CONSULTANTS TO THE AFTERMARKET

Bill Wade

 

Use This Slowdown to Make Distribution Thrive

By Dr. David Kwinn

In light of the current market mandate for change, this slowdown offers a perfect opportunity to revitalize distributors’ business for both short and long term success.

Now is the opportune time to re-examine your business processes and put in place a plan to take advantage of the recovery as soon as it hits. You can follow three specific steps to start a recovery anticipation process: Stabilize, Revitalize, Thrive.

Stabilize

Facing sweeping cutbacks, both employees and customers are shell-shocked—possibly paralyzed—by anxiety. In addition, surviving employees may be facing workloads they can’t manage.

The first step in the recovery-anticipation program is to stabilize the current process to form a baseline for improvement. It is also important to document the current state of the process so that if any further reductions in force occur you can ensure business continuity.

Values stream maps—graphical representations that document step by step whatever process you choose in terms of cycle times, delays, and inventory—are good basic tools. These maps may start from the issuance of a quotation and follow through engineering, order processing, and shipment.

For example, a map may show it takes 60 hours to go from quotation to shipment, but that the actual time to manufacture or distribute the product is four hours. What’s going on the rest of the time? What is it costing you? A cross-functional value stream map exercise should be energizing, revealing both opportunities for improvement of current processes as well as some totally new alternatives.

In the stabilization phase a review of the supply chain may be especially relevant:

  • Are supplier lead-times correct?
  • Do order quantities synch up with current market conditions?
  • If you repackage, are your bills of material and routings correct?
  • If you use a statistical forecasting module, is it working in the current market?
  • What are you going to do if the current market volatility makes the module ineffective?

Finally, review your key metrics for relevance in recessionary conditions. That is, are you key driving-metrics really doing what you expect, and do they reflect what the customers really see today?
For example your system may be telling you that your service level is great, but your customers may be saying something else.

At the counter, you may be answering the phone in four seconds, but the customers may not be getting the answers they are seeking, especially if they have to go through a multiple-level phone menu that would befuddle an air traffic controller.

Revitalize

Here are the key actions in the revitalize stage:

  • Engage employees. Every employee has to buy in to the concept that the improvement of his/her work situation is of utmost importance and every suggestion they can make will help.
    Process improvement is a natural human function and should be fun.

Most people are process engineers in their private life. Your neighbor doesn’t have to “sell” you on the idea of a better mousetrap you see him using. If you see something that works, you take it on board immediately. That’s how evolution works; small spontaneous improvements lead to big changes.

People should come to see that their work place is no different from their private life when it comes to improvements. Continuous improvement should be a part of everybody’s daily routine and not something delegated to specialists who may speak an arcane jargon.

In order to build employee engagement, employee “pushback” to change should be encouraged and valued. The employee probably knows something that may not be evident to an outside observer. It may take time to get to the root cause of that employee’s (or employees’) concern, but if that time isn’t taken, and then the employee knows that he or she is not respected and there isn’t going to be any progress.

  • Remove impediments to efficiency that waste time and money. Finding these impediments is not difficult. If asked, most people will tell you what bugs them about their job, so start with those issues first. The quick hits are so obvious that you don’t need an efficiency expert to deal with them.

A good place to look for process inefficiency is in customer service. How many orders come in riddled with errors, missing information, etc.? There may be a relatively quick fix that would enable the orders to be processed faster, which would increase cash flow. The fix might be as simple as a checklist that isn’t a burden on anybody.

  • Review current process improvement programs. If you have programs based on ‘Lean’ or ‘Six Sigma’—are the programs delivering? Are the results of your shop-floor improvement events turning up on the bottom line? Are gains in one area being off set by losses in another area?

The real issue is not to come up with a more sensitive accounting system. What is needed is a system to detect and stop any process inefficiencies before they hit the bottom line. The overall business value stream map should be used to prioritize process improvements as well.

Why optimize the shipping department if your conversion rate on quotations is falling? Process-improvement activities detect and fight smoke before it turns into fire.

  • Focus everybody on a few metrics that they can see and understand. Many companies publish lots of monthly metrics that many employees can’t keep straight. What are the key, real-time metrics that everybody can help control to hit the numbers at the end of the month?

Most of all, the revitalize phase should be focused, fast moving, and energetic, with quick, visible results.

Thrive

This is the fun part. People can’t stay hunkered down forever. A good personal release from stress is to think about what you will do when better days come. Here are the steps:

  • Review the end-to-end value stream map from the ‘Stabilize’ phase in an “All Employee” meeting to get everybody to speculate about what they would like to see in the future. Collect and analyze all input and report back to the team.
  • Brainstorm about what would really delight your customers. Customers may not be in a position to buy much right now, but you can speak to them about potential new-modes collaboration in the post-recession world.
  • Run some scenarios on what you would do if business suddenly went up 30 percent, 40 percent, etc, just to figure out where your constraints would be and what you would do about them.
  • Celebrate every step forward in some way.

It is clear that many businesses are now in survival mode, facing issues that have never been faced before. Desperate measures may have to be taken, but this does not mean that there is no time to attend to preparing for the post-recession period.

The steps above should be integrated into daily operations and become a part of the normal business rhythm. With a little persistence and patience, your business can be more under control and have a better competitive position once business blooms.

Process improvement expert Dave Kwinn has joined Wade&Partners to provide a new resource for application of Lean and Kaizen in manufacturing, distribution, engineering and financial functions. Kwinn is Black Belt and broadly experienced in Lean Supply Chains He is fluent in Spanish, a major benefit when addressing shop and warehouse improvements both in the US and Mexico.

Assignments have included kanban implementation, plant and DC relocations, sales inventory operations planning, collection processes and order entry.

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