On 25 August, 2013, CEO of BHP Billiton Andrew Mackenzie stated, “Growth for us, and growth for anybody, is growth in free cash flow and you can grow free cash flow in two ways: add more productive capacity by investing (and) you buy businesses by investing, or you can take what you’ve got and make it a lot more productive – that is as much growth for us as the other things and …Operational Excellence is making what we’ve installed more productive (and) is our principal lever of growth going forward”.
Does this represent a change in thinking from the major companies as commodity prices drop? My experience has been that large commodity companies have preferred to ‘throw money’ at large capital engineering projects to increase productivity rather than use internally driven business improvement projects to get more out of existing plant.
With reduced capital to invest and a need to keep improving business performance, it looks like its time for the large commodity companies to get serious about using its people to drive the improvement. We often wonder what results could be achieved, if half the effort that was put into Health and Safety was channeled into improvement projects, what incredible results could be achieved.
As relatively new plant and equipment gradually wear over time and hence downtime increases, it will take a focused effort to lift availability and utilisation and throughput. This will further increase the need for projects. These project need to deliver real value and will require committed and involved leadership. Leadership which wants improved results but are not prepared to be involved will not be successful. Successful improvement leadership doesn’t actually take much effort or time, but is critical for results -Involvement is not an option. So what does it take: Team meetings where improvement is high on the agenda, Improvement as part of everyone’s development plans and annual goals/objectives and a weekly or at worst fortnightly review of projects and progress made, addressing any issues the team may be having. Probably taking no more than an hour or two per week -not too much to ask if it’s so business critical.
During recent Black Belt training a participant had been a Production Manager at a UK Toyota Plant and it brought home to us the level of involvement that senior leadership had in actively reviewing Standard Operating Procedures (SOP’s) and ensuring the processes were in control. Every manager from top to bottom were expected to review SOP’s and performance on a regular basis.
The path to a successful improvement program is not easy, requiring large amounts of persistence over long time frames however results can be achieved quickly. In fact there is a ‘recipe’ that if all the elements are implemented then success inevitably follows. We have used this for several deployments and where the recipe is followed the results are outstanding. In our experience if any of the elements of the recipe are missing then the risks of a failed deployment are increased.
Most of these large companies already have internal improvement teams. Some have a decentralised structure where the Improvement specialists are embedded or part of the Production operations and others have centralised structures where the core team act as internal consultants that run projects on sites when asked (or ‘pulled’ to do so). Each structure type has its pro’s and cons. When decentralised the improvement specialists are operationally accepted by the operations however they are often pulled into non core project work, or in the centralised model, the improvement specialists have less demand for their services but are more focused on business critical projects. We’ve worked under both models.
Over the next few years, it will be interesting to see how these large commodity companies refocus themselves on internally driven improvements.