This post, Who Owns the Problem, is from our first ever newsletter.
Published in February 2007.
It is re-posted in celebration of our 250th edition.
Recently I have been working with an organization to help identify opportunities relating to their indirect inventory.
I won’t provide specifics about the company but I will tell you that an inventory reduction opportunity in the order of $10M has been identified. In addition, it has been agreed that an inventory reduction of this size would also provide a cost reduction in the order of $2M per year.
These numbers have not only been identified but have been agreed to by a number of senior people in the organization. We now have an agreed problem (overstocking), an agreed solution (the Inventory Cash ReleaseTM Process) and a benefit measured in the tens of millions of dollars. We should now get on with realizing that benefit, right?
To my surprise the people in the organization that I am dealing with have decided to shelve undertaking a project to realize these gains for at least 9 months and maybe a year. The reason? Nobody owns the problem!
The inventory reviewed is MRO and Indirect inventory and there is no alignment of accountability and influence for the investment in this inventory.
The finance team is concerned (hence they brought me in) but they don’t have the influence to get something done.
The maintenance team is concerned but are not measured or rewarded by an improvement in this area.
As no one is held accountable for this inventory there is no action and the opportunity is not realized. And don’t forget that the opportunity cost of the delay will be in the order of the $2M annual benefit so this is quite a decision!
In my experience this company is not alone.
Many companies have opportunities that are known and agreed to but not actioned because no one owns the problem.
So how do you drive ownership of the problem?
Here are three suggestions:
- Accountability – make sure someone is accountable for the whole problem. In the case above people are accountable for two separate issues relating to the inventory – working capital and plant performance. Neither has influence over the other. Why not make the engineer responsible for MRO inventory also responsible for the working capital involved?
- Visibility – have regular reporting that highlights the size of the investment to the people as high up the ladder as you can get. We all know the old expression ‘what is measured matters’ so take that advice and give the measurement visibility.
- Link to rewards – nothing motivates like being specific in performance evaluations about goals and targets.
Making sure that someone ‘owns the problem’ is the critical first step to successfully implementing the changes required to realize an opportunity. This ensures that someone cares about the result. Following one or more of the suggestions above will at least highlight the problem and ensure that somebody owns it.
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Originally published in 2007 in Phillip Slater‘s newsletter, Insight.