Boosting quality_ reducing costs_ and speeding production offer

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                                              Performance                                           By Mike Hulser

                                           Boosting quality, reducing costs, and speeding
                                              production offer opportunities to improve
                                              your bottom line in any economic climate

        o matter what the current        most people think in terms of prod-        rate policies and procedures? Same

N       state of your business is, you
        can always improve one or
        more of three things:
• The quality of the output.
• The cost of the output.
                                         uct or service quality, which is very
                                         important. In the business realm,
                                         however, there is a vast array of
                                         opportunities to improve quality.
                                         Particularly when you use the term
                                                                                    answer. For example, does your
                                                                                    business have a clear delegation of
                                                                                    authority policy that shows who
                                                                                    has the authority to approve and
                                                                                    execute various actions (purchases,
• The delivery or speed of the out-      process quality, you can broaden           capital expenditures, employee
  put.                                   your look as to where and how to           hiring, raises, etc.)? How about a
    Let's take a look at each of these   improve:                                   current, accurate, and complete
three aspects of a production fram-      • How about the quality of the             organization chart, clearly show-
ing business.                              financial data at the end of each        ing who is responsible for what
                                           month? Can't its quality—its con-        and the interrelationships?
Quality                                    tent, format, presentation, expla-         The list of possibilities for
If you can improve the quality of an       nation, and clarity—impact the        potential quality improvement is lit-
operation's output while holding           effectiveness of your operations?     erally endless—recruiting, employee
both cost and delivery/speed rela-         Absolutely. Sales and margin by       evaluations, compensation practices,
tively constant, you are making the        product type, customer, and sales-    inventory control, purchase order
operation more effective, which            person are powerful additions to      control, fringe benefits, communica-
should directly drive greater prof-        your financial statements. So is      tions, etc. You are surrounded by
itability, perhaps in terms of a           inventory composition and agings      opportunities to improve quality
potential selling price increase.          of both receivables and payables.     and thus positively affect profitabili-
     When quality is the subject,        • How about the quality of corpo-       ty. All you have to do is look.

Cost                                      are actually causing revenue and      two people if one can do it.
Again, with all other things being        which are not?                      • Physical inventory - Can you take
equal, an improvement in cost                Other opportunities for con-       it during off hours so that you
should directly drive an improve-       trolling costs including looking at     don't need to shut down produc-
ment in profitability. At a mini-       the expense of such items as:           tion? Better yet, how about
mum, margins should improve.            • Holding a management meeting -        implementing cycle counting and
Also, your ability to pursue              Have an agenda and stick to it.       eliminating the physical invento-
accounts that might have once             Don't let the meeting drag on.        ry altogether?
been deemed “marginal” is                 Invite only those you need to
enhanced.                                 accomplish the objective. Make      Delivery or Speed
      Similar to the Quality discus-      sure all are heard.                 Last, but not least, is delivery. Or,
sion above, the notion of cost often    • Unloading a container - Push to     more generically, speed. All other
all too quickly gets narrowed down        get it done quickly, getting the    things being equal, when you
to product or service cost. These         materials into production, but      increase your speed, you can make
are both primary concerns, but you        try to avoid overtime pay. Also     a direct contribution to effective-
are also surrounded by sizable costs      try to move the materials only      ness and, therefore, profitability.
that needed to be managed and             once, if possible.                       Speed has always puzzled me
optimized:                              • Implementing a new system or        because many owners and managers
• Personnel Cost - How do you get         website - In these arenas, how      don't readily think of it in terms of
   more important things done with        much you spend might have           a critical opportunity to improve
   the same or fewer number of            nothing to do with the function-    the performance of an operation. It
   people? In a challenging econom-       ality of what you get. Think hard   is a big one. Some examples of
   ic environment, such as the cur-       about your needs and require-       potential speed improvement are:
   rent one, with the ability to give     ments.                              • If you hold a metrics-driven
   employee raises sharply limited,     • Delivering product - Try to com-       weekly management meeting on
   how do you keep your best peo-         bine trips, including picking up       Wednesdays, try Tuesdays or—
   ple motivated and fully engaged?       inbound materials. Don't send          better yet—Mondays. Maximize
• Occupancy Cost - How can you
   get more output/sales/work done
   using the facilities you already
   have? If you are underutilizing,
   can you rent space out to another
• Marketing Cost - Are you getting
   the best return (sales and margin
   growth) possible with what you
   are doing? Could you reduce
   expenditures and get the same
   result? Could you change the
   media or the message and achieve
   even greater sales and margins?
   Do you know which programs

                                                                                      PFMPRODUCTIONWinter2009 35
  the time left for corrective             There are a number of other     • Producing a catalog, newspaper, or
  action.                             opportunities to improve and/or        other promotion - Don't let people
• Push to get monthly financial       capitalize on speed:                   get fooled into thinking the pro-
  statements delivered in five to     • Physical Inventory - Minimize        motion is the result. More sales is
  seven business days instead of        the time your production             the desired result. Push to get it
  weeks later. If the score is          process is down.                     done. Often, the longer you chew
  important, you want it now.         • Unloading and putting away a         on it, the less exciting it becomes.
  Again, this maximizes your cor-       container - Keep the material           When you consider all of the
  rective action time.                  moving.                            above, it is pretty hard not to come
• Reducing factory production         • Getting a new system or website    to the conclusion that all businesses
  cycle time will result in either      up and running - Push for com-     have ample opportunity to improve
  more sales and/or lower cost.         pletion. When it is close to       their operating performance by
  Keep pushing material through         being done, get it in play and     focusing on improving the quality,
  the process. Constantly be look-      perfect it on the run. If you      cost, and speed of key processes. ■
  ing for product that is not mov-      wait for perfection, you will
  ing, that is laying around wait-      never be satisfied.
  ing for something to happen.        • Responding to system/computer
  The faster you can send materi-       issues - The system is the heart   Mike Hulser, who does business as The Biz
  al through the factory, the less      of most modern business.           MD, is a Hawaii-based management and
                                                                           financial consultant and turnaround specialist.
  chance you have for damage,           Therefore, system problems are,    He is also the CFO at Pictures Plus. You can
  pilfering, misplacement, etc.         in effect, heart attacks. Deal     reach Mike at 808-672-0220 or
• Cutting product “order to             with the issues quickly before
  receipt” cycle times can have the     they become fatal.
  same effect.


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