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2014
The importance of inventory accuracyAlthough a bedrock topic, inventory accuracy is often overlooked in operations strategy discussions as it becomes an assumption or something that just should occur. However, I am constantly reminded of its vital importance and impact on bottom line business results as it frequently arises in client assessments as critical to achieving the company's desired end results.

In my 20+ years of experience as an entrepreneur, business consultant and business executive, I've found it not only essential in traditional manufacturing and distribution businesses but also in those where it previously was thought to be nonessential. Thus, I thought answering a few key questions was in order: 1) Why focus on inventory? 2) What is the #1 key to improvement? 3) How do we track?

1. Why focus on inventory? - It's interesting how often inventory accuracy is relegated to a clerk or analyst yet it can have a profound impact on your business. Does customer service matter? How about profit? Operational efficiency? Of course!In a presentation, "Inventory Management Tips & Techniques for COO's" that I gave for ExecSense, the world's largest publisher of webinars to C-Level executives in over 34 countries, I discussed the 3 C's - costs, cash flow and customer service. Inventory accuracy will affect all three. But wait, there's more - how about audit concerns? Have you thought about the importance of inventory accuracy in this light lately?

2. What is the #1 key to improvement? - Ready for the secret to success? Process disciplines. Now we see why many executives aren't that interested in making it a strategic initiative? ......talk about boring! As a VP of Operations who had to present to a Board of Directors, I can tell you it isn't perceived as nearly as exciting a topic as the latest sales conquests or R&D successes yet it is just as essential - if you don't know where to find your inventory, you will not have customers. Now that can become interesting!Implementing process disciplines can be equated to instilling culture change. And, this boils down to two key factors: accuracy and timing. When you receive product, do you also receive it in the system at the same time? Or do you wait until the next day? Or even several days later if you cannot resolve a discrepancy? Have you accidentally entered it in the wrong unit of measure? The infamous $1 million dollar mistake...

How do you handle customer returns? Can you determine what is usable vs. non-usable inventory by looking in your system? Do your planners include non-usable inventory in MPS/MRP? What is in your hold area? Everyone thinks it's minor yet I've yet to find a hold area that wasn't a key cause of inventory inaccuracy. We could go on and on but these types of questions will make or break your ability to meet customer needs, run an efficient operation and to generate respectable financials.

3. How do we track? - Metrics and tracking mechanisms are always important, and inventory accuracy is no different. Do you perform an annual physical inventory? Do you cycle count? Or perhaps both? This is where audit requirements can come into play. Just think - if you could improve inventory accuracy to the level such that cycle counting would suffice, wouldn't that be a win to avoid a physical inventory? And, more importantly, physical inventories are rarely as accurate as cycle counts.The keys to cycle counting include: 1) Start with the right mindset. Cycle counting is NOT counting and adjusting. It must include research and root cause analysis and resolution. 2) Set priorities - in essence, if you utilize an ABC type method, you'll count the most valuable and critical items more often (A) than the lower value, infrequent ones (C). 3) Consider not only dollar value gains and losses but also location accuracy - after all, if you cannot find an item when you need it, service will be impacted.

Inventory accuracy is cornerstone to manufacturers, distributors, retailers etc. In today's new normal business environment, we must be faster and better than the competition to succeed. Thus, it is not only a key element but can make or break your business.

 

 

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Lisa Anderson - The Manufacturing Connector

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Walk with Confidence

Posted by lisaanderson Mar 25, 2014

smsuccsess.jpgI've noticed lately that walking and speaking with confidence can go a long way!  Did you know that 93% of your impact comes through nonverbal channels?  Perhaps it's best to pay attention to some of these elements!

