Own Stimulus Plan
Businesses seem to be waiting for government stimulus money
to trickle down into their cash flow. Unfortunately, few people seem
aware of the glacial slowness of big government. Rather than wait on
the Fed, businesses can create their own stimulus plan.
While in this economy it's hard to increase sales, it's easy
to focus on reducing costs. Every dollar saved goes straight to the
bottom line. And employees love finding ways to simplify, streamline
and optimize the business to better serve customers.
According to the July-August 2009 Harvard Business Review
survey (How Bleak is the Landscape?):
27 percent of
businesses are streamlining product or service offerings
34 percent are
37 percent are
improving products, services or customer support.
Shouldn't your business be using this opportunity to improve
the value chain?
Stimulus Plan Step
1 - Simplify:
collects clutter over the years in offices, factory floors,
inventory, product or service lines. Now is a perfect time to put
employees to work on eliminating the flotsam and jetsam of the past.
When the clutter is gone, it's easier to see where to focus on the
next step: streamlining.
Stimulus Plan Step
2 - Streamline:
Far too many
businesses make stuff and then try to sell it. Instead of trying to
push products or services onto the customer, change the
business to let customers pull products or services when they
need them. Any business can employ the principles of Lean Thinking
to deliver what customers want when they want it.
products or services on customers results in excess inventory, both
finished goods and raw materials. Pull companies only make
the product or deliver the service when the customer requests it.
Think of it this way: Inventory is fundamentally evil. It has
to be stored, managed, moved, and so on. It eats up time and money
that could be employed elsewhere.
causes the ordering of large batches of raw materials and the
production of large batches of product. Using a Pull system
results in ordering and production of as small a batch as possible.
The ultimate form of this is called "one-piece flow."
When people hear this, they often ask: "What about economies
of scale?" GM and Chrysler are examples of the problems that result
from economies of scale thinking: too much inventory. Consider a
better alternative: economies of speed.
products or services results in delays between steps in the value
stream that slow the delivery of the product or service. Even though
employees seem to be working hard, if you watch the product or
service, it spends a lot of time waiting on the next step in
production. Even if the production line is fast, the delays between
an order, scheduling, production, delivery, invoicing and payment
are often excessive.
The 3-57 Rule:
Employees work on the product or service as little as 3 minutes out
of every hour resulting in 57 minutes of delay. Most people doubt
this, but when managers shift their attention from the employees to
the product, they discover that this holds true in all processes:
office, backroom, billing, purchasing, etc.
Now for the good news: every 15 minute per hour reduction in
How is that for stimulus! Having worked on many projects to
reduce delays, it's often easy to reduce delays by 75 percent or
more (45 minutes/hour) which can increase profit margins by 60
percent! Instead of having to work harder, employees discover that
they have more time to do it right the first time. Why? Because they
aren't constantly picking up and putting down the product or
service. In true one-piece flow, the product is worked
nonstop which results in far fewer errors and faster delivery, which
Many service business owners think that they can't apply the
principles of Lean Manufacturing, but nothing could be farther from
the truth. Hospital emergency rooms are a service, aren't they?
Press Ganey, which monitors emergency room turnaround times,
recently reported that the average emergency room stay is four
hours! Robert Wood Johnson Hospital (winner of the 2005 Baldridge
Award for Quality) turns discharged patients in 38 minutes
and admitted patients in 90 minutes. Healthcare professionals
gasp when they hear these turnaround times. And the hospital has had
a double digit growth rate and had to build a new wing onto the
hospital to handle the load coming out of the emergency room.
Companies that reduce cycle times by eliminating delay grow three
times faster than their competition.
The business that employees the economies of speed by
reducing delays will garner more customers and more profits than
their competition. Encourage employees to start streamlining their
Stimulus Plan Step
3 - Optimize:
remove the slack from their value chain by switching to a pull
system, it's time to start optimizing the process to eliminate
defects and deviation.
Every business makes mistakes. Every product or service
process varies slightly. Finding and fixing mistakes, errors and
variation in the finished product can eat up 25-40 percent of the
total budget. And as little as four percent of the business produces
over 50 percent of the defects and deviation (The 4-50 Rule).
Eliminating defects is easy:
number of mistakes, errors or defects in a process (e.g., order
errors, product defects, billing errors, etc.)
defects by process step (e.g., order entry, packaging error,
process so that it is impossible to make that mistake.
Too many businesses get caught up in blaming employees for
mistakes. Systems and processes let employees make mistakes.
When the system or process gets changed so that it is impossible to
make the mistake, employees stop making them.
Tip: Blame the
process, not the people.
Eliminating deviation is a little bit more challenging, but
not that difficult:
variation in the product or service (usually some plus-or-minus,
over/under variation of length, weight, time, etc.)
root causes of deviation from the customer's target value (e.g.,
machine setup, maintenance, etc.).
process to minimize deviation.
measurement and monitoring process to make sure the machines or
process don't drift from the target value. This usually involves
some form of statistical process control (SPC). Hospitals, for
example, measure infection rates; manufacturing plants measure
dimensions; banks measure customer wait times; and so on.
Inexpensive Excel-based SPC software can do this easily.
Each of these steps - simplify, streamline and optimize -- can
engage employees in the quest for excellence. They've grown tired of
serving customers badly and they've also grown tired of trying to
get anyone to listen to their improvement ideas.
By engaging employees in each of these three steps, they
become renewed rather than burned out. It's a simple way to break
the angst over the economy.
Jump Start Your
Businesses can wait
on the government to throw some money their way or they can start
finding ways to simplify, streamline and optimize the business to
squeeze more profit out of the existing revenue stream. Engage
Getting rid of
unnecessary inventory and delays
eliminating defects and deviation
Set BHAGs (Big
Hairy Audacious Goals) to reduce delay, defects and deviation by 50
percent in six months or less. It will stimulate your business, your
employees and, most importantly, your customers.
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