SG, Inc.
A few months back, a man named Sid Glick, president of a manufacturing company called SG, Inc., phoned my office. He asked if I could have lunch with him to discuss a problem he was having at his plant.
We agreed to meet at his favorite home-cooking café. After the usual pleasantries, Sid blurted, “I called you, Ms. Micawh, because you were highly recommended by some colleagues of mine who told me that you know your stuff, that you’re a plant rat who can take care of the problem.”
Sid got straight to the point. I like that approach!
“Good. But please call me Sam.”
“OK, Sam,” he nodded, “here’s my situation. SG, Inc. manufactures machine components. We can make whatever parts our customers want—gears, valves, pistons, and so on—and we do assembly. I
won’t bore you with details at this point. Now, here it is: I’m considering purchasing a five-axis CNC machine to the tune of $1,200,000 or a smaller, four-axis machine for $750,000.”
I immediately imagined the two CNC machines side by side, with a big yellow price tag on each. (In case you’re not a “plant rat” like me, I should probably explain that CNC means “computer numerically controlled,” which just means that a machine tool is operated by a dedicated computer that has the capability to read computer codes and convert them into machine control and driving motor instructions.)
I listened attentively as Sid presented his situation.
“I would like you to evaluate my backlog, our part configurations, and the run rates on these machines and then help me to determine which would be the smarter buy.”
He slid a file across the table to me.
It was refreshing to meet a person who had apparently done his homework. Sid had determined the root cause of his capacity problem and had narrowed his options to these two machines. I agreed to do lunch with him the following Tuesday.
I reviewed all of the materials Sid gave me, in just an hour or so. I guess I should have known it wasn’t going to be that easy. But sometimes even a hardened consultant like me just wants to believe.
After we met at the restaurant, sat down, and ordered, Sid jumped right into it.
“OK, Sam, you’ve read all the numbers, so you know about our situation and the two machines. Now, give me your best guess—the five or the four?”
“I would rather not guess, Sid. That’s just not my style.”
I paused. Sid seemed to appreciate that I was candid and blunt, so I continued.
“I’d like to look at the plant and review the data that’s brought you to this point. Then, when I understand why you’re trying to decide between the five-axis or the four-axis, I can be sure of offering you the best advice I can give.”
Our sandwiches and coffee arrived and we started eating. Sid told me he would be glad to show me through the plant. But, he explained between bites, there was no specific data prompting the decision. In fact, he pointed out, that’s why he was consulting with me.
“Hmm,” I thought, chewing a little more slowly. “That doesn’t sound good.” But I let it pass—for now. I hoped that my silence would get more out of Sid at this point than any questions. The tactic
worked.
“Actually,” he continued, taking a sip of coffee, “it’s George who says we need a new machine.” He explained that George was the plant supervisor, who had been working at SG, Inc. for 26 years.
“George says that’s the only way we can reduce our backlog and start meeting delivery schedules. So,” he concluded, pushing his plate to the side, “that’s why I’ve asked you to help me decide between these two machines.”
“Oops!” I thought. SG, Inc. is about to decide on a million dollar capital expenditure based on “tribal knowledge,” with no data to substantiate the decision. My lunch suddenly became unsettled, so as we
were at the counter paying the lunch tab, I bought some antacids.
Key Points
It’s a sign of problems when management is making decisions without specific data to support them.
“Tribal knowledge”—although it can be a starting point in making decisions—is generally not enough in inself for smart decisions, especially since this “knowledge” may be only a belief or a feeling or simply a hope.
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