Have you noticed that those people (regardless of their position power) who speak with confidence, walk with confidence and demonstrate confidence through body language get what they pursue? Perhaps it would make good sense to think about what they are doing....  People follow people who believe in what they do.  Thus, I thought a few keys to success would be helpful in how to walk with confidence:

  1. Polish up on your speaking skills  - Although it might not seem fair, a mediocre presentation spoken with confidence will be more successful than an exceptional one spoken without confidence.  Thus, brush up on your speaking skills as you'll likely go in with additional confidence.
  2. Speak louder - Speak so that people can hear you.  I am lucky that I had no choice but to speak loudly so folks could hear me as I led countless conference calls when I was a VP of Operations.  Double your loudness and no one except you will think you are loud; however, it's likely they'll think you are confident.
  3. Make "good" assumptions - I recently had a client point out to me that I assumed I could help them resolve various issues where I had no direct control (such as hiring temps etc.) and she saw that as noteworthy.  She felt confident pursuing what she knew would be successful because I seemed confident I could help her.  I didn't think about it until she mentioned it as I just knew it would be a compelling story and so assumed I could help "make it happen".  The key here is to be smart with your assumptions as I've seen folks go down that rabbit hole.
  4. Consider your presence - Whether we like it or not, our presence matters. My article last month details a few tips to think about.
  5. Consider your body language - Hire experts to help you.  It is not easy to realize what you might be "saying" with your body language unintentionally; however it is likely you are screaming something.  Is it what you want?


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Leadership Essentials

prpgmgmt.jpgStay in the manufacturing game- avoid common program management pitfalls.

In today’s business environment, manufacturing leaders must do more with less – and deliver superior customer service at the same time. In my 25 years of experience as an operations executive and global business consultant, I’m seeing an unprecedented number of projects that must be run simultaneously to deliver business objectives. Juggling multiple balls at once successfully has become a baseline requirement. Thus, program management is essential – those who succeed will “stay in the game”. Since there is no time to waste, it’s essential to avoid common pitfalls. 6 pitfalls to avoid include:

1. Don’t jump into program management without a clear objective: Certainly each project has an objective; however, do they combine to create a program? If there is no overarching objective the company wishes to achieve, program management will likely fail. Too much to do with too few seasoned project leaders with no time. For example, my client that put together a series of projects related to moving from a manual process to leveraging a fully integrated system with a robust process was successful because the program objective was clear. Many others had a disparate list of projects which conflicted and ended in frustration and disappointment.

2. Don’t assign the program manager to be a project manager: Of course it is tempting to ask your best resources to fill several roles; however, the only way for a program manager to continually look across projects for trends, opportunities and roadblocks is to remain impartial. It is only natural to become consumed with your project if you are also the project leader. If you are limited on resources, the program manager can fill in but someone else should have the ultimate authority and responsibility.

3. Don’t work on each project separately: One of the key benefits of having a program manager is to provide support to the projects. Look for trends which can be leveraged across all projects. Look for roadblocks in common – or common elements. Focusing on distinctions among the projects will help to focus attention on the ‘right’ places.

4. Don’t think all projects are created equal: Of course each project leader believes his/her project is the most critical for success; however, the program manager must look across projects for the project or the task which is most critical for success of the program objective. Prioritization is essential in resolving conflicts, assigning resources, etc. The job of a program manager is to help each project leader understand his/her value to the program and any key tasks essential to program success.

5. Don’t focus on correcting weaknesses: Building on strengths has proven to be far more effective than correcting weaknesses. In my experience, it often provides a 10 to 1 return. Look across the program for strengths. How can they be leveraged effectively? How can you build upon the strengths to achieve project and program results?

6. Don’t forget about connections: Links between projects typically are the 80/20 of success. Which tasks are related to multiple projects? Which tasks connect resources from multiple projects? Which tasks are required from 1 project to support the success of another project? Look for links and connections continually. Focusing extra attention on these tasks can be a secret to success.

Delivering program results is vital to company success in today’s new normal business environment. Those program managers who focus on the ‘right’ things will accelerate results. Therefore, make sure to navigate the waters to avoid the pitfalls, and you’ll have a leg up on the competition.

