Follow the Money: Operational Excellence for Today’s World
In today’s “new normal” economy, companies are looking in every direction to maintain profitability and grow their business. It has become imperative to look beyond the top line and focus just as intently on decreasing operating expenses to run leaner and more profitably.
Today, your competitors are stressed, margins are strained, and customers have more options than ever. And therein lies the opportunity! If you instill a culture of operational excellence, this will allow you to make money in lean times and outlast your competition while delighting your customers. So what exactly does operational excellence mean? Stated simply, it means having a disciplined program of customer-focused waste elimination.
Focusing on operational excellence and waste elimination is not a new strategy. Companies like Toyota have been employing these principles for over 50 years. Toyota defines waste as, “Anything other than the minimum amount of equipment, materials, parts, space and workers’ time which are absolutely essential to add value to the product.”
I often tell business owners that the hardest part of the journey is learning to see—to see waste, that is. We live with it every day, and grow to accept it as just part of the cost of doing business. Or even worse, we don’t see it and operate unaware of the potential all around us. As you look at your business, there are seven types deadly of waste to focus on.
1. Wait Time: The idle time while no value-added activity takes place. Are your employees spending time waiting for parts, instructions or software updates? How long does it take to get your crews rolling in the morning? Do you know your crews’ average job start time? A simple process of daily observations and data logging should reveal significant room for improvement.
2. Transportation: Wasted effort to transport people and materials between processes, into or out of storage, or to the job site. For example, think about the multiple trips it takes to and from the site to pick up forgotten materials.
3. Processing: Effort that adds no value to a product or service. While we don’t like to admit it, many of our systems are over-engineered and over-featured for the client. This is an example of over processing.
4. Inventory: Any unnecessary supplies or materials that don’t support the ‘Just-In-Time Production System.’ How many inventory turns does your business go through annually? Peek into your warehouse; I’ve yet to meet an installer who doesn’t have this waste. Eliminating excess inventory can help avoid obsolete hardware. You can also have vendors own and manage some inventory, unloading the work and economic liability.
5. Motion: Any movement of people that doesn’t add value to the product. Think of the time lost in your production process as your employees look for tools and parts, or walk to another area of your business to get materials. Basic workplace organization, standardized work, visual controls and standardized parts can make a huge difference.
6. Defects: Repair of a product or service to fulfill customer requirements. There is nothing more wasteful than having to do a job twice because it was not done right the first time. Call-backs, defective parts and bad installs can create a significant drain on your business resources. Are systems fully pre-tested?
7. Over production: Producing more than needed. Building ahead of demand is often the result of uneven scheduling and can lead to costly inventory stockpiles.
No business will thrive in today’s economy without a disciplined program of waste elimination. Luckily, you are not alone; thousands of companies have gone down this path before, leaving a long trail of material and case studies that can be your guide. These lean principles, pioneered by Toyota and employed by thousands of companies around the world, can provide custom installers with the means to develop their own journey to a waste-free future. •
In this monthly column, Builder Homesite (www.builderhomesite.com) CEO Tim Costello explores how companies can leverage the economic and environmental factors affecting our industry to grow in this ever changing and challenging business environment.
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