Is Your Decision Making in a Slump?

As more producers enhance their strategic and operational decision making, ask: Is your company poised for survival?

A slant on a business fable finds a sales manager, an operations leader, and their boss walking to lunch when they find an antique oil lamp. They rub it, a Genie comes out, and it says, “I will give each of you just one wish.”

“Me first!” says the sales manager. “I want to be in the Caribbean, on a sailboat without this blasted phone that goes off every 30 seconds.”

Poof! He’s gone.

“I want to be on the beach in Hawaii with my favorite Lean book,” says the operations guy.

Poof! He’s gone, too.

“OK, you are up,” the Genie says to the boss. The boss thinks for an instant and says, “I want those two back in the office after lunch.”

Moral of the story: it’s never too early to reverse a bad decision.

The recent exiting of brick and rooftile operations at Oldcastle is just another example of the trend of divestiture within building products. Refined decision-making technologies are driving the reallocation of capital at rates not seen since the early 2000s.

Amazon, iPhones, and Google were not “first movers” in any sense. But they ended up crushing their competition. As more concrete producers enhance their strategic and operational decision making, ask: Is your company poised for survival?

Cases can and should be made for leadership, vision, and core competencies, but one common denominator that doesn’t get enough attention is their ability to make daily complex decisions faster and more accurately than their competitors.

These companies and others rely heavily on data to make systematic decisions that are transparent with high degrees of accountability. Companies with dynamic operations where pennies saved per transaction amount to millions in a year can’t afford to lean on the traditional judgment levers of conventional wisdom, hunches, and reduced headcount to stay competitive.

Would your business see value from a review in supply chain strategy? Take this test (1= does not apply; 5= this is exactly us)

  • Improving operations is a key tenet to your long term strategic plan
  • You have at least one area where it takes an experienced subject matter expert to handle complex decisions on a daily basis. If that person left, there would be trouble.
  • Operating margins are below those of your biggest competitors
  • Your operation’s footprint is geographically spread out with multiple supply points and supply sources
  • Decisions are made on a frequent basis (daily, hourly) on how you should best use these critical assets
  • It’s not always apparent when the wrong decision has been made
  • There exists wide variability in the ways your money-making assets are used/deployed
  • There is high potential value in achieving incremental improvement between actual and theoretical
  • Asset and logistics decisions are highly repetitive and are made in pockets without a view to the bigger network picture
  • The supply chain is under constant duress from customer requirements, suppliers and regulations

A score of 35 or more suggests your decision-making process lends itself to mathematical modeling in order to find optimal avenues for underutilized assets, debottleneck key operational constraints, or improve forecasting. Tools commonly used in these scenarios include linear programs, Monte Carlo simulations, or specialized optimization software. A score of less than 35 suggests there may be more opportunities in channel strategy than in improving your competitive position through modeling.

Whichever it may be, strategic or tactical decisions involving critical assets should never be made in a “black box,” where the thinking that went into choice is unclear. The best decisions are made with the support of a visible, systematic process in which the decision criteria are understood, the range of alternatives to be considered are agreed upon, and the performance of each alternative is systematically assessed against the criteria before a recommendation is proposed. The concrete and cement industries are particularly sensitive to asset utilization and opportunity costs. Having the right operational strategy means speed, reliability, scalability and efficiency.

In this era of optimization, it’s too late to put the genie back in the bottle.

Ryan Brown is the founding consultant at Next Level Essentials LLC., a profit improvement practice for the construction materials industry. E-mail Ryan at ryan.brown@nextlevelessentials.net or visit www.nextlevelessentials.net.