Full Speed Ahead

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How can you create more speed in your company?

  1. Eliminate anything that isn’t needed. Rather than just trying to work faster, assess the process and eliminate unnecessary steps. One way to do this is through process mapping and asking the questions, “Why do we do this?” and “Does this step provide value to the customer and would they pay for it?”
  2. Shorten setup and changeover times in production and distribution. Reduce materials handling and waiting. Reduce part count, number of suppliers, and product assortment. One of my clients cut maintenance technician time by 30 minutes per day by changing the way the technicians’ vans were restocked. The result was over 60 hours per day of savings—15,000 hours per year. Not only did that reduce costs, but often the technicians could do an additional service call per day, which increased revenue as well.
  3. Measure lead times, cycle times, and on-time delivery. These measures drive problem-solving efforts and increase speed. A manufacturing client improved its shipped-on-time from 24 to over 80 percent simply by measuring and posting the results for the staff to see. Knowing the score inspired staff to make quick changes, which dramatically improved results.

Remember to get good first, then get fast. Also, slow down to speed up! Speed is often sacrificed to rework and mistakes or using larger batches to try to be efficient.

 

© 2018, Rick Pay. All rights reserved

This is an excerpt from Rick’s forthcoming book, Moving Into the Express Lane, coming this spring from Business Expert Press.

It’s About Productivity, Not Cost

The headline in the Wall Street Journal reads “China Inc. Moves Factory Floor to Africa.” It seems that China’s labor costs are rising so Chinese companies are moving to Africa to find cheaper labor. The only problem is, African labor is currently only half as productive as in China. In Ethiopia for example, the average worker makes significantly less than the average Chinese worker, but productivity is very low. For example, on road projects, Chinese managers have the shovels handles cut in half so Ethiopian workers cannot lean on them to talk with their co-workers. In fact, China is sending hundreds of thousands of their own, more productive workers to Africa to achieve the output they need.

Deciding where to produce is not so much about labor cost as it is about the measure “unit labor cost.” That takes into consideration the cost of labor and the productivity. It also considers currency valuation and other key factors. As it turns out, the US worker is about 11 times more productive than the Chinese worker, which is why reshoring is building momentum.

When you are measuring the labor productivity and cost of an operation, don’t use direct labor as the sole measure. Don’t even use revenue per head or per hour. Use what Jack Welch said is the only real measure of productivity, units of output per unit of input. That is an apples-to-apples relationship. In the case of labor, it should be dollars shipped per labor dollar.

© 2014 – Rick Pay – All Rights Reserved

 

 

Four Ways to Super-Charge Your Communication With Suppliers

Communication with suppliers is a vital element of forming a supplier partnership program, yet many (I would say most), companies don’t establish a solid foundation of communication. Here are four ways to super-charge your communication:

1.  Get together face-to-face. Phone calls and emails don’t establish the depth of relationship that you’ll need for your supplier partnerships to succeed. Face-to-face meetings to discuss expectations, status updates, changes to products, designs, materials, forecasts and other important issues are critical. Meetings should be on-site, alternating between the supplier’s location and yours, especially for your top ten suppliers. Going to the Gemba (point of work) can help clarify your perception of the supplier’s capabilities and help them understand exactly how their product is being used.

2. Organize a Supplier Day. Invite your top 20 – 25 suppliers to an all-day event where your sales leaders present company growth plans and forecasts, your CEO shares the company’s strategy, and the operations and supply chain people present expectations for the year. This gives suppliers a window into your company as well as the opportunity to network with other key suppliers and find opportunities for cooperation.

3. Connect executive sponsors in your organization to their counterparts at the supplier. Establishing these connections adds depth to the relationship, and also allows the executives to contact their counterpart for support in solving any problems that arise.

4. Set metrics to clarify expectations and provide feedback to the supplier on their performance.

All of these tools can help you super-charge your supplier partnerships and get the most out of these important relationships.

© 2014 – Rick Pay – All Rights Reserved

The Three Types of Communication That Are Vital for Strong Partnerships

Information sharing on several levels is vital in creating collaborative relationships. Many companies think they have good partnerships with their suppliers, but in reality they haven’t reached the level of trust needed to create world-class performance.

First, both parties need to be very open in sharing cost information. Cost structures, Bills of Materials and design information needs to be shared so the customer can improve their product designs to reduce cost and improve performance.

Second, suppliers need to be deeply involved with product design in the beginning and throughout the product life cycle. Involving the supplier in design reviews, cost reduction efforts, and quality improvements (through technical capability studies) can help you reach new levels of performance and cost reduction. It can also reduce lead times and risk in the supply chain.

Third, both sides should use scorecards. I’ve known many suppliers that thought they were doing just fine, only to find out – when it was too late – that their customer perceived their performance as substandard. I’ve also seen customers whose policies made it difficult for the suppliers to meet their expectations. Both sides need to share performance measures frequently. True partnerships are based on trust and communication.

