We now have light at the end of the tunnel, and it’s not the 3:30 express masquerading as Covid-19. The 5 stage Risk-adjusted strategy for economic has been published, and the mobile App EskomSePush has already added this for everyone to view. Let’s all hope we don’t jump between the various levels as we do with loadshedding. If this does happen, we can’t blame Eskom, only ourselves…….
During this last week I was reading an article by Artem Kroupenev and this comment, (The Great Recession of 2007-09 accelerated the shift from the “ownership economy” to the “experience economy” and the reliance on off-shore production in order to remain competitive.) brought back memories of the early to mid-1990’s, where the global manufacturers started talking about Centre’s of Excellence for the manufacture of product families. In South Africa this later became a drive towards “Marketing companies” with manufacturing being outsourced in order to reduce the per unit cost. As China and India rose to prominence, they opened their doors to the world and today are the two major suppliers to the western economy in both materials and finished goods. The latest pandemic to strike the world shows just how this single-minded approach to cost reduction and shareholder profitability has increased business risk to unprecedented levels.
The phased opening of the economy, now that we have a roadmap, gives South Africa the chance to relook all of these lost opportunities and bring finished goods manufacture home wherever possible. The export of raw materials must also be looked at and beneficiation must become part of our long-term strategy to restore South Africa back to where we were in 2007. The “off-shoring” drive has greatly contributed to the high levels of unemployment in South Africa and it is only because of human endeavour that we have such a strong informal economy. Refer to GG Alcock’s article published on April 19th 2020 @ https://bit.ly/2Vy7le7 .
We have a very young population, and we need to create employment now, and in the future, so that we don’t unravel any further and widen the gap between the Haves and the Have nots. World history has proven time and again that this is a recipe for disaster. South Africa is already one of the most unequal societies in the world and unemployment is everyone’s problem. Together we need to make sustainable change and reducing the level of unemployment must be key to organizational strategies going forward.
The question I keep asking myself is “How can we fix Us”? We have a number of challenges. The informal economy needs to resurrect itself after the lockdown and this will take some time because of the short-term lack available cash, but these entrepreneurs are resilient and determined, as they have proven many times in the past. The formal sector must now start planning a phased start up and this needs to be done differently. Let us not go back to doing business the way we’ve always done it, because this mindset got us to where we are today.
The more affluent economies around the world will consider automation as a means of mitigating business risk. South Africa isn’t in the position to throw money at the problem, our unique situation means we need a different approach. The government is already working hard to alleviate the short-term problems with the initiatives presented this last week and now it’s the private sector’s turn to show what we can do. None of us have all the answers individually, but collectively we can create solutions that will benefit society as a whole.
Over the past 4 months, the Supply chain and operations professions have been placed in the spotlight. Already a very pressurised function in every business, they offer a big part of the solution and the platform on which we can resurrect South Africa. There are opportunities for improvement and they start with education and training. How many Executives and Senior managers know the first law of manufacturing, or Little’s law and consider them when evaluating Supply chain and operations performance? Like other professions, Operations management based in science. To quote W Edwards Deming, “Experience by itself teaches nothing…. Without theory one has no questions to ask. Hence, without theory there is no learning”
The second point to consider is changing the basis of performance measurement. Look within your business and see how departments are constantly at loggerheads, making decisions and conducting projects that provide departmental improvements, very often at the expense of the value chain. We need to take a systemic view of our businesses and realise that everything and everyone is interdependent. A change in one area impacts the organisation as a whole and yet no time is spent analysing the consequences of our actions, whether intended or not. We all therefore need to have a clear and common understanding of the strategy and business plan so that departmental plans are aligned to the overall goal.
Applying the first law of manufacturing is a start. Protecting the flow of product through a business drives return on investment and automatically protects cost; The converse unfortunately isn’t true. The more we focus on cost, the more variability we introduce into the value stream and restrict flow. Your average production manager has 2 conflicting measures for every financial cycle, the first is unit cost and the second is schedule adherence. At the beginning of the month, we keep our costs down until we see that we aren’t going to make our numbers for the month. The strategy then swings to schedule adherence and we push like crazy to make the numbers incurring overtime and additional overheads. The result is the dreaded hockey stick. We need to manage supply chains and operations in a way that promotes the overall business performance so that we can generate cashflow to fund overall business improvements.
There are a high number of graduates (include Universities, FET colleges and other tertiary institutions) in South Africa who are currently unemployed. These should be the first group we look at to strengthen our businesses. You will see improvements in the medium to long term if this group is inducted properly and given the correct level of training.
In my time in corporate and as a consultant, I’ve seen many different attitudes towards training and I categorise some as follows:
- Do the training as cheaply as possible, submit works skills programs and claim back the maximum tax relief.
- Training is a grudge purchase, because employees will only leave afterwards to work for someone else.
- Inhouse training is a tick box exercise to satisfy customer and regulatory audits.
- We don’t have time for training, we’re too busy.
- Cut your training budget, we need to save on costs.
None of these comments could have been made with a vision longer than one financial year, and looking after only the immediate future isn’t sustainable as we can see by the fact the current business risk is so high. If we are going to make a difference to unemployment and succeed as a country, we need a vision that extends to creating a collaborative and sustainable environment for the generations to come. Ask yourselves; What world do I want to leave for my children and grandchildren?
A new approach to training and education will allow all businesses, large and small to evolve into learning organizations, where we create sustainable systems and willingly invest in our future. Training needs to become inclusive and collaborative. Every training program must have both a theoretical and practical aspect, and the outcome for trainees must include understanding, application and the ability to transfer this knowledge. Training needs to become integral to businesses and a key part of every growth strategy.
To start this change, current business leaders need to make a paradigm shift and realise that every change starts at the top. It is only sustainable if continually revisited and evaluated. Be part of the change………