As we move forward an increasing number of businesses are experiencing strong cash flows with extremely tight margins as part of the normal business cycle. The supply chain is trying to strip out costs at every opportunity and the end user / consumer is putting more thought into purchases.

This raises the question of “how do I become a lean organisation but still deliver to clients / customers”. To answer this question we must first look at our processes and focus on three core areas

  1. Process / production time – The actual amount of time to deliver the output
    • The scheduling of jobs / projects and the communication of this schedule is a critical component of this stage
    • Ordering, purchase and delivery of the raw materials is also crucial – Receipt of the correct raw materials on time eliminates external influences
    • A systematic flow of production match to adequate resources (equipment, consumables and people) that are well inducted, trained and supervised increases throughput
    • Know what is happening at the delivery point end of the process to avoid bottlenecks
  2. Lead and lag times – The amount of time between order / contract to commencement of production and the wait times through the various production stages to client delivery
    1. When calculating lead time be very comprehensive
      • Understand the pre-sale times and conversion rates – Business development, client liaison, quoting / tendering
      • Sale to production – Contracting the work and receipt of ALL current specifications / instructions
      • Pre production activity
      • Know the delivery target dates
    2. When calculating lag time think money in the bank
      • Have all of the logistical processes locked down well in advance
      • Understand what is happening at the delivery point and adjust production schedule accordingly
      • Know key dates for deliver as they impact on invoicing
      • Invoice regularly AND accurately PLUS understand your actual average debtor days
  3. Right first time (RFT) – Percentage of work that is completed on time or ahead of schedule and without defects
    • This is just as important at the supplier end as it is through your own business.
    • Hold inventory on consignment where possible to ensure you have the correct components on hand BUT at no cost to your business (secure storage and a good inventory system is crucial)
    • Regular quality audits linked into the company training program is essential

After the above analysis is complete it is important to be committed to the change process, treat it with respect and adopt a systematic approach to its implementation.

The following principles provide the structure for implementation

  1. Specify output value from the customer’s perspective
  2. Clearly identify all steps in your processes and production cycles – Eliminate any that do not add value to the output
  3. Tighten the sequence of all steps to reduce “down” time
  4. Provide additional value to the customer – Not just product / service quality but improved delivery times or a reduction in the logistical costs related to delivery
  5. Constantly review the business processes and production outputs by continually implementing the above four steps until your ultimate value is delivered and all waste is extracted from the business