1 very simple question to radically improve performance.

1 very simple question to radically improve performance.

Do not ask who, ask why.

Piles have been written about changing culture as the means to improve performance.

Most of it misses the point.

Learning organisations, teams, mutual obligation, and all the rest, but when it comes down to it, the core is about people wanting to, being able to, and being acknowledged as doing a good, and worthwhile job.

It does not matter if you are the managing director, or the cleaner, both are there for a set of pretty common reasons, and high amongst them is to do a good job.
Nobody, not even the most militant and unreasonable ‘rabble-rouser’ ever went to work to do a bad job.

The task of the organisation is to organise to get the best, most cost efficient, most customer value specific job done and delivered, and in most cases that requires people.

Therefore the task of management, and everybody involved should be focussed on removing the impediments to getting that job done, and having an engaged and responsive work force that gets the job done better than  competitors.

Only then can you be commercially sustainable.

Years ago, (mid eighties) involved in the early production of a new dairy plant which amongst other products made yoghurt, we used to watch the huge waste bins being carted away, several a day, day after day, a seemingly  intractable set of quality problems was costing millions.

Even worse, the office and management staff could see the waste, and lost confidence and heart.

In the midst of the turmoil, I watched one day as bad product was being pumped out of the batching tanks into the system that mixed in the fruit components, and was then sent to the form & fill packaging machine to be packed, to be sent to the waste bin.

When I raced around to get the machine stopped before it was mixed with the fruit, I was told to nick off, the system could not be stopped mid stride, there was  no choice but to knowingly add substantial cost to a poor product that would cost us to throw out.

After some heated exchanges, the whole system was closed down, and I presided over an impromptu meeting I convened almost by force on the factory floor to figure out the cause of the problem. As I was the marketing and sales manager, this was theoretically way outside my formal jurisdiction, but I was the one taking all the customer calls about bad quality and short delivery, and a key KPI was margin, so the bad product was really hurting the formal measures of my performance.

The production manager and supervisory people were seriously pissed, as their KPI’s were all about throughput, nothing about quality, customers or cost.

The meeting was a very unpleasant finger pointing exercise, nobody was to blame, and yet, everyone was to blame, but it was the beginning of an improvement process that led to the plant becoming a world class plant over the following couple of years.

At the core of the improvement was the conversion of the previous procedure of blaming a problem on someone other than yourself, to investigating and fixing the causes of the problems at source.

The tool used extensively was a version of what has become known as ‘5 why’. It replaced what we began to call the failed ‘5 who’ with the genuine investigation and remediation of  the root cause of problems.

The lesson, always Ask why, not who.

 

The differences between Takt and cycle time, and why they are important.

The differences between Takt and cycle time, and why they are important.

 

‘Job shops’ have particular challenges in production planning and capacity utilisation.

No two jobs are exactly the same, so the sequencing of jobs to optimise factory utilisation takes on even more importance.

In the middle of an operational improvement project in a job shop environment with multiple possible routes for a given job, I found myself having a regular conversation with the factory management and machine operators about creating a sense of ‘flow’ through the factory, and how that related to machine cycle time, total process time,  and Takt time.

There were multiple definitions of cycle, depending on who I was talking to, but none had any idea of what Takt time was.

Therefore I followed my own advice to ensure that as a first step, the language in any factory was absolutely common. This ensures that the meaning meant to be conveyed by specific words were exactly the way they were received.

Cycle time.

Cycle time has many definitions depending on circumstances. In effect it is the time taken to do one cycle of a specified task. The cycle time of production of a Boeing 747 is many months, whereas the cycle time for production of a specific part may be hours. Both are valid definitions, so ensuring that the definitions being used in your context are exactly the same is essential.

In my job shop, there are many routes for a completed job via a range of different machinery, each with its own limitations.

A job may be done on a machine that produces  5/minute, a cycle time of 12 seconds, or a machine that does 60/minute, a cycle time of 1 second. Make sure you are talking of the same machine when discussing the routing.

The cycle time of a particular completed job may have a number of separate processes that require both a specific order and potentially variable routing, so knowing the cycle times of each machine option, and other limitations, such as manning, that may apply is essential.

Takt time.  (derived from the German ‘Taktzeit’ referring to a musical beat measured by a metronome)

Takt time is similarly subject to differing interpretations, but less so than cycle time.

