The Recession is Coming

Credit: U.S. Department of Agriculture

While some may disagree, the general buzz from financial analysts and some presidential candidates is that a recession is imminent. I’m sure everyone’s heard more than they want to about inverted curves, which until recently I thought was a skateboard maneuver.

With that in mind, the good people over at Highway 29 Creative, put out a blog addressing how a winery can weather and survive a recession from a marketing and sales perspective.

There are some good ideas in that post, but the front end is only part of the story and should only be part of your approach.

You should also consider whether there are opportunities to improve your sustainability by looking at your operational processes as well. We would suggest that you should always be looking at your overall process health, whether heading into a recession or not. Actually, we think it’s better to be continually looking at improving your processes and, if you aren’t doing that, doing it in good times is the best time to start, as you won’t be pressured by short term concerns.

However, if you aren’t proactively managing your process health and sustainability, there’s no time like the present to start. You may find you get the benefits sooner than later if/when a recession does hit.

While all the economy will feel the headwinds of a recession, the winery industry in Northern California and Agriculture generally has some particular concerns.

First of course, is the US / China Trade war that is severely impacting many farmers throughout the US and with tariffs on wine the wine industry as well.

Additionally, across California, various factors from housing to, possibly, immigration crackdowns, are pushing up labor costs.

The good news is that a focus on having efficient, operator focused processes, should help mitigate some of these impacts. While we don’t advocate using process improvement to reduce headcount (in fact, we specifically warn against having that as a goal as it will lead to resentment and reduce the likelihood of any process improvement initiatives succeeding), a successfully program should result in improved productivity, improved employee engagement and reduced costs.

With labor shortages and labor cost increases, improved employee engagement should not be underestimated. You will be more likely to retain employees and they are more likely to be more productive, in our opinion.

And, of course, improved productivity and reduced costs, while always beneficial, may be the difference between survival and bankruptcy in a recession.

This isn’t just limited to improving your existing processes; you may look at changing how you manage an activity. For example, if you use contract labor, have you considered moving to piece rate where that makes sense? Implementing piece rate, following a process improvement methodology, can be a win-win. Done well, you can reduce your contractor costs and improve quality through a smaller workforce incentivized to get the job done quicker and better, while paying your contractors more than hourly or allowing them to complete their work sooner for the same pay and get more time with their families. You may also see unexpected benefits; fewer contractors may mean fewer internal supervisor hours required, freeing your people up to focus on other tasks.

What process improvement methodology should you use? We believe in a horses for courses approach and are adamant that one size does not fit all. In a very structured environment such as a bottling plant, a formal Six Sigma or similar approach may be best. In the cellar and especially out on the farms, we utilize a modified version of Lean that we adapt to each situation and which allow for flexibility reflecting the variations of season and activities and the unpredictable nature of farming.

Equally important as the methodology you employ, is choosing the right partner; someone who understands your industry equally as well as the methodology.

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