Minimizing risk to boost manufacturing production and safety
As we ought to have figured out by now, the most productive and cost-effective factories are not the ones with the cheapest cost per unit, they’re the ones that remain open when the world gets a little chaotic. Large organizations tend to be risk-averse by nature, preferring the status quo that has them among the biggest fish in their pond. Smaller operations are usually more willing to take risks to make a splash and become bigger. The same thing is true for both, and that’s the fact that outside circumstances change the status quo constantly. You can’t sit on your heels, or you will get left behind, even if you’re currently one of the big fish. Success is an infinite game, and measures to mitigate risk can help you win in the long run, provided you implement them in the right areas.
Minimizing risk most often requires proactive measures. Thus, it can require investment on the manufacturer’s part to guard against potential disasters. Building and maintaining flexibility across all production plants might take a lot of work on the front end, but it’s all worth it when you can easily pivot in the face of changing circumstances. Say COVID measures or a natural disaster in one country shut down production of a key product for a few weeks. If that’s the only place a manufacturer is capable of making that product, they’re stuck facing a logjam of back orders, looming shipping headaches, and angry customers.
If, on the other hand, the manufacturer can quickly shift one of its factories in another country to churning out that key product, that mountain of a problem is now a molehill. That might require a big upfront on equipment that sits idle for much of the time, along with specialized training for workers, but the ability to tell major customers that there will be zero or minimal delays in fulfilling their orders is priceless. In some cases, be it due to lower shipping costs, exchange rates, or increased demand it might make financial sense to temporarily produce goods at overseas factories and ship them to the U.S. market. If those overseas factories are capable of making the transition in a few days, the manufacturer is able to take advantage of changing circumstances on the fly.
Don’t Stop Innovating
We know innovation is key to remaining competitive. But innovation by its very nature is risky. Still, it’s not as chancy as refusing to innovate. To get the best of both worlds, there are ways of minimizing risk while making innovation part of a long-term strategy. This can be something as simple as giving a new supplier a chance to provide production materials. You can either double-purchase for a shipment or two, maintaining the relationship with your old supplier, or source a material that you could be OK without for a brief period. You might find the new supplier can offer better pricing, service, or some other intangible that makes partnering with them the right choice going forward. Or you might find you’re better off with your current supplier. At least you now know, and it didn’t cost that much to find out.
Small changes, once successful, can beget much larger ones. You might take the time and energy to review a production process or a particular machine and see if you can make it just 10-15% more efficient. If you discover you can easily do that, it means you’re producing more and more quickly and can afford to review other aspects of your operations or develop a new product. As long as you keep in mind that any innovation should be targeted at meeting unmet needs of your customers, it will be well worth the risk.
Test, Test, Test
The best way to know whether your operations new or old are minimizing risk is to stress-test them. You can do this with a risk management checklist or Failure Mode and Effect Analysis. An FMEA involves reviewing a design or process, reviewing a safety checklist, imagining all the ways the design or process might fail, then calculating the risk priority of that design or process. An FMEA form helps you calculate the chances of each catastrophe you came up with occurring. Armed with that knowledge, you can implement some risk mitigation measures, test again, and recalculate the risk priority scores. If you made the right changes, the scores should be much lower. Continue to perform these reviews on a regular basis to see if anything has changed and new risk factors have cropped up. It’s a lot of work, but it’s far better than the fallout from some unexpected and unaccounted for catastrophe.
This goes not only for internal processes in factories that the manufacturer can control, but external factories such as natural disasters. You might not be able to prevent an earthquake, hurricane, or flood from occurring, but you can assess the likelihood of such a disaster affecting operations. From there, you can go about setting up an emergency plan and running drills to train managers and floor workers so they can respond without panic when disaster does strike.
Business is risky. Life is risky. Success comes not from trying to avoid risk altogether, but from preparing well and minimizing risk when you dare to do more.