Tim Van Mieghem is an expert with ProAction Group who specializes in helping manufacturers optimize their operations. He put together a list of 10 things you can do right now to improve that don’t involve a big capital spend.
Tim’s Top 10:
1. Line side metrics. Set a goal for each hour of each shift and track it. Have supervisors review progress hourly and help the team address issues live… Remember the Hawthorne effect!!
2. Investigate the following: (remember that these metrics start the conversation! They are not the conclusion!)
- Safety. What is your Mod rate? What should it be? If it is above 1, your company is paying a premium on the premium because you are considered less safe.
- Quality. Do you have to accept the scrap and rework levels in your business?
- Delivery. Do you have past due orders? Do you ship on time, in full and accurately? So easy to have false positives on this. How well do we set good clear targets, communicate them and deliver on them?
- Cost. The line side metrics address this. But I would also look at OverTime and Labor Utilization. These often show major opportunities.
- Morale. How are the stress levels at your company? Turnover? Often communication is the way to address this. Sometimes the cheapest concession is to simply listen. Share the situation. Share your vision. Share your plans.
3. Identify one area that your company performs below competitors. Form a problem solving team to figure out why. Dive into the reasons. Don’t worry about a solution until you truly understand the problem.
- If your company takes a physical inventory, this is a problem. This is often a data hygiene issue. Addressing it will soothe many symptoms.
- Watch a YouTube on doing a SWOT analysis!
- There are some important tips in making this work:
- It is good to have someone independent who knows how to facilitate a problem solving session. Someone who can help people get past any defensiveness.
- The boss should only be involved to sponsor the team and for the report out. The team needs to take ownership of the process!
- Force rank your opportunities to address root causes.
- Easy to implement and high impact
- Hard to implement and high impact
- Easy to implement, low impact
- Hard to implement, low impact.
4. Define your core values. Especially if you sense discord among your team. Document what defines you and your partners, NOT aspirational values, but what defines you as a person and a group. Then hire, promote and fire based on your core values. This is not a tactic that will drive immediate performance, but it is a critical foundation for healthy growth that simply needs to be done!
5. Review your spend by Category. Identify categories that have not been market tested. So many companies have evergreen agreements that are full of waste and lost opportunity.
- Freight costs have been quite volatile.
6. Overhead analysis
- Review the value add vs. non- value add of each person/role in your company
- Based on your strategy, determine where you need skills that don’t exist or people who have a portion of those skills that should have additional training – Provide it!
- While you look at the financial ratios for guidance, use the value added analysis to determine what work needs to be done and define/estimate work durations to create or at least review a zero based OH structure
7. Excess Inventory
- Have a garage sale… Convert balance sheet $’s into income and create future flow to not increase the inventory in the future (easy say, a little more challenging to do, but doesn’t require capital AND frees up cash!)
8. Pressure test your supply chain. Do it now before the next Dock worker strike, the next pandemic, the next trade war.
9. Clearly DEFINE YOUR STRATEGY!!
- This does not require Capital!!
- Evaluate your SWOT
- Adds clarity/focus/priority
- Aligns the organization
- Self-evaluate for up and down, left to right ACCOUNTABILITY
- Remember, the SOFT stuff is the HARD stuff!!!
10. Analyze your Customers and your SKU’s / Service lines.
- Dissect the business to see where you make money and where you give it back
* Segment your customers into A’s (the customers that make up the top 80% of your sales), the B’s (the next 15%) and the C’s (the last 5%). Look at the number of orders (how much work you do) for the total gross profit earned (what you get paid). Many companies make great money on some customers and give it back on others!
* Segment your SKU’s and Services the same way.