Category Archives: Manufacturing & Operations

How Do You Optimize Quality Improvement? Six Suggestions

Situation: A company’s reputation is based on quality of work. The CEO notes that occasionally they have mishaps due to suboptimal documentation. They are considering a concerted quality effort.  Based on your experience, would you do this whether or not you were bound by ISO requirements? If so, would you hire an outside consultant to guide your efforts? How do you optimize quality improvement?

Advice from the CEOs:

  • Some companies have successfully used ISO to force documentation. ISO provides a structure to enforce keeping the company and employees diligent and honest.
  • Other companies have used standard operating procedures (SOPs) for field as well as internal functions to speed completion of documentation and accelerate invoicing. These companies may or may not have ISO requirements.
  • One company tried to go cheap – implementing process improvement without a qualified consultant. While the effort was eventually successful, it took way too much time and money. From this experience, they recommend hiring someone who is experienced and who already has a template to guide the process.
  • To test the experience of an outside consultant, start with a small project to get the company accustomed to the process and to evaluate the consultant’s efficacy.
  • If the choice is to work on this yourself with your employees, start by documenting what happens correctly. Once you have done this, work on improvements to address problem areas.
  • This is not a simple exercise – plan for it and use the right inside or outside person to guide the process.

 

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What Efficiency Metrics are Most Important? Six Suggestions

Situation: An early stage manufacturing company has established repeatable operations that produce the desired quality. The CEO now wants to focus on efficiency. Early research suggests a number of areas on which they could focus. Based on your experience, what efficiency metrics are most important in manufacturing?

Advice from the CEOs:

  • Much depends upon what is being manufactured, and both the complexity and labor intensity of the manufacturing process. Start with the basics: looks for a relevant quality metric, and a time / delivery metric. Test these for relevance to your operations and adjust or change them as necessary over time.
  • Start with simple metrics and make them more complex over time.
  • On an ongoing basis, monitor your processes for continuous improvement. If an employee comes up with an improvement that increases efficiency and saves money, recognize and reward that employee.
  • Be selective. Limit your focus to 2-3 metrics per quarter. Make first period performance the baseline for the next period.
  • Areas in which to focus:
    • Cycle times.
    • Statistical process control to monitor:
      • Yield
      • Throughput
      • Fall-out
    • On time delivery to production schedule.
    • Quality check at end of production – yield rates versus pre-set targets.
    • Use Google to see what others are using. Google “Manufacturing Performance Indicators”.
  • As you develop your efficiency metrics, include your most effective metrics in performance measurement for bonus awards.

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How Do You Cut Excessive Overtime? Five Suggestions

Situation: A family-owned business has a family member on hourly pay who puts in excessive overtime. The cost of overtime significantly cuts into company profits. The CEO wants to cut back these overtime hours and get the employee to work more efficiently. At the same time, she feels that maintaining peace within the extended family is important. How do you cut excessive overtime for a single employee?

Advice from the CEOs:

  • Situations like this within a family business are delicate because of relationships beyond the work place. Treat this individual respectfully, but make it clear that you have to act in the best interests of the company and all employees.
  • Develop a job description with this employee that will help to get their overtime under control.
    • Communicate to the employee: “I don’t want to take advantage of you by requiring this much overtime.”
    • Let the individual know that you are looking for additional talent and want to more tightly define the roles.
  • Develop a company policy on overtime that limits the amount of overtime that any one individual can accrue. If anyone starts to approach this limit, then have a process in place that shifts additional overtime to others.
  • This is a serious problem for the company. It calls for company transformation. Enlist the employee as a champion for the cause of transforming the company. Keep this a positive vision.
  • If the individual is not a keeper: start controlling hours, but don’t give a raise. Let them leave on their own time.
  • If the individual is a keeper: give them raise, while cutting overtime hours.

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Where Should a Company Focus – People or Cash? Four Thoughts

Situation: A small company sells consumables as its primary source of revenue and profit, and produces equipment associated with these consumables. Their challenge is that designing and producing equipment is beyond their financial capacity. They have a small, loyal staff engaged in equipment production. This is a critical trade-off that must be resolved. Where should the company focus – people or cash?