The classic definition of Takt time is:

Available time for production/Required units for production. In other words, the time required to meet demand.

This is exactly right, but the confusion usually occurs in the definition of ‘available time’

Assuming a normal 8 hour day, we start with 8 hours X 60 minutes = 480 minutes.

However, there will also be standard times during the day when the machine is not available. For example, it may take 15 minutes to be set up in the morning, then there are 2 x 10 minute ‘smoko’ breaks during the day, a 30 minute lunch break, and a 40 minute wash up at the end of the day.

The available time then becomes: 480 – 15 – (2 x 10)-30-40 = 375 minutes/day.

This ‘down time’ might be managed by having split times for lunch and start-up/wash up, and would change the Takt time calculation, but essentially to be simple there are 375 minutes available in the day. This becomes the base for the Takt time calculations.

Let’s assume that the customer demand was for 50 units. You then have 375 minutes to produce 50 completed products, or an available time/unit of 7.5 minutes.

Let’s further assume that the product takes  8 minutes /unit to produce, you are therefore  30 seconds short per unit, or 25 minutes over the course of a normal day. This is typically made up with overtime used to produce the 50th unit, or producing only 49 units, which annoys the customer of the 50th who are short or late delivered.

The additional problem is the backlog of back orders builds up, resulting in customers cancelling, going elsewhere, or just losing confidence in you.

None are outcomes you would wish for.

In addition, there are always unexpected things that happen, a machine goes down, a well-meaning manager walks through talking to operators and slows down the speed, a productivity improvement meeting is called, and so on. All this impacts on the available time, but the customer demand does not vary from 50 units/day.

The operational improvement task, often referred to as ‘Lean Thinking’ is to apply continuous improvement to both the available machine time, and time required to produce the unit, so that it eventually matches the Takt time of demand.

Most factories I have seen have no idea of takt time, and many see no need for it, but it has several benefits.

  • It makes capacity calculations relatively easier, even through a complex set of sub processes. By calculating the capacity and cycle time of each process, and the alternative routes that may be available, the best fit to the demand is exposed.
  • It enables the calculation of the best batch sizes to be done.
  • It gives team members an idea of what ‘well done’ looks like for every bit of production, an enormously valuable outcome.
  • It acts as an early warning system of an emerging problem.

Understanding the two times, Cycle and Takt enables a clear sense of priority that can be applied to planning the sequences of jobs, and an understanding the total and local (individual process) capacity utilisation necessary  to be of maximum service to customers.

When you have that clarity, you can address the opportunities for improvement, leading to a greater sense of ‘flow’ through the factory.

 

The 4 dimensions of project planning.

The 4 dimensions of project planning.

Lessons in project management are hard won, and stumbles can be very expensive.

My hard won experience supports the contention of that great management thinker Albert Einstein, noted above.  In every project that I have done that delivered sub par outcomes, at least some of the cause has been inadequate planning in one way or another, for one reason or another. Einstein may have been well known for things other than management, but that did not stop him mumbling things that should be on every managers wall as a reminder.

That experience has led me to the view that every project has four dimensions. For success you need to get them all right, 3/4 is simply not good enough, but of critical importance is the overall planning.

  1. Project Objectives. Having a set of objectives, expectations of the outcomes is why projects are developed, planned, funded, and executed. Being explicit about the objectives, and having everyone involved, and who may be affected, is essential.
  2. Project Scope. The scope describes what will and will not be done as a part of the project. Failing to have an explicit scope encourages ‘project creep’ and lessens the accountability. In the ERP implementations I have been involved in, project creep is an ever present cancer on the project, and those that failed to be absolutely explicit about the scope, and enforced it ruthlessly, failed to meet expectations in numerous ways.
  3. Project Budget. How much the project is expected to cost. Pretty basic,  but ignored often, and subject to blow-out as the scope creeps out of control. The only ones who benefit are the consultants who either fix the problems (often they are a part of the problem) and your competitors.
  4. Project Timetable. Every project needs a timetable, with milestones connected to the scope and costs, as well as performance.

Project planning stepsNo project can reasonably be deemed successful unless it meets or exceeds the requirements imposed by all four parameters. Anything less will deliver sub-optimal outcomes.

Where will the retail gorillas make profits tomorrow?

Where will the retail gorillas make profits tomorrow?

Coles and Woolies are locked in a battle for share of the customers wallets and throats that becomes more complicated every day.

