Sometimes very successful managers grow to believe that they are invincible. Such was the case with the new general manager of food producer ABC Company. At ABC Company, products had to stay frozen until people were ready to consume them. But the business had a small freezer that could only hold a few hours' worth of production. The good news was that the firm enjoyed a long-standing relationship with XYZ Company, which would haul away food production every few hours and distribute it via a network of refrigerated trucks and warehouses. For many years, this resulted in mutual profitably.
However, the new manager at ABC Company was frustrated. He saw that the factory was operating at about one-third capacity and wanted to develop a new product that would turn the excess capacity into a river of profit. He worked with the XYZ Company vice president to plan the new product’s manufacturing and distribution. The launch was successful, and both businesses were justifiably proud of their accomplishment. Unfortunately, the pride was premature.
ABC Company’s production and XYZ Company’s subsequent distribution had impressively absorbed the new product, but ABC Company’s receiving, storage, and internal material professionals could not handle the additional volume. The increasing chaos proved prohibitively expensive. The general manager wanted his company’s inbound activity to be as efficient as the outbound activity managed by XYZ Company. Seeing an opportunity, XYZ Company’s vice president proposed that his company manage ABC Company’s inbound activity—even though his firm had no experience doing so. ABC Company’s general manager agreed, signed a contract, and was convinced his management magic had launched another success.
Of course, XYZ Company was accustomed to managing frozen end items for which the expiration clock did not start ticking until the food was thawed after being sold. Front-end expiration dates, however, are a big deal. Also, some ingredients required refrigeration, not freezing, and the receiving refrigeration room was insufficient. They had to rent refrigerated trailers and a yard in which to park them. The yard was small; some trailers got stuck behind others; and, in the urgency to service production lines, the trailers in back were ignored, and the products inside expired. XYZ Company had turned a trickle of waste into a storm.
After a few months, XYZ Company requested a price increase so it could add resources. But ABC Company’s general manager expected XYZ Company to abide by the agreement, even if it was losing money doing so. XYZ Company threatened to quit serving ABC Company, which, in turn, threatened to sue for breach of contract. That’s when the consultants were called. It just so happened that these consultants were a professor from Michigan State University and myself.
Both organizations hoped we had a magic bullet that would enable XYZ Company to successfully serve ABC Company with its existing resources. We had no such bullet. The contracted price was unsustainable, neither party could be successful without the other, and it would be terrible to destroy a time-honored business relationship.
After much discussion and quelling of tempers, we suggested that the firms cancel the contract for front-end management. We also pointed out that ABC Company’s general manager had been successful at planning back-end processes for the product launch, and now the front end required equal attention. He humbly admitted that he did not understand front-end processes. So we helped him establish procedures and hire an experienced receiving supervisor, whose first act was to triple the size of the receiving refrigerator.
There is no magic bullet and, by the same token, there are no magic managers. Eventually, even the best ones slip up.
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Randall Schaefer, CPIM, is an industrial philosopher and retired consultant. He may be contacted at firstname.lastname@example.org.