positions. Those with the tribal knowledge who could have prepared new team members are gone.

A hybrid model of remote and in-person work is here to stay. The nature of the work itself is different and continues to evolve. Employees have tasted the freedom of remote work and they want choice. Companies who do not offer some form of hybrid where possible and, who do not work to optimize this model, will lose people to those companies that do.

The rapid shift from downsizing to upsizing has caught Human Resource in many organizations off guard. For more than a year, all energy was put into getting smaller. Suddenly everything shifted to adding and retaining talent. It can be difficult for organizations to turn so quickly, especially in cases where HR processes were not robust to begin with.

Reactive Mode (You are): Filling critical vacancies NOW and dealing with stay incentives. If external resources are not available, internal resources are being reassigned. You’re attending to morale and engagement issues after a year of high anxiety.
Proactive Solutions to Pursue (You should): Simplify and streamline underlying HR processes like Hiring, Onboarding, Engagement, Training, and Retention. Focus on waste elimination and capture relevant metrics (time-to-hire, turnover, engagement). Elevate the Human Resources function – it’s going to be even more vital in the years to come.

Demand Exceeds Capacity

In the fight for customers and revenue, “out of capacity” is one of the most difficult things for any organization hear or bear. Yet, it’s quite common now. Businesses that made it through the pandemic have current demand and forecasted business that exceeds pre-pandemic levels. That’s right – more business than they have ever seen before – and this is with the global economy less than half up and running.

Besides the obvious pent-up demand from a year of lockdowns, businesses that survived or even thrived until now are gaining new opportunities and sales from competitors who did not make it. It’s a good problem to have but frustrating when so many puzzle pieces are missing. Gaps in asset availability (people, facilities, tools and equipment), quality and material flow are targets for quick capacity improvement.

Reactive Mode (You are): Doing triage – addressing each emergency as it occurs and ignoring everything that isn’t. Over-communicating with customers about parts and service shortages to avoid surprises. Re-balancing workloads in the bottlenecks and carefully managing inventories. Enabling quality at the source to improve yield. Paying overtime. Meeting each critical need with its own solution.
Proactive Solutions to Pursue (You should): Analyze the value streams that are struggling and implement solutions that go beyond single function quick-fixes. Performance problems such as efficiency, quality or asset utilization are always multi-faceted and span numerous areas. Beyond technical solutions, get your people more engaged in solving these kinds of problems and sustaining the results.

No Easy Answers, but Some Logical Steps Forward

The problems described here are rampant across the board, so you’re not alone. Many leaders and organizations will continue in reactive mode – bending to the tyranny of the emergency. This is a cycle that leads to faster burn-out with teams already fragile from 18 months of pandemic-related stressors. Others will recognize the opportunity to lean into these problems and make fundamental changes to processes and systems. To get started:

Prioritize and bin opportunities. Look for synergies.
Align your Leadership team around a cohesive plan and articulate it with one voice. This will reduce organizational anxiety and prevent assets from being pulled in opposing and un-prioritized directions.
Clarify objectives for the entire organization and describe the ways they will be achieved.
Use a formal project structure to get more of the organization engaged, spread the load, and speed implementation.

It’s a strange world right now with lots of distractions. The true opportunity lies in getting organized and addressing the system, not just the symptoms.

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If you have a comment or story about any of this, we’d love to hear it – drop us a note.

If you’d like to hear more about this subject or how we can help with your business specific issues, call us at +1 317 818 2430 or hit the contact button on this page.

Feedback from Colleagues – A Moderated Thread

If you have a story to post, send it to me: jtimpson[at]kaufmanglobal.com

Putting on a lean hat I’d say:

Review your value streams, especially those hostage to supply chain problems or a real capacity constraint, for near term improvement opportunity.
Prioritize value stream improvement projects to quickly fix what you can, perhaps freeing up labor for other areas. I use 25 – 30% for first pass VS capacity improvement, which could potentially reduce the need for more labor relative to historical performance.
Conduct 80-20 analysis on products and customers. Though most companies are loathe to do this it may be a good way to further focus on the most important stuff. Perhaps some products and customers can be offered lower service or higher price, or dropped altogether.
Such an approach would fit within your leadership alignment and formal project structure approach, but perhaps with a more action oriented approach. The whole system doesn’t need to be in place before you start improving things and train by doing is a good way to build buy in to move forward. Also, for labor constrained operations an employment security pledge at the outset should be easy to give to address fears of employment loss (but not necessarily job change).

~ Bill Roper, Roper and Associates

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I always tried to maintain my focus on Adam Smiths principals and barriers of trade. They formed the base of how I developed many of my solutions.

Information: What do you have that I want or need?
Negotiation: What will I have to give to get what I want or need?
Transportation: How do I get what you have to give me to where I want to use it?
Enforcement: How do I know I will get what I want, in the quantity I ordered, with the quality I demand?

All of those 4 things have costs, reducing any of those costs will increase trade and profit to all involved. It’s that simple and that complex. But the important thing is ALL business fall into this, all of them.

All business:

Take something (Inputs Accounts Payable, RAW Inventory)
Do something with it (some sort of process, WIP Inventory)
Put it in something (wrap or container, Finished Goods Inventory)
Exchange it for payment (money, Accounts Receivable)

Just keep the focus on the essence, all the rest is noise and distractions.

~Martin Donegani