| Derailing Your Continuous Improvement Program |
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Many companies undertake continuous improvement (CI) initiatives to streamline their operations. Yet, the road to Lean and the Six Sigma way is littered with companies that were tripped up in the implementation of these various programs. This series will examine the most common reasons companies fail with their CI initiatives and how you can avoid these mistakes.
Reason: Flavor
of the Month
Lean, ISO, Six Sigma, TQM, and Value Streams are just some of the initiatives companies are embracing in an effort to improve their operations. The problem is when a company jumps from one program to another to another. One company launched three different CI programs in eight years. They thought they were being cutting edge. Instead, by switching programs every two and a half years, the executive team had reduced the initiative's credibility with employees. Why should employees take the next CI program seriously when they know it will change again in a couple years. These actions actually create a culture that is quite cynical and resistant to change.
The best way to avoid this pitfall is to pick a CI program and stick with it - don't chase the trends. There really isn't some silver bullet out there that will solve all your operational problems in 24 months. The companies that succeed and are know for their CI programs (think Toyota, GE, Motorola, Herman Miller) have stuck with their CI programs for the long haul. You need patience and persistence. If you're going to succeed with your CI program you need to take a long-term perspective on it so it becomes a part of your company's culture - and culture isn't developed overnight.
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| Operations Strategy
Consulting, LLC |
Megan E. Burns
Managing Director Visit Us Online
Ph: 814-397-3420 |
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Greetings!
Fall is here. That means the third quarter has wrapped up and the final push to the end of the year is on. Over the next three months, you will also be positioning yourself for 2009. Now is the time to begin negotiating with your suppliers for 2009 purchases, outlining your training plans, and setting goals for your continuous improvement initiatives.
In this issue of The Manufacturer's Edge we will highlight why price negotiations don't work and what model does. We are also beginning a series on the top reasons continuous improvement efforts fail and how to avoid those pitfalls. Finally, we will talk about how to get out of firefighting mode and into solving the root cause of problems.
Here's to your competitive edge!
Megan E. Burns
Operations Strategy Consulting
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Price Negotiations Don't Work
According the the Institute for Supply Management, external purchases of products and services account for more than 50% of total costs. By negotiating based on total cost of ownership (TCO), companies realize a savings of more than 10% compared to traditional practices. Are you using a TCO model or are you still negotiating on just unit price?
The problem with negotiation on just unit price is all the other related costs to an item are ignored. Unit price negotiations were the driving factor for many companies to source items from such low cost countries as China and India. What many companies have come to realize is the increased costs from transportation, warehousing, quality issues, and expediting sometimes offset or negate the anticipated savings on unit price. Instead, companies need to add the costs of all elements associated with the procurement in a model to define the TCO.
The TCO model begins by defining specific requirements based on customer expectations. Next, a value stream mapping exercise determines all of the steps from customer order to fulfillment. This helps identify wasteful activities the company and supplier candidates can work together to eliminate.
Next, the comprehensive TCO model examines soft costs as well as the obvious costs of doing business. There are five primary elements besides unit price in this model. These elements are Logistics, Quality Assurance, Risk, Maintenance and Repair, and Administrative and Financing. Each element contains subcategories that are weighted to fine-tune the TCO model.
By using this model companies can identify pertinent risks, eliminate waste in the process, and determine where the best value is for the stated requirement. A TCO approach involves more work than just shopping the lowest price, but the long-term benefit far outweighs the upfront investment. |
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Firefighting or Solving Problems?
Over and over, as I am working with different companies, I see people running around trying to fix issues that pop up throughout the day. When I talk with them they always seem to say the same thing: "All I do, all day long, is solve problems." Yet, that is exactly what they're NOT doing. If they were actually solving problems, they wouldn't have to fix them day in and day out.
Too often people confuse activity with productive work. Just because they are running around and stressed trying to get things done doesn't mean they are accomplishing anything. Your team is so busy fighting fires every day that they are not solving any problems. As a business owner or leader, you need to help your team recognize this and actually carve out time to proactively solve problems.
First, you may need to get a handle on how your team is spending their time. Draw a quad-chart and over the top right quadrant write "Not Urgent". Over the top left quadrant write "Urgent". Now along the side by the top quadrant write "Important" and by the lower quadrant write "Not important".
The top, left quadrant (Quadrant 1) is where your team is spending most of their day. This is all the firefighting, crisis management, and recovery planning. The rest of their day is spent in the lower left quadrant (Quadrant 3) with phone calls, e-mail, and meetings. The goal is to move more of their time to the upper right quadrant (Quadrant 2). This is where they focus on kaizen events, personnel development, and problem prevention.
Now, this is not going to be an easy transition. Your team will resist this shift because they are so focused on just keeping things going. Your team leaders or supervisors may also resist because they don't have confidence in their teams or employees to follow through on the work being delegated to them. However, you have to help them set aside time every day or every week to work in Quadrant 2. If they don't your operation will never get any better than it is today. |
Monthly Tool Tip -
Problem Statements
The most overlooked and common problem with improvement projects is the problem statement. If you have a poor problem statement, chances are your project will just drag on and you may never solve the root cause of the problem. Follow these rules to formulate a good problem statement. First, a problem statement does not state the cause or propose a solution. Second, a problem statement must be factual, understandable, and within scope. Finally, it should consist of two sentences. The first sentence should describe the current state and the second sentence describe the desired state. Now, you're ready to solve that problem.
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Remember, a vision without a plan is just a fantasy. If you want help developing your TCO model or getting your continuous improvement program back on track, contact us. As always, we never charge for our initial consultations.
Sincerely,
Operations Strategy Consulting, LLC |
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