An experience

I have learnt few lessons while managing business of my client in the last 15 days which I would like to share with you. Businessmen in India are facing multitude of problems in managing business. Inventory control, production planning, MRP etc which you typically learn in any Business school does not work in a highly unpredictable environment. I am not supposed to disclose the real business problems of my client to you but I can take a hypothetical case to explain how difficult it is to manage business. Imagine a scenario wherein you have made commitment to your customers of delivering the products in a given time frame based on certain inputs like available machine capacity and labour and material. What happens if 25% labour suddenly fails to turn up in the shopfloor or the material you received from supplier is rejected due to quality problems and the supplier does not have enough stock to replace it immediately, your production plan goes haywire and you will fail to deliver the goods as promised. Mind you, in this particular case, you have enough machine capacity. In fact, machines are lying idle in the plant but you are unable to produce because of non availability of labour. What is the implication in business if you fail to deliver in time. Customer may cancel the order in which case you end up carrying dead stock because the product you manufactured is make to order and cannot be sold to any other customer. More than the material cost, labour cost etc that you have incurred, you lose goodwill in the market which is going to impact your business in future. Your cash flow gets effected, your sales turnover goes down. Uncertainties cannot be factored in planning. If there is a definite pattern of absenteism, it can be factored in capacity plan but if the pattern is erratic, it is very difficult to factor it in planning. Same is the case with material. If one particular lot is rejected at the last moment and there is no other source of supply, you have no option but to wait for replacement. It will impact your production plan and ultimately the delivery commitment. I have taken only two examples to prove a point how difficult it is to honour the commitment in a highly unpredictable business environment but in real life situation, there are plenty of uncertainties which throw the best plan out of gear resulting in chaos and confusion. Timely delivery and high quality of products is the essence of staying ahead in today’s highly competitive Business environment. The challenge is to brainstorm and find some solution to cope up with uncertainties and come out winners. Based upon my experience, I have prepared a report highlighting business issues and suggesting feasible solutions. This report has been submitted to the client upon his return from foreign tour. What course of action my client takes on my recommendation, only the time will tell.