Operational Improvement & Turnaround Management
Many companies in the sector have operations with low or no profitability. In many cases there are structural reasons in others there are opportunities to reduce costs, improve revenues and return to profitability. In case of structural reasons for lack of profitability it is essential to analytically and strategically assess the situation to reach a conclusion quickly about investment, closure or divestment of operations. Many companies in the industry have shied away from taking tough decisions for years extending the life of barely profitable or money losing operations. Often the fundamentals of a business operation do not support a turnaround because of a disadvantageous situation in raw material access, energy costs or overall uncompetitiveness of an asset with regards to market access, high fixed costs or old technology.
In case a preliminary analysis shows potential for turnaround and the business fundamentals support it, it is important to focus quickly on the key areas. A parallel approach of all areas that provide significant value to achieve the turnaround is required.
At the beginning of the process value analytics, process benchmarking and physical observations are necessary to understand the reasons for the lacking performance. A detailed diagnostics should show the areas for improvement in each function or process such as inbound logistics, inventory management, purchasing, production, outbound logistics sales or financial management. The overall strategy and organizational structure needs to be assessed separately along with the management and incentive systems in place. This analysis should yield a comprehensive list of improvement opportunities with quantified improvement targets. This list should then be prioritized according to speed and value of implementation to develop a blueprint for fast and rigid turnaround.
In the next phase a management sponsored project organization structure will have to be implemented to support the solution development and project implementation.
Based on the initial diagnostics solutions will be developed for each improvement opportunity. In some cases quick wins are possible which will be implemented immediately. The top level project management approach allows for fast alignment of resources to projects according to value potential.
In parallel the organizational structure can be assessed for potential restructuring opportunities through benchmarking and process analysis utilizing the management sponsorship to define a fitting alternative quickly.
All solutions developed, contributing significant potential for turnaround will be signed off by management for implementation according to the provided plan and timeline. As projects move into implementation a reporting and tracking mechanism will ensure progress according to plan and mitigate in case of deviations. Turnarounds are only possible if clear management commitment and drive exists to sponsor the program, projects are implemented uncompromisingly and resources are aligned properly and motivated and incentivized to achieve success. Clear dedication and priority setting is required in order not to lose focus.
StepChange has extensive experience with turnaround management and profit improvement. We apply a collaborative program management approach utilizing client employees to engage them into the turnaround and lead the projects. Through a rigid, structured and fast paced process utilizing our turnaround methodology StepChange has been able to complete multiple turnaround projects across different sites successfully leading companies back into profitability.