- Buyer's Guide
Chris Knight is among my favorite musical artists. He’s a Kentucky-bred folk/Americana singer/songwriter who writes real songs about real people. One of his songs is titled “A Train Not Running”; it’s found on his album “The Jealous Kind.” Here’s what Chris says in the first verse of the song:
“The sound of a train not running has been keeping me awake. The Westmoreland mine ain’t run much coal since back in ’88. I got on at the sawmill, but I’ve got to find a better way before the sound of a train not running is going to carry me away.”
The chorus goes as follows:
“And every time you look at me, Mary, I want to tell you someday we’ll leave the sound of a training not running a thousand miles away.”
Chris Knight has captured in song how a plant closing affects people at a human level – the sense of despair, the feeling of embarrassment because you can’t provide for your family in the manner you’d like. He goes on in the song to discuss the economic impact and the toll that takes on people and families. It’s a powerful message encapsulated in a short but very moving song penned by a talented songwriter.
A plant closing can dramatically affect a community. In many instances, the plant is the prime mover in a community’s economy. In a small community, the closure of a plant can render it a ghost town. In these instances, property values drop precipitously – almost overnight in some cases. This costs each family tens or even hundreds of thousands of dollars in lost equity. Even in a large city like Detroit, median property values dropped by more than 37 percent between April 2006 and April 2010 – even higher when the figures are adjusted for inflation (see figure). More telling, the value of the 25th percentile price house – the “working man’s house” – dropped by more than 53 percent in the same period, falling from almost $118,000 to just $55,000 since 2006.
The toll doesn’t stop there. Families are forced to liquidate investments and retirement plans to make ends meet. The personal toll is even higher. Families are forced to endure duress and are frequently forced to move away from family and friends to seek work elsewhere. Moreover, despair associated with economic hardship can regrettably lead to substance abuse, domestic violence, divorce and even suicide.
Figure 1. The Detroit metro real estate market has been devastated by the economic downturn.
We know that plants close for many reasons; many of those reasons are external and uncontrollable. For instance, many plants are situated near the source of raw materials. When the raw materials are depleted, the need for the plant disappears. The recent economic downturn was largely attributable to a macroeconomic breakdown of our capital market.
Unfortunately, however, in many instances, “the sound of a train not running” occurs because we failed to manage the business effectively. There are several good examples of heroic 11th-hour turnarounds – like Dofasco Steel and Quaker Oats’ Danville, Ill., plant. But far too often, we wait too long. Quaker Oats thwarted plant closure by coming together as a team and focusing its efforts on creating value. It reduced per case costs by 37 percent! The opportunity was there all along, but the risk of hearing “the sound of a train not running” motivated them to act.
Why is crisis often a necessary ingredient to success? Researchers Daniel Khaneman and Amos Tversky suggest that humans tend to be very risk averse when things are going OK. We only tend to exhibit risk-seeking behavior when our backs are against the wall. I think they’re referring to complacency, the essence of why Jim Collins in his seminal book “Good to Great” says that “good is the enemy of great.”
Those of us who specialize in reliability management possess the skills to enable a manufacturing firm to be great. We can’t control external factors, but we can significantly impact the plant’s ability to maximize profits when things are good and to get lean and hunker down to survive the tough times. Our primary measure of success is overall business effectiveness (OBE)/overall equipment effectiveness (OEE). OBE/OEE is a measure of our manufacturing effectiveness compared to perfection. If OBE/ OEE increases, return on net assets (RONA) increases and the world is good.
I challenge you to do some “what-if” analysis. Look at your income statement assuming your current OBE/OEE. Then, recast your income statement after asking yourself the question: “What if we were the best we can be in terms of availability, yield and quality?” I’ve done this with some of my clients; the result in terms of increased RONA and share price is often mind-boggling. In many instances, it creates the “bold, outrageous goal” to become discontented with good and start going after great.
Take action to improve your OBE/OEE by executing proven reliability management strategies. Doing so may help you derail “the sound of a train not running.”