The competitive landscape has changed. The old model of them against each other and independent wholesaler supplied groups, has been spiced up by Aldi, Cosco, and the tide of competitive business models evolving both in store formats such as the convenience small stores around commuter points, farmers markets, and digitally enabled sales.

Those sales I call ‘Beyond Checkout’ cover everything from online ordering with home delivery to the evolution of old fashioned drive thorough pickup.

In my view the battle is a losing one for the gorillas without significant change to their operational culture. Their current business models are based on mass merchandising, not easily made compatible with the personalised service delivery and the  lower volume specialised products now being sought. You need go no further than the disappearance of Thomas Dux for evidence.

Having said that, I see 5 general areas for operational innovation of both the gorillas that would deliver ongoing profits, and sensitise them to the changes happening beyond the walls of their stores.

  1. In store technology deployment.

Deploying some level of the data driven category management control to store level would greatly enhance assortment optimisation, out of stock reduction, and margin maximisation. The assumption of course is that there is staff in the stores with the nous to leverage the information  they are being given.

There is also the juicy thought that stores will be able to connect to consumers in close proximity to stores via their mobile devices geo location capability and make them offers based on their purchase patterns. Then there is the option of instore kiosks harnessing the value of instore video and personalised advertising and promotion, again catalysed by your mobile device.

  1. Leveraging existing asset

Reduction of maintenance and running costs with innovations like rooftop solar power, preventative maintenance programs, improved store security, and stores as the logistic base for home delivery. Home delivery will become more and more important to time constrained consumers, so developing a compelling offer should be high on their agendas. To date the penetration has been poor because the logistics, particularly for fresh and frozen product is really challenging.

  1. Employee productivity improvements.

With better staff training, particularly in produce, customer sensitive opening and closing times, cash register  speeds (the Aldi insistence on prominent bar codes by observation speeds up throughput significantly), much can be achieved. Self-serve checkouts currently rolling out with store renovation programs have clearly been a success with consumers, and offer significant productivity improvements.

  1. Value chain optimisation

The use of collaborative technology  that goes back into supplier production planning and collaborative volume management from the production line to the checkout has been around for years. However, there remains huge opportunities to extract benefits from inventory management for all in the value chain. The barrier is cultural, as the gorillas want all the benefit to come their way, removing the incentive for suppliers to take risks and innovate, except when under the whip.  Collaboration through the value chain can deliver great benefits when done well.

  1. The customer experience,

What is retail about, if not customer experience?

It is here that retailers can differentiate themselves in all sorts of ways.  What they cannot do is demand from head office that customers like them, and prefer their stores over the others. Store choice is a personal thing for consumers, made up of many elements, but creating a store environment where the employees are pleased and proud to be of service is a great start.

Long way to go there.

What the senior management can do is provide the infrastructure that enables that level of personalisation and service to be delivered in stores, and the leadership to create and encourage the customer centric culture that front line employees then deliver.

And a final thought: Is that the light at the end, or a headlight?

E-tailing is a huge threat to the gorillas, and while it involves capital to develop and deploy the technology, it is essentially an individual engagement and transaction. Online gets all the publicity, but still only accounts for around 6% (depending on whose numbers, and which categories you look at) of sales. The gorillas should see E-tailing as their next opportunity area, to be embraced rather than feared.

Remember what happened to the Blockbuster video business? They had the game by the throat, Netflix was just an irritation in the corner, so they ignored them.

Bamm! Blockbuster is gone.

While it is still pretty hard to stream a family roast dinner, the lesson of Blockbuster should not go unheeded by Coles and Woolies.

 

The 4 strategies to scale a small business.

scaleable

courtesy www.myob.com.au

 

Most businesses want to grow, even just a bit, it is not only in the DNA,  but some scale makes life in most areas easier. So how do small businesses go about it?

4 basic strategies.

1. Empower the team.

Make every front line person as well as the office realise that their input and customer service is essential. It can be done, and it works. Bunnings is king of the hardware space, delivering great outcomes for Coles, whereas Masters has been a disaster for Woolworths, yesterday claiming the scalp of the MD Grant O’Brien. I shop at Bunnings a lot, drives me nuts, but at least their  people their have product knowledge useful to a casual renovator, share it with you and smile. My two attempts at Masters have been different, and there won’t be a third. Whilst these are both large businesses, it is no different for a small one. Make everyone aware of the 8 moments of truth, and committed to improving them on each interaction that occurs.

