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WITHOUT THIS YOUR COMPANY WILL NOT SURVIVE

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Show me a business that is highly profitable and I will show you a team of employees behind the business that are clear on the vision, their role in support of the vision, and demonstrate a level of commitment that far surpasses that of the “average” company.

You see business success isn’t built upon a top CEO, a strong executive team or even happy customers (although you need all three to activate and build a profitable business!!). Building a profitable business that sustains over the long term requires committed employees.

What does commitment look like?

  • Employees that show up and want to contribute
  • Employees go beyond the restraints of their job description in support of customer needs
  • Employees work together in support of achieving the company mission

In this brief video I share a case study of a client who changed how they structured their business in order to build stronger commitment in their employees. The results are astounding and most importantly, what they did is exactly what you can do at zero cost.

click here to watch video

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Creeping complexity

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Complexity can easily creep in through even seemingly insignificant decisions.

For example, naming the computer servers in your organization.

I've been in one company where they named one set of servers after U.S. presidents, and another set after animals.  On the other hand, another company named them things like chidirsdap05 and chihdirdap05.

In the case of this second company, many hours were lost over time with people trying to communicate server names in meetings and conference calls.  Risk and errors increased because people typed in the wrong names and worked on the wrong servers.

In the first company, there was never any misunderstanding if you were told to log into "Reagan" or "giraffe."

I've also seen this in other examples. 

For example, in an organization, one software payments application assigned sequential numbers to transactions.  So, for example, "10,301" followed by "10,302", etc.

Another application assigned Oracle auto-generated IDs such as "B65AZX456RD45WRFT" and the next one would be "B65AZX457LD45WRFT" - the difference is a couple of positions in the middle of the string. 

When it came to help desk support and tracking payments for customers, which one do you think created extra complications and headaches?

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THE RICHEST VEIN OF IDEAS IS RIGHT UNDER YOUR NOSE

Do you know where the most powerful and cost effective source of best practices exist? Would you be surprised if I told you it was within the four walls of your company? Employees offer a source of rich ideas and pragmatic solutions to some of the most challenging problems, all resulting from their intimate knowledge of your customers, suppliers and day-to-day operations.
 
A framework for collecting, assessing and introducing these internal best practices consists of 3 stages:

  1. Idea formulation: Soliciting of ideas and solutions from employees through a variety of channels including front line management input, employee suggestion programs and senior executive discussion forums.
  2. Concept Validation: Having employees make suggestions AND provide sufficient information supporting how their idea will improve existing business performance improves the value of the idea and the level of engagement of the employee.
  3. Solution Application: I’m a strong proponent of a collaborative approach to introducing validated solutions by engaging both employees and front line leaders in the process. These groups have the greatest impact on successful solution introduction hence their involvement at this stage is critical to successful implementation.

So stop looking externally for solutions to your business challenges and start soliciting your employees for ideas. The value and success of introducing these ideas will be far greater than any initiative you may try to find externally.
 

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Build Holiday Cheer Into The New Year

Welcome to the New Year! Are you overwhelmed yet? New resolutions, goals, a pile of work waiting on your desk, and of course all of those appointments and meetings you put off in December. Everything now comes hurtling at you with and for some unknown reason, often contains an increased degree of urgency.

This is even more evident when you are managing or leading teams. The social buzz and enthusiasm from before the holidays has now quickly dissipated, replaced by the hum-drum post-holiday blues.

Yes, sometimes the invigorating energy of a New Year can really bring you down! That is, of course, unless you have a plan. Here are some ideas on how you can reinvigorate your team with enthusiasm to keep the momentum (and results!) moving.

Perspective:

A fire is urgent; everything else cascades from this point. The perception of heightened priority is typically the result of lack of movement or progress caused by Christmas holidays or vacations. Think about the last time you couldn’t get your kids or significant other off the couch. The longer they stayed there, the more frustrated you became. The key to ensuring that the energy and engagement amongst your team remains high is to create real priorities and minimize distractions or impacts from other parties. Shelter your team from the rest of the organization for the first weeks back to help them get back on track, completing assignments that were started before the holidays.

Festivities:

Part of the reason people become so depressed in January is that their time with friends and family is now seemingly a distant memory, only to reoccur in April or possibly July. That’s a long haul to think about, so try to keep the festivities going. January is a great time for a team-building event, a potluck lunch, or to spend time talking with your team about memories from the holidays. If you can “keep the party going” in the minds of your staff, the moods and work performance will remain high, helping you to make significant ground on your team goals and objectives for the New Year.

Planning:

What’s your plan for 2013? Are there any significant challenges or changes that may be coming about later in the year? Well, if there are and you haven’t shared them, now is the time to do so. The degree of energy that exists immediately following the holidays is a great sounding board for change. The degree of receptivity is always high following holidays, and discussing the challenges and changes coming in the new year is a much smoother conversation when everyone still has that holiday twinkle in their eye. A warning for the wise, however; February is likely the worst month for introducing change, as the holidays are a distant memory and April is still a stretch goal. Spend some time in mid- to late-January discussing what’s on the agenda for the upcoming year; it’s a great way to plant the seeds for change while ensuring receptivity remains high.

