“I Know We Need To Expand, But The Risks Are Too High” (Lesson 1)
You’ve started your business and you’ve probably secured some reliable contracts, and now orders are flowing in and steadily growing. You managed to set-up your operation in a facility that you could afford, with a production process that’s been able to get the job done—for now.
With increasing sales, you’ve noticed increasing challenges in the facility’s capacity to keep growing efficiently. Larger production runs are taking longer to complete, which in turn consume larger proportions of your weekly production line availability and are compromising your capacity to complete some or more of your smaller production runs. Increasingly you’re asking your staff to work more overtime or weekends, as you’re at risk for missing orders or having to decline new business opportunities.
This is a challenge that every growing factory will face on multiple occasions, as it expands to its natural limits and tries to take advantage of growing orders and new business opportunities.
Even the largest manufacturing companies around the world grapple with the dilemma of maximising sales from the existing facility, versus when and how best to expand so the business can grow at its optimal and most sustainable rate.
They’re constantly asking the same questions, such as:
- How can we extract more production from our existing production facility?
- Are our inventory stores adequately optimised to maximise our production capability and cope with unplanned promotion orders or once-off “monster” orders?
- How do we improve production planning and communications across key operational departments and staffing representatives?
- Are we enabling and encouraging our staffing pool to deliver the best contribution that they’re trained and capable of?
- Are there current staff who aren’t achieving their full potential versus staff who are contributing the lion’s share and/or getting the best results?
The Mindset Challenge
One of the biggest challenges relating to this expansion dilemma is mindset. Whilst the current operation may be increasingly difficult to manage or stretched in supplying larger and brand-new orders, this often seems less concerning and less risky than jumping into purchasing equipment to expand current capability or capacity.
Simply put, rather than venturing into uncharted territory to realise the next growth stage of business, it feels safer to stick with what you know (despite the increasingly chaotic nature of the situation).
The perceived risks around expanding your current operational capacity or capability can often seem overwhelming. What if you…
- add complications to the existing production process,
- buy the wrong equipment or are simply let down by your nominated equipment supplier(s),
- install the equipment incorrectly or with incorrect spacings or conveyor lengths between major equipment,
- are out of production during the changeover phases,
- need process validations or verifications when switching to new equipment,
- must train staff when the new equipment comes online, or
- require excessive extra technical support after the new equipment has gone into operation?
Well, before you start to worry about these perceived risks, step back and take a minute to ask yourself whether there is any additional hidden capacity that can be unlocked by revisiting your existing production processes.
You may not need to go the expansion route as your immediate next step, depending on how you answer a few questions.
To Expand Or Not To Expand
There are four questions I have learned that will give you a good indication of whether you need to expand your production facilities or not. Answer them honestly!
- How well is your inventory management performing?
- Are you optimising the people and machine interactions in your facility?
- Are your finished goods and distribution channels adequately developed?
- Is your current production shift capacity fully utilised?