Advice from the CEOs:

  • This product/profit combination is common. HP sells printers and ink, as well as other products, but ink cartridges have long been their primary source of corporate profit. The question is how to produce the associated equipment at the lowest cost?
  • Given the shortage of financial resources, why not asks a company with expertise in equipment to build the equipment on a contract basis?
    • Offer the outsource company the designs and expertise to support the project. That company may even hire your employees who have developed expertise in this area.
    • In return for providing design and guidance, ask the contract company for a percentage of the revenue or profit on equipment that they sell. This relieves you of the payroll and cash obligations for the equipment, and provides you with a modest income stream from equipment sales.
  • There is an obvious question of how the small company retains its intellectual property position. Is it possible to look at critical sub-assemblies and retain the expertise within the smaller company to complete and install some of these?
    • If so, this will boost annual revenue. The contract partner completes all but the most critical pieces, and the small company finishes the product with its technology.
  • The small company, through its sales and marketing efforts, should maintain control of leads and sales of both equipment and consumables.

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How Do You Manage Customer Change Orders? Three Suggestions

Situation: A mid-sized company has taken over management of the supply chains for several large customers. The products that the company manufactures have long lead times both for sourcing materials and manufacturing customer orders. Sometimes customers either ask for additional production on an existing order in process, or ask for deliveries to be spread beyond contracted timelines. Either situation has a significant impact on the cost of producing the order and company profitability. How do you manage customer change orders?

Advice from the CEOs:

  • The issue is one of managing contracts and customer expectations. Because this is hurting the company, prime the customers now that things will need to change in the future. Depending upon the level of comfort the response can be reactive or proactive.
  • A proactive response: because this happens with some frequency, establish a change order schedule and share this with the customers. Your message will be that you are happy to accommodate changes in orders, but you need to recover the cost of these changes in order to be able to continue supplying the customer. Include the change order schedule in future customer purchase contracts. This may cause them to have second thoughts about requesting changes in orders.
  • A reactive response: the next time a customer makes these demands the response can be: “We’ll take care of you this time but when we draft our next contract we have to adjust the terms of the contract so that it is a win-win.”
  • The appropriate response depends on value of each customer’s business to the company – both revenue and profit – and your confidence in the relationship with the customer.

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How Do You Simplify a Firm-wide Software Roll-out? Five Ideas

Situation: A company plans to implement a new CRM system. They have a project road map and have assigned a manager for the implementation. However, the CEO has concerns because this is the most significant software roll-out that the company has ever attempted. She wants to assure that the roll-out proceeds smoothly, and that and that sales, marketing and customer service functions are not hampered. How do you simplify a firm-wide software roll-out?

Advice from the CEOs:

  • Focus on company business objectives as you plan and implement the roll-out. Optimize the system to company business objectives, not just what the team wants.
  • Scope this out as a project management exercise.
    • Identify objectives.
    • Build and test.
    • Roll the system out to preliminary production and collect feedback on functionality.
    • Rebuild and test.
    • Plan and conduct system orientation training.
    • Set a date for the roll-out.
  • Don’t immediately roll the new system out company-wide. Conduct an initial implementation with a small scale test team. Make sure that everything works as planned and that day-to-day function is not compromised. From the information that you gather during initial implementation, tweak orientation training so that everyone is comfortable with the new system.
  • During initial planning sessions to set system objectives, meet first with managers whose teams will be impacted by the roll-out. Managers may not speak freely if their support staff are present.
  • Have a roll-out celebration and be generous complimenting personnel who have been involved in planning and roll-out.

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How Do You Focus Managers on Growth? Five Suggestions

Situation: Two key managers of a company are too busy with day-to-day activities to focus their planned 40% of time on growth. The company has hired personnel to relieve some pressure on them, and a new ASP (Application Service Provider) is improving customer out-reach. How can the CEO take pressure off these managers so that they have time to grow the business? How do you focus managers on growth?