Most importantly, if you are managing a team either directly or indirectly, make sure to stay motivated yourself! There is nothing that will kill a team’s morale faster than a bummed-out over stressed manager or leader. Apply these same principles above to your own preparation for 2013 and your employees (and your boss) will thank you for it!

© Shawn Casemore 2013. All rights reserved.

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Avoiding Obsolete Inventory: Possession is 9/10ths of the Problem

 

By Rick Pay, as Published in IndustryWeek

Obsolete inventory is one of the largest components of inventory cost and often is larger and more costly than executives are willing to admit. Many suggest optimistically (and often sheepishly) that there is no such thing as obsolete inventory because it will sell … someday.

I have developed a new three-letter acronym for this to go along with JIT, RAW, WIP and FGI. It is "GSM" for "Glacially Slow Moving"! Studies related to inventory cost and inventory reduction prove that obsolete inventory does in fact exist, along with the warehouses, containers and trailers to hold it. Warehouse personnel will express how frustrated they are because the inventory takes up prime bin locations and gets counted, recounted and moved many times during its life. Most companies are busy searching for ways to return, sell, give or throw away obsolete inventory, but the important question isn’t how to get rid of it, but how to avoid it in the first place.

Why does obsolete inventory build up? The root cause is uncertainty in both supply and demand. Reduce the uncertainty and you diminish your exposure to obsolescence. Three tools can accomplish this: 1) sales and operations planning; 2) auto-replenishment systems; and 3) "ramp-up/ramp-down" discipline. 



Sales and Operations Planning

If you are experiencing growth in obsolete inventory, missed forecasts, reduced earnings and increased backlogs, consider taking major action through sales and operations planning (S&OP). S&OP strategies closely integrate the supply and demand planning processes that allow the business to provide the right products/services at the right time in the right quantity at the lowest possible cost. A tight connection between operations capabilities and sales demand planning enhances profitability, performance, customer satisfaction and return on investment, all while lessening exposure to potential obsolete inventory. Recent studies by the Aberdeen Group show that S&OP can boost profitability, delivery and cash flow, regardless of company size, by as much as 40%.

One of the key traps associated with demand planning is the optimistic view that new products or promotions will generate high sales. Many a company executive has been stranded with major amounts of excess inventory after ordering surplus materials/parts in anticipation of demand. Inflexible operations and supply chains require a gamble of sorts to ensure that the demand can be met. For example, many companies have ordered container loads of parts from China only to see the anticipated demand fail to materialize, leaving them holding mountains of inventory. Some companies make it worse by renting warehouse facilities to store it all, increasing costs in an already bad situation. Flexible operations, supplier partnerships and agile supply chains help prevent this catastrophe.

Auto-replenishment Systems

Auto-replenishment systems, which help reduce supply uncertainty, are another valuable means of preventing obsolete inventory. As the name suggests, they automatically replenish inventory without using systems such as MRP. The two most widely used are vendor-managed inventory (VMI) and kanban. Recently I helped a client almost double its inventory turns (from six to 11) in about six months using these methods. During the same period, the client trimmed its average order lead-time from more than 90 days to about 30 days, and the numbers are still improving.

The VMI approach asks suppliers to come on site to determine needed inventory, order it, receive it and often even put it away in point-of-use locations. While such systems must be managed correctly, VMI has the power to reduce not only stock-outs and excess inventory but also handling and transaction costs. Kanban, a Japanese technique that uses a card or other visual trigger to replenish inventory, is usually implemented as a two-bin system. When one bin is empty, the in-house or out-of-house supplier receives a signal to replenish in a fixed quantity. Both approaches can improve overall inventory turns and accuracy, while reducing stock-outs.

VMI is not without traps. If the programs are not carefully designed and monitored, suppliers will over-fill the bins, potentially resulting in excess stock. Many a salesperson, needing to make month-end or quarter-end numbers, has aggressively replenished customer stock. While VMI can be a strong tool for inventory management, bin sizes and vendor activity must be monitored to ensure that the system is preventing, not encouraging, obsolete inventory.

Ramp-up/Ramp-down

The last technique is what I call "ramp-up/ramp-down." This is the process of introducing new products and parts into the inventory system and eliminating old ones, and it prevents overstock in anticipation of a spike in sales. During the ramp-up phase, buyers should carefully monitor results to determine if sales are meeting the targets and communicate closely with suppliers to update plans frequently and set appropriate restocking levels. Even before the sales process starts, the materials group can collaborate with design engineering to suggest common parts that will help reduce the quantity of part numbers and the potential for excess stock.

Ramp-down is the process of systematically reducing the quantity of products and parts that are going to be superseded. Companies are often hesitant to discontinue old products, thinking that there may still be customers who will need it, or in the excitement of rolling out a new product, they fail to plan the slowdown of the old one. By making last-buy offers to customers, salespeople could actually boost sales levels in the short run. Buyers should adjust their restocking plans with suppliers to flush the entire supply chain. Regardless of how a company implements its ramp-down, someone specific (usually in the materials group or purchasing) must take charge of the process and remain actively engaged with sales and new product development.

