Get Back to Basics

At an operations management workshop a while back one of my co-presenters passed out laminated cards showing a drawing of a button and a caption that read, "Magic Button." There it was, at long last, the answer to every manager's prayers. Where had it been hidden? How did he find it? Why was he giving it away? Did he know how much it was worth?

When we pressed on the button you can guess what happened. No beep. No buzz. No marvelous turning of gears. Nothing. The point he was making is that there's no such thing as a magic button or a silver bullet—or a radical management strategy or a whizbang piece of new technology—that will make all of your problems magically vanish. If only it were so easy.

At a theoretical level—excuse the business-school jargon—an above-average distribution operation achieves superior efficiency (cost competitiveness) and customer responsiveness, and it maintains that high performance over time. In real life this might be reflected by inventory that turns 12 times per year instead of an industry standard of five turns. Or it could be an order-fulfillment process that delivers product to customers within one day (at a higher margin) instead of the standard three days.

Such superiority does not flow from a single big idea or some innovative piece of equipment or new technology, although they can help. The rate that a company adopts new ideas and new methods of getting work done faster at a lower cost has an iterative effect, like a power boost in a video game, which propels an organization forward. Likewise, a willingness to invest in new technology when it generates a sufficient return on capital will also contribute to superior performance.

Eventually however, new ideas become common practice and technology becomes outdated. An operation may not have a clear edge over its competitors in either leading practices or technology, yet it may still lead its industry by executing the basics better than everyone else.

Every business function, including material handling, has basic competencies that can be performed more or less well. A distribution center achieves superior uptime from its fleet of lift trucks because technicians perform all preventative maintenance exactly on schedule. A factory reports accident and injury rates that are a fraction of the industry average because the management team makes safety a top priority. In both of these examples the difference between mediocre and stellar performance isn't additional resources or more people, just basic good management.

Indeed, because it reflects a disciplined culture, safety performance is a prime indicator of an organization that has mastered the basics. After all, what could be more basic and more important than everyone going home at the end of their shift in the same condition in which they arrived? Have you ever heard of a world-class operation where many employees were being injured?

No matter what initiatives managers may launch, mastery of the basics can mean the difference between success and failure. This is more obvious today because we're in a period that's relatively free of management fads, which tend to be repackaged versions of good management practices in any case. The precepts date back much farther but lean manufacturing has been with us in name since 1988. Six Sigma, itself the reincarnation of well-known variation reduction techniques, has been around since the mid 1980s. Each has passed from a craze and a movement—as stated by General Electric, one of Six Sigma's early proponents, in a recent annual report—into a way of doing business for the leading companies in many industries.

Of course software vendors and radio-frequency identification proponents will continue to dangle the "Revolutionary!" benefits of "real-time" material visibility before us. But as the majority of companies adopt them, the competitive advantage from these new technologies—and the next new technology, and the next new technology after that—will come down to which organizations implement them best, and integrate them with basic good management practices.