I interviewed Jerry Horton who discussed Importance of Business Systems for Mid Sized Businesses.
Can you provide a brief background of yourself?
Certainly. The vast majority of my background is with a major aerospace company, General Electric, which is all about the engines for aerospace. I spent most of my career with GE, then left and opened up a consultancy, and basically, I'm engaged in continuous improvement and specifically instituting business systems for medium to small businesses.
My first question is can you talk about why it's important to have a business system?
Indeed. Business systems are very common. They have been around for a long time. What I'm talking about here is Twin, a production system, and many others and many other names, usually very unique to the company. Like, if you put two next to each other, they wouldn't look was much alike in the overall sense.Business systems are usually unique to that very business, and within corporations, the businesses could be radically different from one plant to the next, depending on what that plant did.
These systems basically capture what happens every day. What I mean by that is making sure that your activities on the floor all coincide with your goals at the top, the whole focus being on taking care of the customer and the right amount of time and the right amount of cost effectiveness, if you will.
So, a lot of medium and small companies find out about these business systems through consultants and just general knowledge of the genre, if you will. And they basically consist of a reporting system that flows from the floor up, and that's generally done by the day. It's a reporting system that says, "If we achieve X throughput in our tiny little cell here, that is what's needed for the overall business collectively in the overall business to be successful for, say, a week." As opposed to doing the monthly review every month with senior management team and looking backwards about how you did last month. This kind of precludes all that, and you have an opportunity to solve any problems that may arise of the day that it arises. And you can look from one day to the next looking back on the day you just did and said, "Did we get there? Did we do enough in our little portion of the business here in order to feed the bigger part of the business, which needs X-amount of throughput in order to be successful?"
That's pretty much what I mean by business systems.
Are there simple measurements that companies can do are their business?
Absolutely. If you look at a business, all businesses are made up of processes. As a matter of fact, everything is made up of processes, and it really doesn't matter what you do, whether it's banking or pharmaceutical or even healthcare, given that... It's a matter of being able to look at the process and say to yourself, "How would I break my plant down to where I could measure so I could get some sense of what success looks like?"
In my world, if you were to take an engine, a lot of parts, when an engine is torn down, are torn down into modules, and they're basically categorized to some part – the front part of the engine, and fan area, the turbine area, and then the exhaust, just for an example. But when an engine is come in for repair, for instance, there will be a determination on whether they're good or not. Good meaning, are they acceptable to reinstall. And if they're not, then they either go out, repair, or replace them with something new.
In that scenario, there are many little processes going on in every business. And it's important that you understand and look at every day how did they do. What that will do are you is to drive you to fixing things much faster and the ability to predict how you're going to end up against what your customers’ needs are. For instance, it's this basic. The metrics in these smaller cells... The example that I use and start out with in my consulting work is safety, quality, delivery, inventory, and cost. SQDIC.
SQDIC is something that I didn't invent. It certainly has been around for quite a long time. It's a very valuable, five little measurements that will tell you pretty quickly where you stand in your little small cell within the bigger cell called the company.
Safety is always number one. It's the biggest threat to success. You don't want anybody to ever get hurt. But certainly if that happens, it can really bring a business to its knees.
So, quality needs to be on everybody's mind at the first five minutes of work, in my opinion. Quality is did I get anything that was not properly processed to work with today. In other words, did another processing cell deliver a part to me that wasn't really where it needed to be? Conversely, have I passed anything on past our cell that downstream is not going to work? So, those are another good measure.
Delivery. Did I deliver today what we agreed I needed to deliver? If I didn't, what's the mitigating plan? What's the plan for me to be able to catch up with that in order to be successful for the business to be successful? It takes a little brainwork there to make sure delivery is right. If one day you find that you didn't deliver correctly, and that's Monday. You've got Tuesday, Wednesday, Thursday, and Friday. But solve that problem within the week. In other words, don't let it go by two weeks. Don't let it build up and become a problem for the overall business. So, it drives that cell leader to think a little bit more futuristic, if you will, about the things they may have run out on, the things that are in short supply, the things that never really got there. That sort of thing is what that delivery metric is all about.
Inventory. Inventory is do I have enough inventory within my tiny little cell here to be successful. Conversely, do I have too much inventory? Do I have stacks of things all over the place that our people are tripping over? As that team leader within that cell, I need to know do I have too much, or do I have too little. And if I have too little, how am I going to procure it? If I have too much, what's my plan? How much do I need really, in my tiny cell here in order to be successful?
The last thing is cost. If you look at every little cell in the business and say how much cost is allocated to this cell so that I can be successful and not overrun, if you will. In other words, I don't want to buy too much raw material. I don't want to buy too much labor, blah, blah. You kind of run it and look at those cost numbers and work with management around the cost number. And you don't want to exceed it. It's not something you're going to stop the world over, but it certainly is something you want to keep in control.
So, once again, safely, quality, delivery, inventory, and cost are the metrics that every cell that I work with, I start there. Now, are there other metrics? Of course, there are. Many, many, many, many more, depending on how the folks in the cell think that they need to respond to those triggers in order to be successful in the day. Does that help?
Yes. My last question is about cross-training. Can you define what that is and discuss how it's important for your business plan?
Certainly.Cross-training is one of those things that I feel is somewhat overlooked in the overall scheme of things. Cross-training– and I have different names for what cross-training is, but think of it this way. The most valuable resource any business has is its people. You can start right there. If managers don't realize that, then they're missing the boat, for sure. The smart way, the best way I've ever explored this topic was a time that we were in a position where I was working at the time, that we didn't have the luxury of hiring, and we certainly didn't have the luxury of laying people off. So, we were kind of in this middle area, which is really the sweet spot for a business.
And the only way to improve that resource for my and any other cell leader at the time was to go to those work cells that weren't as busy, say, as my work cell, or vice versa, and grab a few of their folks and get them up to my cell and start the process of training those folks on the skills that happened in my cell. By doing that, I always had a ready-base of people that if something in [inaudible 00:10:02] happened, I had resources regardless outside of the plant that I could go and get and switch around.
I think that everybody kind of glosses over the cross-training idea, but the bottom line is that it's probably the biggest, fastest, smartest way if you're a shop floor person or a department head, it's the quickest way for you to solve a resource problem, as opposed to going to a meeting, sitting down, and saying, "I can't meet demand. I have five people. Three are on vacation, one is sick. I just need some more people." And so manager, making a decision to go hire some temps or whatever, which is starting below ground zero. In order to be efficient, it will take you weeks and weeksand weeks.
So, I really push this concept everywhere I go, about supplementing your workforce. That's what I call it. Supplementing the workforce, an element of that is cross-training. It's the most important skill, I think, that supervisors, leads, or anybody can have within a process cell that will guarantee that if you run into that emergency, if there's some reason that you've got to improve your throughput, that if you activate cross-training/supplementing workforce, you're going to be successful.
Thanks, Jerry, for sharing today on these important issues regarding business systems.
Certainly. I appreciate the opportunity to share my thinking about this. The entire world, I think, is going to find out that business systems are going to be the standards very soon, because it's just a more efficient way to operate. And I look forward to helping them get there.
About Jerry Horton
Growth Strategist, Lean Deployment,SixSigma,
Coach, Trainer, TPS Practitioner