Cost reduction almost always takes center stage in an economic downturn. When the pipeline begins to hollow out and sales flatten and start declining, the natural reaction for a manufacturer or any company is to reduce both variable and fixed costs. We've seen this reaction in poll after poll here at Managing Automation. In fact, MA readers signaled last fall that cost reduction had become their top priority looking ahead to 2009, ending nearly three years of emphasis on growth initiatives.
The focus on cost reduction this year remains firmly in place as manufacturers try to adapt to the economic downturn and all that it has meant in terms of declining sales, less cash on hand, and the need to remain profitable. But just below the surface of cost reduction activities lies another set of initiatives that manufacturers are increasingly relying on to both get through the recession and better position themselves for the recovery that will follow.
It's not some big, new idea from a management guru, nor will it require you to turn your company upside down. It is simply the idea of driving operational excellence throughout the company. Better-run operations can yield not only financial gains, but also faster time to market, higher customer satisfaction, and greater employee productivity. Stepping up operational excellence in a recession puts a premium on performance based on the realization that cost reduction alone won't be enough to ensure competitiveness. It's like an athlete preparing for the toughest game of his or her career. The old routine just won't do.
Getting to the next level in operational excellence is very much on the minds of manufacturers this spring, but getting there is no simple task. In a new poll conducted in cooperation with IDC Manufacturing Insights, readers of MA's sister publication in Europe, Manufacturing Executive, said that operational excellence is a key strategy for them during the recession. In fact, a solid majority of poll respondents, 56.5%, indicated that the importance of operational excellence — encompassing quality; lean, Six Sigma, and other continuous improvement initiatives; demand sensing and forecasting; and green manufacturing — is increasing this year.