Is Your Business Ready for the Recovery?
Just like the seasons, economic busts turn into economic booms. Whether the economy or the stock market has bottomed out is irrelevant; one day soon the economy will turn around. Will your business be ready to handle the increasing volume of orders smoothly and efficiently, or will you find yourself back in firefighting mode, scrambling to deliver?
While most businesses are whining about the recession, a few are preparing for the recovery. They know that now while business is slack, is the ideal time to tune up their operation. Don't waste this opportunity. If you want to be ready for the recovery, the time has come to simplify, streamline and optimize your organization in preparation for the future.
Step 1: Simplify
Over the years, every business collects clutter: unused materials and machines that muck up daily operations. The solution: Spring cleaning! Go through every nook and cranny and throw out anything that is out of date or unused. Organize what's left so anyone can find it when they need it. Label the locations of all materials and tools to make them easy to find.
Step 2: Streamline
Businesses grow organically, not systematically. So they often look more like a gnarly tree than a set of railroad tracks. This convoluted workflow takes too much time and causes preventable errors.
Eliminate Unnecessary Movement: In any business, walking is waste. Unnecessary movement of people, machines or materials is wasteful and slow. Reorganize the flow of work to eliminate unnecessary travel.
Eliminate Unnecessary Delays: Remove the delays between steps in the workflow. In most businesses, the product or service spends 57 minutes out of every hour waiting for the next employee to do something with it. When you look at the total time from order to delivery, employees are only working on the product or service for three minutes out of every hour (the 3-57 rule). When businesses eliminate the delays between steps, they can reduce turnaround times by 50 percent or more, double productivity and increase profits by 20 percent or more. Companies that eliminate unnecessary delays also grow three times faster than their competitors.
The mistake most managers make is looking at their employees and thinking: "Our people are busy." And they are, but the product or service isn't busy most of the time. When you eliminate the delays and unnecessary travel, employees don't have to work any harder, yet the product starts working much harder. Eliminating unnecessary delays and travel makes the company faster, which delights customers. More importantly, they will tell their friends. Nothing beats word-of-mouth to grow a business.
Eliminate Unnecessary Inventory: Hold onto this thought: Inventory is evil. Raw materials and finished but unsold goods take up space, time and money. In most businesses, some level of inventory is necessary, but companies often stockpile materials they rarely need. Figure out how to get them when you need them.
Shift to One-Piece Flow: Most of us grew up learning about mass production and the economies of scale. While useful at the time, the Toyota Production System has taught the world about the economies of speed. If a customer only wants one of your products, it doesn't matter if you can produce 10,000 quickly. They only want one and you end up with 9,999 in inventory (inventory is evil). Figure out how to redesign and reconfigure machines and processes to produce one item or one thousand quickly and easily. This simplifies production scheduling and reduces time to deliver.
Once the business operation is simplified and streamlined, it's time to optimize the process.
Step 3: Optimize
Every business makes mistakes, errors or defects. Even productive, profitable businesses can have 3-6-9 percent error rates. Unfortunately, most managers blame employees for errors when it's not the people who are at fault. Instead, blame the process. Processes let people fail. Processes can be setup to prevent failures in such a way that anyone could do the job.
Everyone's familiar with Pareto's 80/20 rule: 20 percent of the business causes 80 percent of the errors, but as little as 4 percent of a business (one step in 25) causes over 50 percent of the errors (the 4-50 rule).
Count and Categorize Mistakes and Errors: When businesses take the time to count and categorize their errors, they quickly discover where most of the errors occur. The employees who work in that area can often figure out a way to mistake-proof the process to eliminate most of the errors.
Mistake Proof the Process: Mistake proofing makes it impossible for an employee to make an error. Examples of mistake proofing surround us. Modern cars won't start unless the transmission is in park, and the driver has a foot on the brake. Electrical plugs have a fat and slender prong so that people can't plug them in incorrectly. A spell checker automatically checked my spelling as I wrote this article.
Any process can benefit from mistake proofing. It just takes a little imagination to figure out how to change the process so it becomes impossible to make a mistake.
Are You Recovery Ready?
While the economic downturn has been painful, it has also given every business an unparalleled opportunity to simply, streamline and optimize in preparation for the recovery. Could you use this time to become faster, better and cheaper than the competition? When the economy recovers, will you be ready?
Jay Arthur, the KnowWare Man, is author of "Double Your Profits: Plug the Leaks in Your Cash Flow." He has spent the last 20 years helping companies maximize revenue through the "Lean Six Sigma System," a collection of audio, video, books and software. To sign up for free Lean Six Sigma lessons, click here or or call (888)468-1537.