- February 6, 2019
- Posted by: Chase Gregory
- Category: Emerging Technology
How the right material management (astronaut) saved a manufacturer millions of dollars
When you say materials management to a non-manufacturing person, they often have visions of moving boxes around or driving raw materials around the factory on a forklift.
When you say materials management to a manufacturer, they often think of the most important person in the building. The Materials Manager is quite literally responsible for the lifeblood of a manufacturing facility. They manage the purchasing of all raw materials, scheduling the production of orders, and ensuring the manufacturing section hits all of its service metrics along the way.
They’re responsible for every order that comes in the door to the time the goods are shipped. They make sure the raw materials are received, sent to production, turned into the right products, and shipped on time.For example, at one manufacturer, one of their service goals was that all orders should be shipped within 48 hours of receipt of the order. Now, that didn’t matter if it was an A item, B item, or C item — items we continually kept in stock, items we made frequently, or items they had to make to order — it had to be shipped within 48 hours.
For this manufacturer, the material management person was was so good at her job, she eventually became the operations manager, overseeing not only the materials management department, but also the inside sales, production, and shipping departments.
She also worked closely with the quotation department to know when the orders were coming. That’s how she forecast her buying and production schedules. Miscommunications could result in late shipments, missed parts, or even production errors. Any one of those errors could cost tens of thousands of dollars.
Before being placed in that role, many of our materials managers were unable to do the job we needed them to do. They were quite happy to be siloed, but in a material manager’s role, it’s necessary to be cross-functional. Because they were siloed, they weren’t concerned with what happened after they completed their particular function. Because of the interconnected nature of manufacturing, being siloed will cause things to fall through the cracks. They’re not a part of the team, and so they can’t see the ripple effects of their actions.
As a result, there were a large number of mistakes made in that department that cost thousands and thousands of dollars for each error. Order errors, production errors, product defects, and so on led to a major financial sinkhole within our own company. It also had an impact on customer retention, and were losing long-time customers as a result. We ended up firing most of the management in that department and brought our materials manager in to turn things around.
““Let the person make the office, rather than the office make the person.”
What that means is that a capable person will feel a sense of responsibility for the whole outcome, as opposed to just their limited portion; a less capable person will have no sense of responsibility for the total outcome. This manager was definitely the former, and she made sure that the office matched her capabilities and expectations.
She ensured she hired the right people, they were properly trained, and their performance was also measured. The objective was zero defects or zero errors. That was measured on a daily, weekly, and monthly basis. And if a person could not meet our stringent expectations, they had to let them go; it was too expensive to keep them around.
Think about this from a business standpoint. How many mistakes are we prepared to let our bank make? One? Two? Three per month for three months in a row? Of course not. They probably get one chance, and the second one sees us looking for a new bank. So why shouldn’t we have the same expectations of ourselves and our associates?
So, if a materials management person made three mistakes a month that resulted in credit memos being issued, that was a serious performance issue. And if that went on for three months in a row, that person was no longer with the organization. That sounds tough, but when a single error often cost tens of thousands of dollars, several of those could be very costly over time.
But by finding the best person to run that office, and letting her make the best decisions, it ended up saving us upwards of a few million of dollars over the next several years.
With over 20 years of experience in manufacturing, I have visited many plants all over the country. As soon as you walk into some—- you instantly know that it is well run.
David Marshall oversaw the running of 4 different plants that were well run and the one who placed this material manager in this role that saved his company millions.
I worked with him over 10 years and I know you can trust him to help mentor your team members to become an “astronaut”.
Reach out to me to learn how you can schedule a 15 minute discovery call with David.