Advice from the CEOs:

  • Small companies grow through their early stages with everyone wearing many hats and doing everything. The company is now larger than this and it has to stop. Managers need to focus their responsibilities where you need them to focus and stop doing less important tasks.
  • Have you gone over key responsibilities and expectations for the two managers? Do they have clear objectives and deliverables? If not, focus on this.
  • Brainstorm with them how they could free-up time to focus on growth.
    • Do this in a meeting. Your plan is 10% growth. Ask for their ideas on how to grow the business, and develop a plan to put their ideas into action. What help or resources do they need to meet this plan?
    • Three heads better than one to ask core questions – let them come up with the answers.
  • Design processes to address needs and responsibilities.
    • Rank implementation of options in terms of impact to the company and financial results.
    • Given the ranking, implement programs sequentially – most relevant and easiest first.
  • Taking orders by phone is clerical. This should not be a manager’s prime focus.
    • Have a clerical person answer the phone, and train them over time.
    • Limit the manager’s direct involvement in phone orders to critical situations.

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How Do You Optimize a Promotion? Four Recommendations

Situation: A company has a long-term employee who has been growing in responsibility as Customer Service Supervisor. The CEO is considering giving this employee the new title of Production Manager at the same time that the employee receives an annual wage increase. How do you optimize a promotion?

Advice from the CEOs:

  • Any promotion or increase in responsibility must be consistent with the strategic direction of the company. What are the company’s current and future needs and, based on past performance, can this individual satisfy those needs? If so, this may be a good match.
  • In addition, it is important to consider the needs and career path of the individual. Does the new position involve an increased time commitment, additional skills and training, or other important factors, and is the individual prepared for this increased commitment? Will a higher level of commitment be rewarded financially? The only way to answer these questions is to have a conversation with the individual.
  • If as the first two questions are considered there is any doubt, a longer-term transition may be appropriate. Meet with the Customer Service Supervisor and set a series of goals and objectives that will demonstrate their ability to assume the new role over a 6 month time frame. The concept here is that you must work at the level of the new job before you get it.
  • Before embarking on the above recommendations, draft a job description and list of responsibilities for the new Production Manager position, consistent with the company’s needs as it grows. This will involve input from employees who currently handle these responsibilities. Also look at the reporting structure as it currently exists and as it may change.

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How Do You Close the Books on Time? Four Suggestions

Situation: A company has experienced delays in closing their annual books for years. Inability to complete final inventory is the critical factor. In recent years it has taken four months or more to get final numbers for the year. How do you close the books on time?

Advice from the CEOs:

  • It is important to put a system into place well in advance of fiscal year end. A key part of this is to conduct final inventory so that it is done smoothly and accurately either immediately prior to or following the end of the fiscal year. Retail or wholesale operations normally complete final inventory within 30 days of fiscal year end.
  • If your inventory includes both large and small value items, ask whether you have to count everything. Based on past inventory it may be that small items that do not substantially impact final inventory can either be eliminated from the count or handled on an exception basis.
  • Consider a system of doing monthly or rotating monthly inventory smaller sets of items that make up perhaps 60% of sales, and quarterly inventory on an additional larger set of items that together with the first groups make up perhaps 80% of sales. By completing inventory of these items more frequently, the company will not only have a better handle on total inventory, but is also likely to be more accurate at the end of the year. At year-end inventory add those items that make up the final 20% of sales to the inventory count.
  • Again, depending upon the nature of the inventory, it may not be necessary to count items that, as groups, are valued under $500 per group. Seek expert advice from your accountant on this point.

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How Do You Move a Live Online Data Center? Seven Suggestions

Situation: A company has run out of space and is planning a move to a new and larger facility. The biggest challenge is that they maintain a live online data center upon which their clients depend. How do you move a live online data center?

Advice from the CEOs:

  • This is not a rare event. Many companies with live online data centers have to upgrade their systems on a regular basis as equipment and software technologies evolve. Maintaining service during a move is not significantly different. Research what steps these companies have taken to minimize disruption during upgrades.
  • Don’t try to do it all by yourself. Seek outside expertise to help you plan the move, and to develop options that will minimize both downtime and service interruption.
  • Ask a trusted data center resource for a 3rd party audit of your move plan.
  • When one company moved, they overlapped their leases by one month, and their Internet connections by 2-3 months. This gave them breathing room as they completed the move and allowed them to stay live uninterrupted through the move.
  • Another company increased their back up servers and service. They also planned their move to occur during what they knew would be a low demand block of time. As a result, they were able to complete the move, plug in the servers and were only down for 30 minutes.
  • If it is feasible, consider leaving your old center in place as a back-up data center.
  • Conduct a number of practice shutdowns and restarts to test your systems.

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