2. Critical processes need to be documented.

This is not just to pass the various audits haunting us, but so that employees and everyone else knows what is important and what to do. Documentation makes for robust repeatable processes. The challenge becomes one of continuous improvement, as once a process is documented, it sometimes takes on a persona as being “done”. Within continuous improvement lurks the obvious but often overlooked fact that to improve you first need a stable, measured processes as the starting point for improvement. Documentation provides that starting point.

3. Automate repetitive tasks.

If the same thing is done regularly, in the same way, automate it. Then  you get accuracy, reliability and cost reductions, and who does  not want those. Often there is a cost up front, but taken in the context of the potential savings and productivity improvements they are usually small. The most common automation target is customer service. It can be very successful at stripping out costs, but go too far and customers go somewhere else.  A “learning” FAQ function makes great sense for many, and make sure you do not lose the opportunity for the personal touch.

4. Make everything searchable.

Documents, emails, social media posts, everything that gets done should be in a central repository searchable by anyone when it is needed. The waste of having documents in silos is enormous, unnecessary and just plain stupid in this day and age.

The technology is now such that it is possible for small businesses  to be significant global players in a narrow and deep niche should that be their objective, but even for the local businesses without those grand aspirations, scaling operations is a key consideration in the quest to maximise that other most important resource, your time.

 

Two sides to the flow of cash.

cash flow

Times are tough, success is hard to come by, even for businesses that have been around for a long time,  well and truly beating the hoodoo that stalks new businesses, 9/10 failing in the first few years.

Somebody I have known for a long time, who has run a small businesses delivering a range of very good products to consumers via FMCG retailers is about to go to the wall. 25 years of effort and commitment about to slide down the dunney leaving him with nothing, not even his house, left to him by his parents.

Worse than sad. Tragic.

Many things factor in the eventual failure of this business, but one stands out starkly.

Poor management of his cash.

There are two sides to the challenge of managing cash.

The first is the cash itself.

In this case, from week to week even day to day, he knew how much was in the bank, but when the big bills came in,  it has been a real struggle to pay them, because he was not adequately forecasting the flow of cash, giving him the opportunity to adjust activity as necessary. His bank has been unsympathetic, creditors demanding, and debtors increasingly reluctant to part with their cash, even in this current super low interest rate environment. Meanwhile costs have increased inexorably, way out of line with his ability to extract a corresponding increase in the prices he can charge in the marketplace.

Not pretty, and all too common.

The second is how the cash you have is used, the level of productivity you extract from it. Cash by itself is worthless, its value is in what you do with it. Purchase inventory, pay staff, provide a factory and all the other stuff we call the costs of being in business. After all that is done, most want some reward for the long hours and stress of being in a small business, and then to have some left over to go towards that world trip on retirement.

The productivity of the cash is not measured by the amount you spend, but by what you get for it, and small businesses rarely spend enough time considering ways to increase the productivity of their cash, concentrating on the absolute amounts coming in and going out. Challenge is that there is no explicit measure for cash productivity, and it is not a notion recognised  in the accounting packages everyone uses, the accounting standards, or most peoples mindsets. Best we usually seem to do is have a few ratios like the “Quick” ratio which measures current assets over current liabilities, which are not regularly tracked performance measures, and have room for interpretation and thus manipulation.

Stock turn, debtors days Vs creditors days, Sales or Gross margin/employee, product value produced/realisable value of a piece of machinery, production value/production employee, time taken/task, and many others. There are thousands of ways to measure the productivity of the cash tied up in any business, and every business will be different. However, there will be a few measures for each that capture the essential nature of the business, where an improvement will deliver measurable financial  results.

You should  be seeking and using these key measures of cash productivity in your business.

Back to the case of my acquaintance.

He did not manage his cash flow well enough. Failure to adequately forecast  and thus manage the ebbs and flows of cash into and out of his business, and as a result having to put in place very expensive short term funding in one way or another meant he was always chasing his cash-tail. He also did not measure, almost at all, the productivity of his  cash, allowing the ” hidden” costs of poor cash productivity to kill him. Despite his Income statement, often called the Profit and Loss statement, telling him he was making a modest profit, he has hit the wall.

A sad but unfortunately common story, one I hope you are not seeing first hand.