APICS - The Performance Advantage
February 1998 • Volume 8 • Number 2


Building the 24/7 Global Organization
By Philip E. Quigley, CFPIM

The new requirement for operations is to function in an environment that is 24/7/global. In other words, operating 24 hours a day, seven days a week on a global basis. The requirement on information systems in this environment has been discussed in this column before. Beyond these concerns, there is even a greater demand being put on the organization and its business processes.

This new world of business is demanding that organizations:

  • deliver products quickly (JIT) with superb quality and at a competitive price
  • develop and deliver new products on a regular, and shortened design cycle, based on feedback from the customer
  • implement new manufacturing processes on a routine basis to improve quality and reduce cost
  • work with suppliers on a seamless basis to improve delivery, quality and cost
  • work with customers on a daily basis to resolve their problems

Meeting these demands takes a first class organization that thrives on change and challenge. The question is: How do we in management develop such an organization? I believe the answer is to look at Toyota and its production system — specifically, Toyota's requirement that its suppliers and plants improve productivity every year by 2-3 percent (I've heard different numbers). Why this one aspect?

Recently there was an article in the Wall Street Journal that described how one plant that supplied Toyota dealt with this requirement. The plant had to deliver high quality products on a daily JIT basis, and it also had to cut its price every year by 2-3 percent. To meet this goal, the plant manager did the following:

  • carefully picked and constantly trained the work force
  • hired people with no experience so that they would not know something "couldn't be done"
  • hired a diverse work force believing that a diverse group would generate more ideas
  • demanded that this work force deliver a stream of process and product improvements to reduce costs using TQM tools and techniques

By doing this, Toyota has forced its suppliers to embrace change, learning and lean operations. Suppliers have no choice if they want to do business with Toyota.

The lesson for us in operations management is to take away the option of not changing. We talk about change, TQM, etc., but in too many cases we have no way of forcing the change. Toyota, by demanding the 2-3 percent price cut has forced the issue. The yearly reduction can be done using continuous improvement. Over several years, 2-3 percent reductions can add up.

Unfortunately, the usual practice I've seen is for companies to try the TQM and continuous improvements, get no improvement due to management inaction and then demand a 10-20 percent reduction and get it by laying off. The result is one year of good numbers and then the company is left in a worse situation than it started out in.

Another key lesson from Toyota is to demand price cuts, not productivity improvement. Organizations quickly learn how to fudge productivity improvement; but price cuts can't be fudged. Real cash is involved, and that can be tracked.

The ultimate goal of all these efforts is to develop an organization that can prosper in this new, fast-paced, demanding business environment. By setting a requirement to continually reduce price, the organization is forced to act differently; to act differently it must become the lean, fast and learning organization necessary for goals achievement.

Amidst all these functionality changes, senior management must also revise and change policies concerning pay and bonuses, promotion, diversity and job security. Some details are:

  • Pay and bonuses should be tied into continuous improvement, both for individuals and the organization. Incentive programs for suggestions must be implemented. These programs must be real programs where people can make money.

  • Promotions must be based on people proving their ability to lead and manage a strong group of people.

  • Diversity — bringing in and maintaining a mix of people is difficult. Management has to have a real commitment that is worked on day after day. Diversity is not a "good" thing to do in today's world — it's necessary.

  • Job security — a real commitment must be made here. If people believe they are working themselves out of a job so that senior management can get a bigger bonus, nothing will happen. The flip side of job security is a commitment from the work force to continuously improve processes and themselves.

    Developing and maintaining an organization that can succeed in today's 24/7/global world is not easy — it's necessary. The old ways of working and managing companies don't work any longer. The good news is that if you can make the change, there is a tremendous future out there. The word is full of new opportunities for companies and individuals that make the change.

    Phil Quigley, CFPIM, is a project manager with IBM Global Services, Costa Mesa, Calif. He is a member of the Orange County Chapter of APICS and teaches project and information technology management at the University of Phoenix, Southern California Campus. He may be reached at 714-438-5227 or by e-mail at [email protected]