Companies that embark on physical restructuring projects, like plant openings or closings, often think they can easily handle them. However, businesses that internalize these moves are not always successful, and a problematic move can have dire consequences.
Here are the five most likely reasons a business could run into trouble when transferring operations:
- Failing to control the number of changes. Most companies see a physical change as an opportunity to improve additional aspects of the business. However, attempting to improve things like product profitability through design changes, IT systems, or the production process makes the move exponentially riskier. Make these kinds of changes ahead of time, and freeze them at least a month before the move. Only transfer stable products and processes.
- Underestimating the people aspects. Employees are absolutely critical to a successful transition, but they’re often overlooked. Engaging the workforce at the closing site, communicating how changes will impact each individual, and establishing fair severance packages will make things run much more smoothly. Use tools to capture “tribal knowledge” so what’s done but not documented can be transferred.
- Assuming a product is ready to transfer. Across almost every industry, I’ve found out-of-date drawings, suppliers that have changed, and undocumented deviations in place. Validating that process controls are current and used by the team is also important. Guaranteeing you know what you’ll get at the receiving site is critical. Keep golden samples from the sending site, and do CPK measurements at the receiving site to establish a baseline.
- Overloading suppliers. Suppliers have multiple challenges during transfers. They must continue to supply normal production, facilitate increased demand due to a bank build, and fill the pipeline to the receiving site. Assess the status of supplier capacity and put strong “Tier N” management in place. Once you know where your weakest supplier will experience issues, you can either improve capacity or adjust to the constraints.
- Failing to assign a project manager. Having a dedicated project manager, as well as workstream managers to analyze activities, is critical. Without them, schedule, quality, and cost problems creep in. Workstream leaders can crosscheck between product perspectives and business functions. Projects with high complexity, sensitive customer timelines, or unstable operations usually require experienced support. The cost of external help can be worth the guarantee of success.
Whether you manage a move internally or externally, here are best practices to follow:
- Achieve strategic alignment before you announce the plan. When executives expect different outcomes, it’s almost impossible to get staff aligned. The coordination of resources becomes more like herding cats. Formulate a management plan ahead of time: a single document that allows anyone on or joining the team to understand how things will work.
- Develop a quantifiable line-move model. We build models as soon as possible for our clients to understand machine capability and supply chain constraints and demonstrate the best order to move lines and equipment between plants. Quantified models can make constraints clear and explain how a bank of parts should be built and managed.
- Establish a communications cadence. Communication is difficult in any situation, but particularly with a big move. Set schedules that incorporate regular reporting, both upward to the steering committee and back down to the team members.
- Establish clear governance and control. Engage a core team that will do the work to deliver the project and a steering committee that will remove roadblocks and hold the core team accountable for results.
Underestimating big restructuring projects can affect major customers, result in the loss of business, and damage a company’s reputation. But if you plan ahead, stay organized, and get assistance when you need it, you won’t be caught off-guard by the challenges ahead.
Ambrose Conroy is the founder of Seraph, which works with clients to transform, relocate, or restructure business operations. Seraph consultants bring experience in exploiting emerging markets, wringing profit from troubled operations and accelerating product development. Confroy works with automotive, aerospace, energy, and medical technology companies.