Are You Postponing Profit?

It seems like there’s always a better time to do something, and that time is “later.” Many companies that want to accelerate profit and growth think that improvement initiatives – like Lean Manufacturing, supplier partner programs, global expansion, new product launches, or other opportunities – will wait. While they’re waiting, their competitors are moving forward.

What executives often don’t understand is that return on time (ROT) is often much greater than the return on investment (ROI). Many companies wait to start initiatives until empty positions are filled. Others wait until current priorities, which often shift like the sands of time, are complete. Some just seem to feel that the time isn’t right.

Recently, one client delayed the start of a project until they could hire a new production scheduler, which took six months. Then something else came up which delayed the project further. In another case, a company delayed an operations improvement initiative for almost a year while they searched for a new VP, Operations. These delays cost months or even years of lost benefit.

How to Get It Done Now, Not Later

To move initiatives forward quickly, companies need a clear strategy and vision for improvement. A client recently told me that because of the strategy and roadmap we created, they achieved results far beyond their expectations and in a very short time frame. In fact, the results were so dramatic (and quick), that a university is studying the process to see how it was done. Vision is key to driving change and defines where the future state is.

Innovate for Speed

Companies can also use “disruptive” approaches to remove silos, introduce new concepts and encourage collaboration. Disruptive approaches foster innovation and generate new approaches. For example, one client partnered with suppliers, allowing them to raise part prices and manage the flow of inventory directly to the end point of use. Letting a supplier raise prices seems counterintuitive, but in this case the improved inventory flow dramatically reduced inventory (by over 70%) and yielded millions of dollars of savings in warehouse costs. At the same time, service levels rose to over 98%.

Most companies wouldn’t even consider a price increase in exchange for a total cost reduction that improved profitability and cash flow for the company. The end result was an increase in business value and a rise in the price of their stock.

Engagement and Teamwork

Engaging people in the process is vital. Setting goals, letting people know how they’re doing and making change personal encourages employees to move the needle quickly. Many of the recent techniques to improve operations and supply chain are process-focused and often overlook the people who execute those processes. Without engagement and teamwork, the initiatives won’t last and improvements will decay. Making people’s jobs easier and helping them feel secure in their jobs fosters engagement in the process and accelerates results.

The Cost of Doing Nothing

Waiting rarely provides the benefits that quick action can bring, yet most companies overlook the cost of doing nothing. By waiting, things continue as they are now, and solutions and improvements are delayed. This has the potential to cost hundreds of thousands or even millions of dollars in missed opportunities. For some companies, even a few weeks’ head start on the competition can mean dramatic increases in market share, growth and profitability.

Many companies in industries where speed is paramount have learned to do things fast. Zara, the Spanish company that is a world leader in fashion, is clearly focused on ROT in the form of quick delivery from design to store. It takes two to three weeks to release new designs so consumers can have the latest and greatest, quickly. Excited customers line up at Zara stores.

How fast could your company move using clear strategy, disruptive ideas and employee engagement? Don’t underestimate the power of ROT. Don’t put off profit until “later.”

© 2015 – Rick Pay – All Rights Reserved

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