© 2014 – Rick Pay – All Rights Reserved

Discipline Makes It Happen

We all know we need to lose weight, stop smoking, write more or make improvements in our businesses. In many cases we even know how to do it, yet we never seem to get it done. Why? Simply, we don’t have the discipline to carry it through. Actually doing it is the hard part and best intentions are not sufficient.

So, how do we develop discipline? There are four steps:

  1. Set clear objectives – this is often the “vision” or target state describing where you want to end up. For instance, you may want to lose weight, but put a number to it, for example, 25 pounds this year, or 10 pounds by Christmas. Notice not only the amount, but also a deadline. You can make it a stretch goal, but make it achievable or you won’t follow through.
  2. Develop a plan – decide how you are going to approach the process in a way that is engaging. If you hate going to the gym, maybe walking in the forest would help you persevere. To look at this in a business setting, if employees don’t want to remove waste to help the company, maybe they would if it would make their jobs easier.
  3. Do it regularly – and most importantly, put it in your calendar. Set aside a regular time for it. If you go to the gym, perhaps 7:00 AM every other day, or if you want to write more, perhaps the first hour in the morning. Regular short times are much better than infrequent longer times. Schedule it and it will be come a habit.
  4. Measure the results – weigh yourself regularly. Track the number of articles or blog posts you write each week. Measuring becomes its own reward and shows that you’re making progress.

Most of all, don’t give up. Things often get worse before they get better, so give it some time to start showing results. Then as the changes become habits, you’ll enjoy the new you and reap the rewards of your efforts.

© 2011-2013 – Rick Pay – Al Rights Reserved

There is No Accountability Without Consequences

Recently I spoke to a very frustrated executive. His people weren’t doing what needed to be done. They often subverted their teammates and occasionally they would yell at him. As might be expected, the overall performance of the company was below par. As I examined the situation, I found that there was no accountability in the organization and there were no consequences for weak performance.

To establish a culture of accountability and strong performance, it is important to do four things:

  1. Make sure expectations are clear. Let people know what the vision and goals are and make sure they understand them clearly.
  2. Give people the resources they need to do the job. This might include training, staff, IT resources, etc.
  3. Measure results. Make sure people know how they are doing.
  4. Establish consequences for both good performance and for continued poor performance. Celebrate success. Take action on poor performance. Those actions might include retraining, reassignment or in particularly poor performance, consider termination.

Your actions related to performance speak loudly to the organization. Are you serious about your expectations? Doing nothing for either good or bad performance will tell your people what they need or don’t need to do.

© 2013 – Rick Pay – All Rights Reserved

The Key to Transformation: Accountability

A May 14, 2012 article in Fortune Magazine, “The Man Who Got Honeywell’s Groove Back” explains how CEO Dave Cote achieved the amazing turnaround using several disciplines, one of which was accountability. Through accountability he changed the culture, implemented a new strategy and boosted profitability.

Creating Accountability

I believe there are three keys to establishing accountability: vision, communication and measures. One of the problems Cote faced was a culture clash created by previous merger attempts of Allied Signal, Honeywell and Pittway, a fire and safety company. These organizations’ cultures were in constant conflict. By establishing a clear vision, Cote aligned the people and cultures to pull in the same direction.

Further Steps

He then established clear communications at all levels to let people know what was expected. He sent a team to Toyota to learn Lean, but did not apply massive layoffs to reduce costs. He knew that would demoralize the workforce, so he used a series of furloughs to reduce costs instead.

Finally, Cote implemented clear metrics to keep the focus of the organization on the right things. One of these was headcount.

Through strong, clearly communicated vision and a system of metrics to help people know how they are doing, organizations can really turn the corner to Operations innovation and financial performance. Accountability is a vital component of that transformation.

© 2012 – Rick Pay – All Rights Reserved

Waste Reduction Through Sound Supplier Management

I am currently reading Toyota’s Supply Chain Management by Iyer, Seshadri and Vasher (New York: McGraw-Hill, 2009). Dispersed among lots of fairly dry detail are several valuable nuggets, one of which is: “80 percent of the waste in the auto industry is the result of poor supplier management…the cost related to such waste is estimated to be $10 billion.”

Think about that. Of all the Toyota Production System related waste in auto plants, these authors suggest that 80% starts with the suppliers! Given Toyota’s recent quality problems and their apparent root cause, I see how that could be possible.

Many of my clients’ inventory, quality and service problems start with the supply chain. Much of the actual waste can be traced back to communication (or lack thereof) with the suppliers. Exceptional supply chain performance is built on things such as good specifications, effective order coordination and strong planning and execution.

There are two approaches to reducing waste through supplier management: a strong supplier partner program and measures of performance.

The supplier partner program includes involving suppliers during the design phase, and strong communication through:

a) providing forecasts and demand planning,

b) sharing actual parts flow plans including internal production schedules and pull systems, and

c) having regular face-to-face meetings.

Frequent performance measurements should monitor cost reduction activities, quality and delivery. Suppliers need to know how they are doing.

Supplier management is a vital business process with the potential to reduce waste and increase the bottom line.

© 2011 – Rick Pay – All Rights Reserved