Many Operations executives spend a great deal of time trying to figure out what the capacity of their operations is. I suggest it is always much more than you think. I found this out through an experience at my prior company.
I was VP, Operations, and one day the VP, Sales came into my office and told me that our biggest competitor was experiencing a major product failure. If we could almost double our output for 120 days, we could scoop up a number of major accounts, shutting our competitor out of a key segment of the market. His question was, “Can we do it?” I said “of course,” and then when he left, I thought, wow, how are we going to do that?
We named this challenge “Project 45.” We had to go from 25,000 units per month to 45,000 units for three months, then ramp back down to 25,000. We thought that our capacity was in the neighborhood of 25,000 units. We did three key things that helped achieve our target.
- First, we went to the employees and explained what we needed to do. I had gone to the CEO and CFO and got them to agree that we would pay a bonus to the employees of a percentage of the added gross profit above 25,000 units. We would also need a lot of overtime and would have employees from other parts of the company help on the production lines.
- Second, we created a measurement system much like the United Way thermometer to track our progress and make it visible to everyone.
- Third, we went to our key suppliers and explained what we needed and the great opportunity for them if they could quickly ramp up while maintaining quality and on time delivery.
The project was a resounding success. We actually had suppliers work Thanksgiving Day for us. We hit 64,000 units the last month and we won a number of major accounts, effectively crippling our completion. While we knew that 64,000 units was not our true capacity (it was a one-time flex), we knew our capacity was much higher than 25,000 and the employees believed in their ability to produce beyond expectations.
The best part was when the project ended just before Christmas, I got to put on a Santa Claus hat and pass out bonus checks to the employees equal to a month’s pay. It made for a very Merry Christmas for all of us!
© 2011 – Rick Pay – All Rights Reserved