What do you get when you combine five bankers, McKinsey and a CEO who knows nothing but marketing? Propriety prevents me from getting too graphic as to exactly what sort of cluster that crowd creates – suffice to say it is an outcome so ugly as to be laughable.
I have to confess that I was suffering from a touch of writer's block, and fell back on one of my reliable solutions – that is to look to any company with the word 'Brands' in its name. The theory that a first class comedy could be written from the press releases of the 'Brand' companies took seed when I began consulting with Wahl Clipper, and saw them clean Sprectrum Brands' (Remington has the misfortune of being one of the Spectrum brands) clock. It was a hoot when I moved on to Furniture Brands. They continue to entertain, now moving from China to Mexico and still losing money.
The banking - McKinsey fiasco centers on a three ring circus called Pacific Brands. In fact, they are a lot like Furniture Brands. The big brains at Furniture Brands declared, "I have frequently pointed out that we are not really a manufacturer," right before they started closing plants, moving to China, and losing money. At Pacific Brands, Sue Morphet – their big thinker – said, "The future of Pacific Brands is not in clothing manufacturing." She then proceeded to close all of their Australian plants, kick 2,000 Australian employees out on the street, outsource everything to China … and continue to lose money. More and more is appears they aren't in clothing selling either.
The story is made especially comical by the Pacific Brands proclamation that they operate by values including "Informed Decision Making": "We do our research and make well-considered decisions. We act decisively and take the right action, at the right time, based on insight and informed judgement." And then take the advice of bankers and Mc"One strategy fits all"kinsey … and take decisive action in 2009 … about a year after everyone else started to realize that going to China may not put them in the land of mild and honey after all.
The best part of the story is that Ms. Morphet and the Pacific Brands gang is getting their collective gludius maximi handed to them on a platter by Inditex' Zara chain – the Spanish outfit Dan and I have written about that is driven by speed – a couple of weeks from concept to market in order to minimize cost and be hyper-responsive to customer needs. And the Australian retailers are competing with the likes of Zara by cutting out the middleman – Pacific Brands – and going straight to China themselves. "Some of the country's biggest retailers, such as Myer, have gone to factories in China to produce cheaper house-brand merchandise."
The bottom line – the moral of the story – is that Pacific Brands had a manufacturing problem. Too slow, too much inventory, too high costs. Bringing five bankers, McKinsey and a marketing wizard together to solve a manufacturing problem is like calling Kevin, Dan and me in to sort out an issue with the space shuttle – clearly the wrong men for the job and nothing good is going to come from it.
It seems obvious, but if the company can't manufacture well enough, they need to get some smart manufacturing people in to straighten things out. No one should be surprised, however, when the best bankers, McKinsey and a marketer can come up with is to ship manufacturing 5,000 miles away from the customers and let someone else deal with it.
Gautam Loves ellipsis AdNet says
Bill, while I loved reading your post, IMHO I have a hunch that you don’t know what the people high up the chain know. It’s unfortunate that in today’s world executives care much about what goes in their pockets than in the welfare of the company. Have you seen any great company taking birth after the 60s? (and I’m not talking about technology – Google, Microsoft and others… I think they are too young to be considered… the real face of a “company” is revealed after the CEO and the founders – the first generation per say goes away…
Bill Waddell says
You are certainly correct in that I cannot know everything that went on behind the scenes, and your comment that what happens with the first generation of leadership after the founder is gone tells an important tale is a great observation.
I do know, however, that after all of the outsourcing, Pacific Brands’ inventories went down by quite a bit. If someone can move a huge chunk of production 5,000 miles further from the customers and have inventorylevels drop, their level of manufacturing management had to be deplorable. And I know that extending supply chains in order to avoid the consequences of lousy manufacturing management is not a good strategy.
Jim Fernandez says
After reading your last two articles “Looting Factories For Fun and Profit” and “the bankers, a consultant and a marketer”, it made me think.
On occasion a manufacturing company may need to simply go out of business. For instance suppose the only thing they make is a slide rule and for one reason or another they can’t make anything else. At some point it’s time to pay your employees as much as you can and close up shop. By the way, this happened to me. I owned my own business and after 5 years I had to close down.
So maybe we can’t look at every company with the thought in mind that; it could have survived if only we would have had a smart Lean manufacturing person to save it. Sometimes companies go out of business for good reasons. And what we are observing are people trying to maintain these companies in a hopeless situation.
As some wise person once said, “Change is inevitable – except from a vending machine.”
Mark Graban says
I think there’s a difference between “having” to go out of business and being destroyed by the actions of bankers.
Sort of like there are cyclical recessions as part of the natural business cycle, then there’s this most recent mega recession caused by the excesses and greed of the financial and banking sector. Past recessions dragged down the finance sector, this time it was the other way around.