Dell, on the other hand, doesn’t have a six-month backlog of orders. Dell takes an order and builds the computer. When the earthquake struck, Dell changed the prices on its Web site. The configurations that they couldn’t build because they didn’t have the right chips were suddenly more expensive. The configurations for which they did have the components were less expensive. To keep the prices low on some models, Dell announced that it would ship those configurations with less memory. Dell shaped the demand to where it could fulfill it, unlike Apple, which was stuck with long-term commitments to specific configurations. [Also see “Manufacturing Myopia,” by Kaj Grichnik, Conrad Winkler, and Peter von Hochberg.]
S+B: How does this kind of thinking fit with service firms and nonmanufacturing enterprises?
SHEFFI: There are a lot of issues around the deployment and training of employees. You can redesign operations into a series of small processes on which the employees — and even the suppliers — can be trained, so that if there’s a problem, work can easily be moved around. In 1986, a big ice storm shut down Louisville, where UPS has a major hub. UPS workers couldn’t get out of their driveways to come to work. But the company realized that while they couldn’t clear the roads, they could clear the runway, and they started flying workers in from other parts of the UPS system. An employee in New York or Atlanta could do the work in Louisville because the systems are relatively standard, and because the employees are cross-trained.
Cultures of Resilience
S+B: Is there an essential difference between companies that respond well to disruption and those that don’t?
SHEFFI: It was clear from our work that there’s something in the DNA of companies that are resilient that doesn’t seem to exist in the DNA of companies that are not so resilient. In the study that led to The Resilient Enterprise, my colleagues and I referred to this element as “corporate culture,” and we tried to analyze its characteristics.
We found that resilient companies communicate obsessively. Every Dell manager gets a production report of what’s happening throughout the company every two hours. They get it on their PDA or pager — so they’re always in the know.
Another important principle of resilience is “Drive the power to make decisions down in the organization.” Most people are familiar with the way Toyota empowers production-line employees to pull the andon cord and stop the line if they spot a quality problem. [The andon, from the Japanese word for lamp, is a visual display that lights up when a sensor detects an anomaly on the assembly line.]
Zara and World — two retailers based in Spain and Japan, respectively — are unbelievably good at empowering line employees. In both companies, the store managers collect information every night, not only about what is selling and not selling, but about why it is not selling. They interview customers. “Why don’t you buy this shirt?” “Can you please tell me what’s wrong with this blouse?” They get all this information and report it every night to headquarters. Computers sift through this information and try to find out if there’s a certain trend. The same night, designers, who are mostly 22- to 25-year-olds, sit in front of their computers and change the designs on the screen, send it on their own to manufacturing, and it goes from there back to the stores. It takes them three weeks to go through the whole process. This is something that takes Marks & Spencer nine months to do.