Part 3 - More of ‘What’s in it for you?’…

As you know, I have been talking about efficiency for quite a while. Of the many definitions, I see efficiency as the ability to accomplish a job with a minimum expenditure of time and effort. I have to believe that a company’s main objective is to reduce costs, increase quality, increase revenues and, finally, increase profits.

The last couple of ‘ideas’ covered reducing costs and increasing quality, this one covers Increasing Revenues.

On the Topic of Increased Revenues

For the sake of argument, let’s assume that your efforts to be more efficient are successful. This means you have reduced the cycle times of your processes and it could produce several advantages that would result in increased revenues.

If I can produce more goods in the same amount of time and there is a market for them, it would increase revenues. Ford planned to manufacture a specific amount of new Mustangs. The demand has been much greater than that amount. They were able to increase output some, but not enough to maximize the revenue potential of the Mustang.

Time to Market is not a new concept, but what does it mean? If you can get to market early with a high demand product, you can capture a larger revenue stream than the competition. Let’s look at the Apple iPod. They were there first to market. They created the demand. They had the inventory to meet the demand. Early to market enabled them to build a successful music distribution service. By the time Microsoft responded, the Apple customer base was set. The Zune is playing catch up and is not likely to ever make up the lost ground.

If you are late getting your product to market, you may lose market share that you can never get back. Amazon.com was the first company to sell books online. They put in place inventory, infrastructure, logistics and big advertising. They had been up and running [gaining market share] for at least a year before stores like Barnes & Noble realized that they needed to get into that market to compete. Barnes & Noble will never be able to make up that gap.

Our customers have discovered an additional advantage to efficiency. They are using it as a selling tool to get new business. They bring in their prospects and show them how efficiently they manage their design and manufacturing processes. They are landing new business – new business yields new revenues.

You may have not have given it much thought, but Efficiency can increase your revenues.

Next topic – increase Profits

Your Thoughts…

Part 2 More of ‘What’s in it for you?’…

As you know, I have been talking about efficiency for quite a while. Of the many definitions, I see efficiency as the ability to accomplish a job with a minimum expenditure of time and effort. I have to believe that a company’s main objective is to reduce costs, increase quality, increase revenues and, finally, increase profits.

The last ‘ideas’ covered reducing costs, this one covers Increasing Quality.

On the Topic of Increased Quality

In a manufacturing environment, quality improves reliability and increases production. Fewer defects translate to fewer warranty claims and increased profits. It costs money to improve quality, let’s look at where you are likely to spend money…

Prevention – New product review processes; Quality planning; Supplier approval process; Process capability evaluations; Quality improvement team meetings; Quality education and training; etc.

Internal Failures - You are able to discover the failure before it gets to the customer, but now spend cash on scrap, rework, re-inspection, re-testing, materials reviews or downgrading.

External Failures – After the customer has the product, you are processing customer complaints, customer returns, warranty claims and doing product recalls. We know one large aerospace company that delivered a faulty product and it cost them over $2 million to correct it.

Most companies looking to improve quality will revisit their processes and re-engineer them to prevent quality defects and internal/external failures. They look to Six Sigma, Lean manufacturing and TQM strategies for help. The bottom line: A large number of manufacturing companies are achieving real success and real success increases their profits.

Next topic – increase Revenues

Your Thoughts…

I ran across something from the University of California that I found interesting. They are addressing the topic of process simplification. They have identified what they believe is the foundation for process quality, improvement and innovation. They describe this foundation as having 5 'piers'.

Their 5 'pier' foundation includes: Simplified accountability, Better information, Responsive structure, Behavioral values and Leveraged technology. Building on these 5 'piers', your company can streamline their processes.

Why is this important?

They believe that streamlined processes will reduce process cycle times, improve transparency and improve quality.

Our thoughts…

As you know, I have been talking about efficiency for quite a while. Of the many definitions, I see efficiency as the ability to accomplish a job with a minimum expenditure of time and effort. I have to believe that a company’s main objective is to reduce costs, increase quality, increase revenues and, finally, increase profits.

I think it is important to discuss ‘what’s in it for you?’ - So I will make this a multi-part newsletter. I will address the following: Reduced Costs; Increased Quality; Increase Revenues; and, Increase Profits over the next several ‘Ideas’.

On the Topic of Reduced Costs

Select any process within your company. If you could simplify/reduce the time it takes to complete that process, wouldn’t that reduce the costs associated to that process. If you could do this to multiple processes, wouldn’t that reduce costs.

Let’s look at a specific example. A paper based change request process costs a company $2,500 per change request just to manage the request process. If you process 50 changes per month, your costs would be in the neighborhood of $1.5 million. Our customers are experiencing an order of magnitude reduction in the cost of managing change requests – today it costs them about $250 per change request. They are seeing a savings greater than $1 million a year.

The University of California article talks about ways you might streamline your processes. You can reduce the number of: hand-offs, steps, wait/delay intervals, signatures, decision points and pathway options. This assumes that you can dictate what steps are to be taken and how long it should take. This assumes that you can actually see where an activity is within its process – if it is late, you could do something about it.

Next topic – increased quality

Your Thoughts…