Interim Operations Director appointed at Dage Precision Industries to inject a more commercial approach.
Peter S was brought in as interim Operations Director to electronic test equipment manufacturer Dage Precision Industries in order to inject a more commercial approach to operations. He was placed at Dage by Executives Online.
"Dage needed support on the operations side: they wanted someone to put operations on a more commercial footing – that was the main driver for appointing an interim," says John S.
Like most interims, John's prior experience was at a level more senior than that of his interim appointments. He had come from running his own company, bought as a management buy-out, which was then sold on. "The challenge had gone," he says, "So I took interim assignments initially to see what my opportunities were, and decided that I liked the lifestyle."
John S found that one of his key areas of focus was going to be the company's new product line. Getting the new product manufacturing process into shape was, says John, "quite difficult – because no one wanted to spend any money." In order to free up the funds, he first focused on procurement of the existing products. "We had a long order commitment and a high liability on purchasing," he says, "which led to a problem with cash. So I rehashed the purchasing process."
Material control is now founded on time-based contracts, not volume-based, with lower inventory, reduced material costs and more responsive parts service to Production. Applying the Parento 80/20 rule, John S identified which suppliers' parts represented most value to Dage. Around 20% of the parts turned out to represent about 80% of the value of all the parts purchased. He then changed arrangements with suppliers, not only looking for partnerships and better discounts, but also reducing Dage's financial commitment to them. Suppliers now hold only one month's worth of finished goods stock, with a further month's work in progress. "That's eight weeks liability, which is 70% down on what it was," he says.
"The decreased financial liability," he points out, "realised more cash into the business, and that's the saving I'm spending on the new product line!"
John S also investigated operations at the other end of the business and created a new customer returns process for items under warranty or chargeable repair. "Customer turnaround times for repairs was very long," he says. Now, instead of customers returning a defective assembly and waiting for it to be repaired, a 'repair by replacement' system operates. Customers inform Dage of the defective assembly and a replacement part is shipped and invoiced immediately. When the defective assembly is returned, the customer gets the invoice credited either partly against the fixed repair charge or totally against warranty. The system keeps paperwork to a minimum and, says John, "no one is waiting for parts."
John S believes it is vitally important to see the whole wood and not just the individual trees. "You need to understand the bigger picture – half the battle is getting the company to see that, which is difficult for them when they are running nose to the grindstone. Improving just one area of operations is not enough – everything must be taken into account, such as making savings in one area to fund changes elsewhere."
Although originally taken on for a two-month assignment, renewed thereafter for a month at a time, John S was invited to become a permanent member of staff, which he accepted six months after his interim appointment.
"The CEO told me that 'my one weakness' was that people thought that, as an interim, I'd be going away." The temporary nature of an interim can indeed be an issue in any assignment. Although it affords the flexibility and freedom – plus support from the top – to carry out the necessary work in ways that a permanent hire might find contentious or politically charged, as well as often bringing a fresh approach to solving problems, sometimes the improvements are only as temporary as the assignment.
"As an interim you can address the symptoms but it's very difficult to change the culture," he observes. Overall, he says, permanent staff reacts in one of two ways to the arrival of an interim. "You get two camps. One camp can see what you are trying to do and feels good about that and tries to achieve it with you: The other camp waits for you to go away." By and large, though, a new interim will, he says, get a honeymoon period that they need to exploit as much as possible.
John S' major piece of advice to any interim is "to act as if it is your business and your job for life. If you do that then you'll be giving good value, and the company will start to trust you."