Luis began an aggressive calling plan to get his money collected, put holds on new orders for customers who were past due and began requiring deposits on large orders. Nothing happened at first. Luis stayed off kilter for the better part of two weeks. Slowly, he calmed. Payments began to come in, not enough to have a party, but enough to breathe.
“Management is about making resources productive,” I repeated. The first thing to manage is capital. Next are your physical assets.
“Our building, our equipment?” Luis confirmed.
“The first decision is to decide what is necessary. You haven’t thought about that since this company was a start up. Back then, you thought about it a lot. You outsourced some production until you could afford your own machine. Then you bought a second machine. You moved into a new building so you could bring in a third machine.
“Now, you can’t keep the second machine busy. You tell me, what is necessary?” -TF
It’s necessary to align your equipment resources with your business model and growth plan. If a machine isn’t getting used, find out why and fix that problem. If it becomes an oversized decoration in your facility, well then it’s time to clean the house.
Philip,
Your analogy of the oversized decoration is amusingly accurate. Thanks for the comment.
Do all machines need to be busy all of the time? Do all machines work at exactly the same rate? Your operation would be flooded with work in process if they all worked at maximum capacity and you still would only get out of the process what the slowest machine could produce.
“Busyness” is not effectiveness. For a better explaination and a great read, pick up a copy of “The Goal” By E. Goldratt.