By Edward G. Enquist, Kenton C. Toomey, and Richard Artes
The underlying factors
Three productivity drivers—speed, cost, and quality—are the engines of your business process. Value, which is something we hear all the time, is quality divided by cost. Value increases when quality increases relative to cost. Value drives buying decisions and future customer orders; therefore, it’s the basis for profitability.
Speed multiplied by value equals the velocity of profitable cash flow. Increase speed and you increase the cash in a given time period. It’s as simple as that. Companies have been working on product quality for years, often with outstanding results. The U.S. automotive manufacturers are testimony to that. And it is well documented that ongoing cost reduction practices have been a mainstay culture of successful manufacturing businesses in the past.
|Do the math Quality divided by cost = value Speed multiplied by value = velocity of profitable cash flow|
Speed, speed, speed
The problem most manufacturing businesses wrestle with is speed, which is the direct result of process quality. Consider four world-class sprinters who have been assembled to run a 400-meter relay race without any training for passing the baton efficiently. As individuals, they might each be world-record holders in the 100-meter dash. However, as a team they may fail miserably because the baton is dropped between two runners. One runner has to stop, return to the point the baton was dropped, and then get back up to speed to finish the race. Although the baton may have been dropped on only one leg of the relay, the team’s finishing time may be nearly twice that of the winning team!
Not doing the fundamentals well is what slows down companies and disconnects their manufacturing capability from their information capability. At every spring practice, Green Bay Packers coach Vince Lombardi would circle his players and start them out with this simple reality: “Gentleman,” Lombardi would say, “this object in my hand is a football.” The symbolism was strong. Lombardi was telling his team that they would work on the fundamentals every year and would make no assumptions that certain teammates didn’t need to do this. No one was exempt.
Process quality and business fundamentals
The flow and manipulation of data in information networks is typically flawless because it is relentlessly controlled by the seldom failing software. If errors occur, a programmer/analyst can isolate the cause of the problem and rewrite or insert code to avoid a recurrence. Some people in a manufacturing business might say that the problem of getting orders out the door is caused by a newly installed enterprise resource planning (ERP) system. Odds are that the ERP system software works just fine, but the information being entered and the way the business processes are used are not flawless. Although people are trained on the use of the ERP system, they typically are not educated in new streamlined business processes that are made possible by the ERP system.
The fundamental issues of people skills, process flows, data accuracy, access control, and training and development, to name a few, continue to trip up and slow down business information systems. Training people on a new system is often less difficult than getting them to give up old habits that are contrary to making the new system work. For instance, you may make difficult and time-consuming decisions to retool a factory for a new product line. Consider your reaction if, after the new tooling was in place, you discovered people in a cell manufacturing the new products with the old tooling. Your response would be swift and certain.
Rapid changes in information technology require that people retool as well. Yet “trained” employees often revert to using old, comfortable methods without anyone detecting the problem. (Could this be because too many top managers who use an assistant to print out their e-mail are engaged in making information-system decisions for which they have little know-how?) Has a commitment been made to educate and train employees in new business processes? Have performance measures and department accountability been put in place? Installing an ERP business system and the new technologies of e-commerce and B2B is only one of the two legs that must be re-engineered.
Unless a manufacturing business is willing to commit the time and resources for enabling people to learn and properly execute new systems and methods, it will simply fall behind its competition. Businesses must take the steps to match hard manufacturing speed with information processing speed, and this means getting business processes right!
Every company with the proper support and facilitation can train and develop its employees to execute new systems with few flaws. The right process begins with an honest assessment of both the business climate the company is managing and the industry and competitive trends that will or are impacting it. Here are the key actions a company must take:
- Evaluate and define for all departments the performance and expectations of the new business processes, such as e-commerce.
- Document all the relevant current business processes and evaluate how they stack up against the business climate trends and the skills and behaviors necessary to compete in the new business climate.
- Assess employees’ skills, taking into account employee attitudes, and obtain input from customers and suppliers.
These steps allow you to generate a gap analysis and outline specific actions to eliminate the gaps. How the gaps are closed is critical to implementing a continuous improvement culture with ongoing, self-sustaining learning that adapts the company for future success. The key is the continuous ability to recognize needed changes and to confidently make changes in a supportive environment that welcomes new challenges and new learning.
Problem-solving training, team-based activities, and boundary-erasing communications are a few of the techniques that a business must embrace. A business must also redefine and redeploy work to encourage employees to improve their fundamental knowledge and to work on problem-solving solutions in a team orientation. This measure must be augmented with ongoing resources that provide information, training, and how-to support for getting the job at hand done or a new problem solved. In this way, teams of employees grow in their ability to support ever-changing information requirements with fast-acting manufacturing capabilities.
Measuring and enforcing basic business fundamentals, such as product structuring and resource management, procurement techniques, cost management, methods scheduling, and inventory management, provides a solid foundation for organizational change.
New business concepts for managing information through the use of application service providers (ASPs) offer manufacturers the best of two worlds: a way to outsource and pay for only what they need of a technology that is not core to their business and more time and resources to commit to what is core to their business success. The implication is that manufacturers that missed the last wave of information technology changes will be swamped by the coming wave. Their competition will have even more time and people to focus attention on core business process capability and the underlying fundamentals that, when done well, increase the speed of their growth.
Edward G. Enquist has 15 years of manufacturing, engineering, and supply chain management experience.
Kenton C. Toomey has over 30 years of manufacturing and supply chain management experience.
Richard Artes has over 25 years of business and manufacturing management experience.