What is 'Operations' Excellence all about?
Low regionally protective barriers, transparent access to information and high pace of changes easily leads to a ‘winner-takes-all’ dynamics, where the player with the strongest operational efficiency and flexibility can capture a dominant share of the market’s value.
Operations has been Capacent’s original core expertise area since it was established from within ABB in 1983. Capacent’s Helsinki office was established in 2005 and we have supported customers across a broad range of industries on diverse operations-related assignments.
Working capital as indicator of operational performance
At Capacent we have a long track record of using Net Working Capital (NWC) as a high-level indicator to assess and improve companies’ operational performance. Even though it may appear to be a financial KPI, NWC is very much an operational indicator, as improvement actions require very tangible changes in operations. On the easiest level, one simply needs to identify and stop bad habits, but this is hardly enough to ensure sustainable competitiveness against world-class players. After the low-hanging fruits have been exhausted, one needs to make increasingly fundamental changes to the set-up, structure and cultural DNA of the company to drive further improvements until the company is capable to compete and win against any competitor, anywhere in the world.
As an example, NWC is often dominated by inventories, which can be fine-tuned by clearing excess and obsolescence, but to achieve major step-changes in the need to carry inventories requires changing the fundamental need to carry inventories. This can be achieved e.g. by reducing risks or managing risks by other means than thick buffer levels. By helping our customers improve their operations’ performance they are typically able to sustainably release millions of EUR of cash from their NWC. Cash, that they can then invest more productively e.g. into growth strategies.
Profitability via cost efficiency
Operations control large profit drivers in many companies, especially the Cost of Goods Sold. The starting point for managing this driver is the fact-based understanding of cost, and how it is formed. Often, especially in process industries, acquiring this info requires coordinated actions and well-designed analytics. Managing cost as profitability driver is not a static one-time exercise. Instead, to remain cost-competitive in uncertain and changing environment, focus needs to be in optimizing the life-time total cost. This in turn requires accounting e.g. for cost road-maps when yields improve over time, assets get amortized and cost elements materialize at a different speeds than production and sales e.g. excess costs. Optimizing for these costs have led some companies to adopt unorthodox strategies that appear counter-productive in short term but lead to profitability in the long term.
Any insights into cost, it’s drivers and development are irrelevant unless one can execute actions to benefit from them. Often this boils down to supplier management. Supplier management needs to operate on multiple levels: In the supplier portfolio level companies need to define their current and future business needs for which they would need suppliers, and then work to ensure that they have competent supplier base when they need them and also to facilitate competitive pressure between them. In the operative horizon, companies need to earn suppliers’ respect by demonstrating that they are on top of their game, and that they cannot be exploited opportunistically. And finally, once suppliers’ respect is earned, companies need to ensure that suppliers’ business case is and remains aligned with theirs e.g. via risk sharing and collaboration practices.
Scalable operations enable profitable growth
When companies seek to increase their value by growth, operations’ scalability become a critically important requirement. Having survived yesterday is not sufficient if one wants to grow tomorrow.
Any inefficiency, delay, manual process patch or blind spot is only going to get worse as the speed, size and complexity increases. Growth cannot be managed only by hiring more people, as the current persons’ competence has been the driving force that has enabled the growth opportunity in the first place. In order to be prepared to grow, companies need to aggressively reduce the load that existing operations cause to their professionals, so that their competence and energy can be allocated towards capturing growth and competing in new environments. In practice, this frequently requires reviewing, challenging and ultimately updating processes, tools and working habits that have been ‘good enough’ in the past.
Scalability of the current operative model has it’s limits, no matter how good the processes, tools etc. are. When pursuing sufficiently ambitious growth plans companies need to also revise the company structure and it’s ability to remain competitive. For instance, if growth calls for competing in new time zones, cultures or high-pace channels, the legacy operative model can become a source of friction, delay and inefficiency. We have supported companies evaluate in detail what are the competitive priorities they need to master when seeking to grow, evaluate what would be the efficient operational mode to excel in these priorities, and ultimately proactively implement changes in case current structure or operative mode have a risk to become a burden.
