A Perspective on Operations and Project Management for Profitability

operations-projects-profitability

The interesting bit about the confusion that surrounds these terms isn’t our daily tasks or our reactions to these daily tasks. The confusion stems from the manner in which we react to the surprises that each environment throws up and how we are for some reason always surprised when faced with them.

Seems confusing? Let’s step back for a minute. Where does the confusion come in? Both environments are impacted by uncertainties that make life difficult, albeit in their particular way. The difference between the two sets of uncertainties, however, is how we allow ourselves to react to the surprises in each environment, whether repetitive or one time. How we manage them so that our goals and objectives are always achieved to plan.

To truly understand these environments, we must ponder over a few questions which keep cropping up in our day to day management:

  1. If Operations is a repetitive activity, shouldn’t murphies (after Murphy’s law or uncertainties) be related only to external dependencies such as design changes, or non-availability of materials and resources rather than operations planning issues? If I were to go one step further, I’d posit that even these external dependencies are repetitive.
  2. When operations planning is well managed, shouldn’t our plant run on an auto-pilot mode with predictability in murphies? However, auto-pilot in operations is often a mirage because there are just too many internal challenges. More so than external ones. We also spend more time managing these internal issues as they are far easier to handle as compared to external ones.
  3. Why do external issues tend to be hidden in the closet until they escalate into an emergency requiring the expertise of senior leadership? Yes, it is a universal truth – the role of senior leaders is often validated by their firefighting skills. Most organisations have a few on the rolls and are quite proud of it.
  4. Is it really all about capability and skill in managing issues? If that is the case why do we often end up with a solution in the end when the client is screaming at us down the phone or when senior leadership steps in?
  5. Is everything about capacity and time? If so, how do we always have that big push in our turnover in the last month of the fourth quarter of the financial year? This one is a killer and should give us pause and make us really evaluate our environment and company.

Even if one were to go back and replace operations with projects in the above, the challenges would seem similar. Possibly the only reason projects are generally managed like an operations environment as if everything is repetitive and operations like projects as if everything is unique. Any wonder then that companies are struggling to deliver and meet profitability targets in both while leaving customers thoroughly unsatisfied?

Fabtech as an organisation is uniquely placed to understand these issues. We are a made-to-order (equipment manufacturing) company that also designs, manages and commissions projects to provide a complete 360-degree solution for our customers. You could say we are the only single source project management company in the world with its own manufacturing.

Let’s share some of the understanding of both environments we have learned through years of experience – a prerequisite to understanding how we do things differently and successfully.

For any environment to ensure flow and deliver profits, we must focus on the right things. In the case of operations it should be about protecting capacity, and for projects, it has to be effective time management.

It is essential to understand that in a pure operations environment, out of the total lead time for doing the work, ‘wait’ times are much higher as compared to the ‘touch’ or the ‘do’ time. Fabtech manages this in our made-to-order environment by recognising that the major driver of capacity is never internal. It is all about the speed at which we procure long lead time items and convert order books into dispatchable orders that are less prone to design changes and ensuring we take the right orders into production.

Our experience has taught us that the more time we spend on negotiation and design approval for long lead time items, which don’t really change, the lesser time we have available to us to manufacture. Lengthy negotiations on long lead items eat away at profits and have no incremental benefit.

At Fabtech we initiate the process from the start, during the sales cycle and subsequent handovers. Once we have clarity on long lead items, the design team has sufficient time, and we can still procure the rest of the items in time for production to deliver the final quality product. By ensuring we focus on the right things, we free up capacity constraints.

In a project environment, when we talk of lead time, it is precisely the opposite. Of the total lead time available for getting the job done, ‘touch’ time is much higher as compared to the ‘wait’ time. The focus, therefore, is in our ability to seek early warning signals from resources who are engaged in the work so as to guard time available with resources to complete the tasks, fiercely.

Since all projects are unique and each project is literally a first, the real issues on the project that can impact project deadlines do not emerge until the on-ground resources start work and the project is well underway. In most situations, the team believes they have everything under control and are unaware that small issues can snowball into more significant challenges that impact timelines. This often results in senior management and experts being brought in at the last minute to get things ‘under control’. Opening lines of communication at all levels, clarity on what must be escalated and when, and management keenly receptive to signals at every stage of the project will go a long way to dispelling the notion that projects are always delayed, and that’s how the industry functions.

At Fabtech we have aligned processes to ensure we manage ‘Operations’ as operations and ‘Projects’ as projects, which has improved our on-time delivery in both the made-to-order and projects environments. Subsequent blog posts will explore each of these environments in detail along with initiatives we have undertaken to ensure better management for profitability and growth as well as an ever-increasing list of satisfied customers.

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