It's Not Luck - Eliyahu M. Goldratt [7]
“How do you suggest doing that?” I ask.
“We have to get the high-volume business. Right now almost all our wrapper business is in the low-runners—candies that sell in small quantities. We can’t get the work for the really popular candies, the ones selling in the zillions—that’s where most of the money is.”
“What do you need in order to get those orders?”
“Simple,” he answers, “more advanced equipment.” And he hands me a thick report. “We have surveyed it in depth, and we have a decisive recommendation.”
I flip through the pages for the bottom line number, and find 7.4 million dollars. He is out of his mind. Keeping a straight face, I say, “Pete, don’t ask for any investment.”
“Alex, we cannot compete with our old machines.”
“Old machines? They aren’t even five years old!”
“Technology is moving much faster than in the past. Five years ago they were state-of-the-art. But now I have to compete against companies, most of whom have the new generation. It’s not offset base, it’s rotogravure. Those machines have better resolution in dark colors; they are able to print in silver and gold, which I cannot; they can print on plastic, I can print only on paper. But above all, they are much wider. The width alone gives them three times more output per hour. This difference in output speed gives them a huge advantage when large quantities are concerned.”
I look at him. He does have a point. But it doesn’t matter, not in light of the board’s resolution. I decide to land it on him. In any event, I have to tell all my presidents about it.
“Pete, in the last board meeting the strategy of UniCo turned one hundred and eighty degrees.”
“What do you mean?” he asks.
“The board decided,” I say slowly, “to switch from diversification to concentrating on the core business.”
“So?”
He doesn’t get it. I’ll have to spell it out. “So, they are unwilling to invest even one more cent in our side of the business. Actually, they have decided to sell all the companies in our group.”
“Including me?” he asks.
“Yes, including you.”
He is turning white. “Alex, this is a disaster.”
“Calm down. It’s not a disaster. So you will work for another conglomerate. What’s the difference?”
“Alex, what are you talking about? Don’t you know the printing business? Do you think that any other company will allow me to operate the way that you have taught us? Do you think they’ll allow non-bottlenecks to stay idle from time to time? That they’ll allow us to not build finished goods? At every other printer I know the cost mentality is dominant; we will be forced to reverse everything we have done. Do you know what the results will be then?”
Actually, I do. I know it too well, I have seen it in other places. It is one thing to deliver on-time in only seventy percent of the cases—the clients are used to it and protect themselves accordingly. But if they are spoiled by your delivering constantly in the high nineties and then you drop your performance, you have caught your client off guard, when they are not protected by hefty raw material inventory. They will never forgive you for that. Degrading the performance translates almost immediately into lost clients. This will cause more layoffs, even worse performance, and the company spirals down at an incredible speed.
We are not talking here about finding another job for myself. We are talking about the livelihood of my companies. We are talking about almost two thousand jobs.
We sit quietly for a while. Then I pull myself together and say, “Pete, what can you do to increase profits for this year? Substantially?”
Pete doesn’t answer.
“Well?” I press.
“I don’t know,” he says. “I really don’t know.”
“Pete, let’s face it. Our chance of reversing the board’s resolution is like the chance of a snowflake in hell.”
“And Granby?” he says.
“Yes, Granby might do something