Exposure to risks and the ability to cope with them
Risk is not a force majeure that companies should accept as given and unavoidable. Operations define greatly how exposed companies are to uncertainties, and how capable are they to respond when opportunities arise, or risks materialize.
Typical drivers of companies’ risk exposure are their offering, channel and market strategies, which are company-level decisions. However, within these strategies, operations can influence risk exposure e.g. by sharing risks with suppliers and customers, and by de-coupling operations to limit how deeply uncertainties are allowed to disrupt operations.
Coping with risk begins with the understanding how different parts of the company influence each other. Effectively, this boils down to Planning, which needs to be able to trigger coordinated responses to catch rising waves or to bail out from falling ones. Especially, if companies change their exposure to risks, e.g. by expanding into a business with higher speed or by starting to offer more integrated solutions, they need to ensure that their Planning (process, analytics, decision-making, execution…) is able to cope with the complexity and speed that competing in these new businesses require.
Flexibility increases the ability to cope with risks, and operations are holding the keys to manage it’s main components: lead-time, capacity and inventories. Through coordinated and fact-based development of these components, companies can ensure that they have the right amount of flexibility, that is of the correct type, and that their investments into flexibility are optimally allocated.
Our Operations professionals in Finland
We have 5 experienced project managers who are specialized in operations-related projects.
Eero joined Capacent in 2018 after 15+ years of experience in Sourcing and Supply Chain business development and transformations from multiple different industries, such as consumer electronics, process industry and logistics. Eero has also hands-on operational experience in leading availability for >400M€/year international supply chains during extreme turbulence. Eero is passionate about proactively building supply chains and operations that are ready to adapt and compete also when the going gets rough. Eero holds a Master’s degree in Industrial Engineering from Aalto University.
Mikko joined Capacent 2018 after working in a management role in an automotive company. He graduated 1999 from Tampere University of Technology with a Master´s degree, majoring in Industrial Engineering and Management. Mikko has global, comprehensive experience in supply chain management in various industries and businesses: consumer goods, retail, wholesale, chemicals, paper, automotive and food. He is keen on exploiting lean management principles across the supply chain in order to maximize the performance and efficiency as well as customer satisfaction.
Erno started at Capacent in 2013 and has broad experience as a project manager from field of operations, global production networks and supply chain management during this time at Helsinki office. His client projects have varied e.g. from strategy implementation at machine tool industry in Finland to net working capital optimization of marine business in USA all the way to spare parts supply chain development at Chile. Erno’s inspiration comes from creating concrete measurable value for the customers while having strong focus on operative implementation. He has specialized in developing solutions adapting to constantly changing demand signal from customers e.g. by demand-driven production planning methods. Erno holds a master’s degree in Industrial Engineering from Aalto University.
Teemu has been with Capacent’s Helsinki office since 2011 after finishing his master’s degree in Finance at Aalto University. During his career at Capacent Teemu has gathered extensive project management experience especially in the field of working capital optimization and supply chain development where he has worked with developing solutions to challenges in customer interface, supplier interface and internal processes. Areas where Teemu has done projects in include industries such as retail, wholesale, construction, service and FMCG.
Vast majority of his client engagements have been focusing on implementation. In these projects Teemu finds inspiration in gathering commitment to jointly defined solutions from people all the way from top management to shop floor. Additionally, Teemu’s fact-based approach has been utilized in interim CFO and interim business controller assignments.
Antti joined Capacent in 2018 after 4 years in Pöyry Management Consulting, where he gained strong experience in pulp & paper industry with primary focus in operational excellence and strategy assignments. Projects in Pöyry were carried out mainly in German speaking Western Europe, Iberia, Latin America and the Nordics. With Capacent, Antti has been active in working capital management projects for clients in retail, electronics and machine building. He has a strong drive for finding ways to improve clients’ profitability and enjoys managing their organizations to close gaps that can encompass lack of management focus, too broad product portfolio, timing and size of purchases or suboptimal warehouse locations to name a few. Antti holds a M.Sc. (Tech.) degree in Energy Economics and Power Plant Engineering from Aalto University.