Stop the Pendulum!

Podcast Series: Finish Strong® – Fulcrum ConsultingWorks Inc.

Following the inflation, high interest rates, and economic downturn of the late 1970s and early 1980s, American manufactures felt significant price pressures. They, wrongly, believed that offshoring production and sourcing to low wage rate countries was the only way to remain competitive.

As they complicated the supply chain and extended lead times, they also began to listen to select parts of the Toyota Production System. Select, as in they chose to see Just-in-Time as reducing inventories rather than designing systems to meet customer demand just in time.

The combination of offshoring, adding complexity, and reducing inventories locally was a bomb waiting to be lit. Covid did just that.

So what are a number of US manufacturers doing now? They are swinging the pendulum back the other direction by jacking up inventories and relocating sourcing to the US.

That makes no more sense now than the decisions to offshore made before. The unintended consequences are in most cases foreseeable, if only we look.We shipped middle class careers to other countries. Wage pressures in the United States are mounting as every industry faces labor shortages. Just how will re-shoring solve your problems now?

When is the last time you spoke with “customer support” that is located in the United States? We outsourced our customer relationships to India — an educated and English speaking country with low wage rates. Because services are less impacted by supply chain disruptions, no one is discussing moving that back to the US.

While the thinking of businesses advances in some areas, in critical ones it seems to swing as a pendulum. Core competency, or vertical integration, or conglomerate? Look at the historical trends, and its easy to see the near future. Outsource, face a problem, then in-source. Lower inventories, run out of things, raise inventories.

Where is the strategic problem prevention and solution? Going back to what we used to do may be quick and comforting, but that doesn’t make it wise.

If you haven’t developed a robust supplier selection and development process over the past decade, you’ll regret making changes now. Bouncing from one undesirable situation to another is not the goal.

While speed is important and highly valued, actual strategic thinking is more important.

If you insist on moving quickly, and for some of you there is little choice, at least identify the very predictable problems that the quick moves will create. Develop plans quickly to minimize the negative impact.

Agile was never intended to mean bounce from one bad decision to another. The value in agile capabilities within your company is its fast learning, fast change incorporating that learning, and then fast learning again.

If you skip the learning, incorporate learning steps, you’re not agile. You’re just chaotic.

Stop the pendulum from returning you to prior problems.

Think. Analyze. Rely on robust processes you’ve put in place.

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