Finally, what gets measured gets managed. Hold people accountable by establishing key performance measures for obsolete inventory, set a level of acceptable obsolescence and measure write-offs against it, and monitor slow-moving inventory through turn and earn reports to help ensure levels don’t creep up unintentionally. Use the "ABC" classification to rename obsolete or slow-moving items as "D" stock to help it stand out in reports. Then clean out the old stock.

Do you have obsolete inventory? Are you willing to own up to it? If you’re ready to reduce your GSM quotient, take a close look at what S&OP, auto-replenishment systems and ramp-up/ramp-down can offer. These three approaches, properly implemented, can help you avoid obsolete inventory and add to your bottom line.

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Everybody's Jumping on the Lean Bandwagon, but Many Are Being Taken for a Ride

by Rick Pay, as Published in IndustryWeek

Manufacturers are climbing on the Lean bandwagon in droves. The Industry Week/MPI Census of Manufacturers, released in November, 2007, shows that nearly 70 percent of all plants in the US are currently employing Lean Manufacturing as an improvement methodology. But is Lean right for every company?

A further look at the same IW/MPI survey may provide a clue. Only 2 percent of companies who responded to the survey have fully achieved their objectives and less than a quarter of all companies (24 percent) reported achieving significant results. That leaves 74 percent of the responding companies admitting that they are not making good progress with Lean – at least at the time of the survey.

Through my experience consulting with a variety of companies implementing Lean, I’ve learned there are four major reasons that companies fail to achieve benefits:

  • Senior management is not committed to and/or doesn’t understand the real impact of Lean.
  • Senior management is unwilling to accept that cultural change is often required for Lean to be a success.
  • The company lacks the right people in the right positions.
  • The company has chosen Lean as their process improvement methodology when a different process improvement program – or none at all – would have been the better choice.

Before deciding to implement Lean or any productivity improvement program, management must first examine its business strategy and ask the tough question: Will a productivity improvement program such as Lean contribute directly to the company’s strategy? The answer is not always obvious.

Some companies’ strategic focus, for example, is on competitive market positioning through new product development. In these companies, process improvement and productivity measures may not be perceivedas contributing directly to their competitive advantage. You can bet, therefore, that in these companies senior management may not support a Lean initiative if waste reduction on the shop floor is the focus. And, without the full support of top management, the likelihood of success of any process improvement program is jeopardized.

On the other hand, in companies where strong operational capabilities are viewed as a competitive advantage, top management will be more receptive to the process and productivity improvements that Lean (or other process improvement programs) can achieve. But they still need to be “sold” on its benefits, particularly if its champions were at the division level or in the manufacturing or operational areas. Why? Top management needs to fully understand the various stages of implementing Lean so they won’t be tempted to pull the plug before results are achieved. In short, they need to accept Lean as part of their overall operations and business strategies and support it all along the way.

The second major reason companies fail to realize Lean benefits is their top management teams miss the point that Lean transforms an organization’s culture – and they don’t want theirs transformed! Most productivity improvement programs, including Lean, result in enhanced communications, more empowered teams, and the positioning of decision making at the lowest possible levels. These are simply the realities. If management is not ready to let go of the reins and let this happen, most productivity improvement programs will fail.

To be successful, top management, therefore, must be willing to accept and even drive culture change. The top team must invest in the transformation process in terms of both time and money.

The third reason that companies often fail to realize gains with Lean is because they don’t have the right players in the right positions, especially at the line manager level. What’s more, they don’t support their team with strong training and development opportunities. This is an essential part of process and productivity improvement implementation. For each key position, management must answer the following questions:

  • What are the four to six key short-
    term priorities for the position?
  • What attributes or characteristics should the person filling the position have?
  • What experience and education should the person have?
  • What measures will tell us we have the right person for the job?

Measuring current management team members against these criteria will quickly tell if the right people are in place.

Once companies have top-level commitment, a willingness to accept culture change and the right people in the right positions, they are ready to consider Lean or some other program. But which one is the right one for them?

While Lean is probably the one most talked about and currently the most popular, Six Sigma, Theory of Constraints, Toyota Production System, World Class Manufacturing and others are also very good programs and should be considered. Each one has its strengths and weaknesses, and some companies are even combining them to form approaches such as Lean Sigma.

To help decide which one is right for any organization, one must first address the following three questions:

What is the focus of the operations strategy for the company? Is it primarily on quality, cost, speed and flexibility, or innovation and custom products? Is the company process driven or value chain driven?

How is quality defined? Some companies such as Toyota define it as fit and finish, while others such as BMW define it as innovation and features.

Does the company have the necessary technical resources to lead the charge? Six Sigma for instance uses experts known as Black Belts and Master Black Belts to lead initiatives that are selected by management.

So which program is right for your company? Are any of them? Are you ready for Lean or Six Sigma or any of the rest? First, analyze your business and operations strategy against the goals of the process improvement program; assess your leadership’s commitment to the program; determine your company’s willingness to change its corporate culture; and decide if you have the right people in the right positions. Only then will you know for sure.

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