Many years ago in a conversation with a former President of McDonald’s Canada he shared a very important life lesson to being a leader …
As a leader you need to take time to “pause” to be “ON” your business rather than being “IN” your business.
It initially may sound like a profound statement but it forces you as a leader to think in a Tactile manner. If we attempt to define the word “ON” … it can arguably be defined as do you have the Perfect Process in place?
Attending a recent workshop a significant portion of the workshop was designated to help business owners work on developing or defining what was their organization’s Value Proposition .. A statement that would inspire customers to instigate engagement with you while at the same time define what you can provide them. But this is a topic for a completely different newsletter … since we quickly concluded that ours needs a lot of tweaking.
Back to the Perfect Process !!! A Perfect Process can be defined as a process where every physical or chemical transformation through the process steps adds a value the customer is willing to pay for with no disturbances to flow. But it needs to continue … the value creation process needs to optimize the capacity band-width allocated while meeting customer demand.
However, once the perfect has been defined it needs to be modelled against your cash-flow analysis to determine if the process will deliver the tangible results desired by you the owner or the shareholder value desired? … heck let us acknowledge that we are ultimately in business for the money.
The Perfect Process for your business needs to be quantified, articulated and then documented. Once documented you can the assign Key Performance Indictors so that you and your team can measure success.
You may have defined the Perfect Process but if the through-put velocity of your product or service does not match your customer’s expectations you have either 1) not sold your value proposition correctly or 2) you will need to redefine your Voice of the Customer (VOC) expectations into “Needs” and “Wants” and then define what each attribute adds to your overall process time and adjust accordingly. If your customer needs or wants
more then they will understand why extra process time is required.
Your defined Perfect Process may not have enough capacity to satisfy current customer demand or financial expectations. You will also need to look at your Perfect Process and envision scalability as customer demand increases … I typically suggest looking at a 10X
(10 times) factor.
Don’t engineer how you will get it but how to deal with the additional volume.
Factoring Velocity into the definition of your Perfect Process is very important. If your velocity is too fast then your customer may question what is truly the “Value Add” that they are compensating you for … so if your Velocity is too long you will be considered too slow to react and most likely very expensive and too fast you may be thought of as cheap and potentially lacking quality.
Adjusting process velocity is usually a by-product of managing capacity. Normally adding capacity should be considered as a “step” function within your business.
Initially to add capacity you will likely decide to add additional labour to your process until the machine constraint within your process is optimized. To further optimize the machine constraint by adding SMED or TPM to improve machine up-time or you may do some additional machine tweaking to increase through-put.
But the time will arrive that a step increase of capacity will be required. This can take the form of adding machine capacity through acquisition or the addition of an extra shift of employees.
If you add machine capacity it will not immediately be 100% utilized so you will need to adjust your product costing or overhead rates to help absorb the machine cost incurred during idle time.
Similar, if you add an additional shift what are you going to do with your excess available time. Hopefully, you will not resort on a “make-to-stock” model which has a whole bunch of muck you most likely will not want to manage like material handling, warehousing and inventory management costs. As an interim step you may likely benefit from designing your process to support single-piece-flow which will can provide scalability of up to 100% if you have done a good job engineering and defining your work breakdown structures.
So as we have defined our Perfect Process where each chemical and physical transformation creates value through the process that our customer is willing to pay for and at a rate that our customer is willing to accept now what?
You or your may embrace a methodology that will allow you to meet and satisfy the requirements of your Perfect Process this could be one or several spanning the worlds of Lean, Theory of Constraints (TOC), 6-Sigma, Job Skill and Experience or just plain intuition none are better or worse than another it is the final result being achieved that is the most important.
I profess that the most valuable vehicle for me as been the use of Enterprise Value Stream Mapping (EVSM). EVSM allows you to observe and document your Physical and Chemical transformations including your information and communication flows which can then be comparatively analyzed against the KPI of your Perfect Process.
The EVSM exercise should be completed during “Pause” phase of getting “ON” your business and strongly suggest you use “outside eyes” as your facilitator. Since they likely do nit know your product or process I can guarantee they will be asking difficult and probing questions that ultimately will make you a better organization.
You need to walk your Process Flow as you create your EVSM while collecting data. Remember, if you cannot taste it, touch it, or feel it most likely it is a story. I cannot share enough instances where I have walked Value Streams for years and seen huge piles of inventory only to be told that the situation is not normal … but after observing the same for multiple years I concur that it is a normal part of the process and an opportunity.
Also observe the surroundings while interviewing … one time I saw a stack of paperwork that was actually processed work-orders that had not been invoiced … a quick review showed close to 1 million dollars of potential revenue. Something that would have slipped to be documented in our EVSM.
Or consider for example a Service Vehicle. On average no matter what industry it costs around $150,000.00 per year to maintain a vehicle on the road. Your onboard technicians are like maintenance employees … pack-rats that keep stuff just in case since their focus is to minimize unscheduled machine downtime. For a Service Vehicle this additional weight can be detriment to vehicle fuel mileage which will ultimately cost you a lot of money … and the other big-time waster is incurred as they transition from location to location driving up your per client visit call and then of course they need to off-load multiple tool caddies … so a good map routing software is invaluable.
So ultimately … “Pause” … get on your business and articulate your Perfect Process with attributes of Velocity, Value-Add and financial remuneration.