Just One Step to Bankruptcy

 26/03/2019
By Dr. Shigeyasu Sakamoto
Just One Step: From Success by Productivity to Bankruptcy
Real Story: a CEO and His Short and Very Short Term Thinking

This company has successfully developed a unique product that has helped keep the company’s performance so far. The company’s financial performance has not been preserved in the long run, so a main bank sent the vice president who hired a person from outside with top management experience, resulting in excellent productivity and consistent profitability improvement in a company, the hired methodology being MDC.

Then a MDC consultant was invited there, the company started FS, feasibility study concerning productivity and profitability for three months. The FS result shows the possibility of reducing the number of workers in a shop by 30 workers without capital investment. This meant 200 percent of productivity enhancing. Then after the performance control system would have been implemented, workers’ performance level would have been improved from 60% to 120%, measured with high task standard. So, within the shop a total 300 percent productivity improvement possibility was identified using mainly MDC and performance control.

After the presentation of this FS results, the top management asked the consultant that he could fire the 30 workers immediately as a consultant. Immediately after, the consultant replied NO of course, because FS is not auditing and/ or improvement itself, it is just estimation of MDC effectiveness and performance control as well. So, the MDC consultant support did not start the project, and the company went bankrupt two years later.

The CEO was the founder and owner of the company, and he simply asked the consultant for the above. He had a lack of modern management. Rationalizing and improving productivity are quite different and an MDC consultant never proposes to dismiss people for simplification.

As the figure shows the reduction of product cost, then BEP, the break-even point comes down from A to B, it makes the profit increasing, even present revenue, the possible result leading to increasing sales and production volume as well, so there is no need to fire employees.

The consultant made the presentation to the company, there was gold mining, however the CEO couldn’t find and catch the gold.

The following figure shows what could have been happening with the MDC application – Break Even Point (BEP) improvement through MDC (from point A to B):

So, What Do You Think?

Why do you think short-term thinking is often chosen to the detriment of a consistent productivity program?

Why are some CEOs quite reluctant to the obvious data presented in the above figure (obtained with measurements and materialized in a feasibility study of future productivity and profitability possible)?

References

1. Manufacturing Cost Policy Deployment(MCPD) and Methods Design Concept(MDC), The Path to Competitiveness,  Alin Posteuca and Shigeyasu Sakamoto, CRC Press, USA, 2017.

2. Beyond World-Class Productivity, Industrial Engineering Practice and Theory, Shigeyasu Sakamoto, Springer, UK, 2010.

3. Design concept for methods engineering in Maynard Industrial Engineering Handbook, the Fourth ed. Hodson, Shigeyasu Sakamoto, McGraw Hill, 1992.

Dr. Shigeyasu Sakamoto is a management consultant in productivity and profitability improvement and president of Productivity Partner Incorporation - Japan. Before his current appointment, Sakamoto was vice president of Maynard MEC AB (Sweden) and vice president of JMAC (Japan).

Dr. Sakamoto is a Fellow at the World Academy of Productivity Science. He received his doctorate degree of policy science from the Graduate School of Doshisha University in Japan and is certified as a P.E. by the Japanese government. He is also certified as: industrial engineer from the European Institute of Industrial Engineers, international MTM, method-time measurement instructor from International MTM Directorate (IMD), a MOST instructor from Maynard Management Institute and Work-Factor and Mento Factor instructor from WOFAC Corporation. He worked for the IMD as the technical coordinator responsible for developing a new system of MTM. Sakamoto is a senior member of the Institute of Industrial Engineers in USA.

Dr. Sakamoto has more than 50 years of management consultant experience and he has very good feedback from his clients - top management - especially regarding the direct contribution to corporate performance with his own developed methodology of MDC, method design concept and work measurement rather than introducing a lot of fashionable topics. Basic industrial engineering technologies are not hackneyed. Effective results come when industrial engineers know how to use the technologies and demonstrate their abilities. This includes going back to the basics.

Dr. Sakamoto insists that the fundamentals for a higher level of Syakaku is only possible to reach through a higher level of profitability based on a higher level of productivity. There are so many arguments and targets for improving productivity for the purpose of competitiveness in the world market. However, poor levels of productivity and profitability only compromise higher corporate dignity, which is Syakaku.