APICS CEO Abe Eshkenazi CSCP, CPA, CAE -
April 20, 2012
Combing through the news this week, I observed a theme. “Sony’s New CEO Vows to ‘Revive’ Company” appeared in theWall Street Journal [subscription needed]. “Best Buy Should Act Urgently to Repair Company,” was a headline on the MSNBC web site. Best Buy and Sony are at a crossroads. These once-venerable businesses are struggling to capture customers.
Best Buy recently posted a $1.7 billion quarterly loss, and it is shutting 50 of its stores. The Best Buy business model is taking a beating from the likes of Apple and Amazon. Likewise, Sony announced plans to cut its workforce by about 10,000 and experienced a fiscal year loss of $6.4 billion.
But this week, I don’t want to discuss failing companies. I would rather consider how struggling companies might find success again by learning from Honeywell International. This week’s Economist outlines how leaders at electronics manufacturer Honeywell started paying attention to the details and turned things around.
In 1999, Honeywell operated mostly in the controls and aerospace realm. Although it kept the Honeywell name, it was bought by Allied Signal, an aerospace, automotive, and engineering firm. There was a clash of cultures. According to the Economist, Allied Signal was too wrapped up with cost control, arguably at the expense of long-term investment. By contrast, the original Honeywell was known for being customer-centric and creative, but not for its execution. Another blow came in 2001, when the European Union blocked Honeywell’s acquisition by General Electric because of antitrust considerations.
In 2002, David Cote took the reins at Honeywell and worked to instill in the company a culture that now includes a new production system. By implementing a commitment to continuous improvement, along with six sigma and lean manufacturing, Honeywell’s sales in 2011 were 72 percent higher than in 2002. With customers such as Intel and Samsung, it boasted profits of $4 billion.
Right down the road from APICS headquarters is a Honeywell plant in Lincolnshire, Illinois, that, through this new production system, has experienced significant productivity improvements. “The production process used to consume the factory floor; now, it uses merely a quarter of it. This has freed up the rest of the factory to make lots of other products. The factory makes more stuff, generating more revenue, with essentially the same head count, square footage, and energy consumption.”
Back to basics
The Economist describes changes at Honeywell that aren’t revolutionary to those in the APICS community. But, these changes did manage to turn a struggling company into a success story. Therefore, it might be worthwhile to review some basics. Consider the definition of continuous improvement as it appears in the APICS Operations Management Body of Knowledge Framework:
“Continuous improvement means an ongoing effort to expose and eliminate the root causes of problems, which leads to incremental improvements over time. In six sigma, the improvement process has five stages__define, measure, analyze, improve, and control. The stages are grouped collectively as the acronym DMAIC.”
Like the leaders at Honeywell, you can apply some of the basic principles in the APICS body of knowledge and make a big difference in your company’s bottom line. APICS has the resources to help you make that happen. Visit apics.org to get ideas and learn more about APICS classes, conferences, and certification.
Now, you can take the APICS Operations Management Now discussion to your social networks on LinkedIn, Facebook, Twitter, and the APICS Supply Chain Channel. Be sure to use the hashtag #OMNow and include @Tweet_APICS in any tweets to have your words featured on the APICS homepage.
In other news
- What can your company learn from Honeywell?
- Does your company engage in continuous improvement?
- Is it time to go back to supply chain and operations management basics?
- How can Best Buy and Sony revitalize themselves?
Related APICS education
By John P. Collins, CFPIM, CSCP, and Eric P. Jack, PhD, CFPIM, CSCP
March/April 2012, APICS magazine
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In the Right Space
By Richard E. Crandall, PhD, CFPIM, CIRM, CSCP
January/Febuary 2012, APICS magazine
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