 

 

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Lisa Anderson - The Manufacturing Connector

© 2014 LMA Consulting Group

ERP-Success-300x235.jpgERP system implementations fell off the grid during the recession; however, I’ve seen resurgence in the last year. Companies are thinking about investing again. However, although businesses are picking up, they are by no means out of the woods – every dollar invested must provide a solid return.

Implementing a new ERP system can provide you with upgraded tools to run your business or it can devastate your business – it all depends on the effectiveness of your ERP selection and implementation processes.  It is not nearly as simple as it seems. Unfortunately, in my experience, 80% of the time, it fails to achieve the expected results. Worse yet, I’ve seen some horrific customer service impacts. Thus, when you choose to implement an ERP system, it’s worth taking into consideration the lessons learned from failures.

After being involved with many system implementations including several ERP implementations across multiple industries and globally, I’ve seen what works and have compiled lessons learned from failures. As I could go on for days on this topic, I thought I’d pick three top lessons learned from failures to discuss: 1) It’s all about culture change. 2) It’s not black or white.  3) KISS.

1. It’s all about culture change

One of the largest and most commonly repeated mistakes is to forget about the culture.  It doesn’t matter if you’ve purchased the latest, best, world-class system; if you haven’t considered your culture in your selection and implementation plans, you can count on failure.

As system implementations always involve some aspect of culture change, it is vital to think about it in advance. What are your culture norms? Are you planning to change the culture? Are you thinking you’ll change the culture by implementing a new system?  I hope not, as it won’t work! Instead, you should consider how to integrate the new system and work processes into the culture in a way that will benefit the organization.

If you incorporate culture change into your plans and stick by them (a plan that is communicated but not executed is worse than no plan at all), you’ll be able to leverage the system implementation to achieve significant results. Remember successful culture change requires exceptional leadership.

2. It’s not black or white

I have lost count of how many times I’ve seen ERP implementation teams forget common sense – what will “work”? Instead, as these types of projects tend to be massive, they will throw out random rules such as “no changes to the way the system is designed”, “we’ll do a conference room pilot but we cannot make changes”, “we’ll keep the same number of people in xzy function as we cannot afford to increase staffing” (regardless of whether it would stay the same overall but needs to be adjusted by functional area), etc.  Instead, we need to think in terms of guidelines and allow for common sense.

For example, one of the most frequent rules thrown out is “no changes to the way the system performs the function” – we’ve spent a boatload of money on this system, and we need to use it as it was intended. I loved one comment, “xzy system is set up for best practices; use them” (even though these best practices were not aligned with the industry requirements and would lead to disaster). Of course, these statements are reasonable overall and can be a common sense guideline; however, it can lead to disaster when viewed without consideration for the circumstances. Allows for a few tweaks, and I’ve seen companies dig out of customer service nightmares and achieve 98-99% levels.

3. KISS

KISS (Keep it simple stupid) – I was reminded of this by a former mentor recently.  Why is there such an inclination to get complex and convoluted so quickly? I find that it is best to continually review the plans, progress and system utilization for simplicity. There is no reason you need to implement all of the system functionality, even if you purchased it.  Instead, think about what will add value to your business. Look at it from a lean point of view – what is waste? And keep it simple. Of all of the system implementations I’ve seen or participated with, those which kept it simple turned out significant better than those who wanted to leverage all the complexity the system had to offer on day one.

In today’s new normal business environment, it is not only essential to improve the bottom line but it is also vital to provide exceptional service levels. Do not let your system implementation transition from a tool to leverage for success to the noose around your neck weighing your business down. Learn from others’ failures and continually remind yourself to focus on culture and common sense.

 

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How do you and your organization develop or maintain a winning culture?

In my 20 years of experience in working with multiple companies across multiple industries and globally, there is a lot of talk about culture; however, little to no impact – bottom line results. On the other hand, I’ve seen companies with an existing, winning culture and I’ve also seen one built – both types of situations drove bottom line results. The distinction between the so-so (and ugly) cultures and the winning culture is perseverance of implementing and maintaining the core elements of culture.

The reason the ‘talk’ rarely turns into a winning culture is that it isn’t backed by solid fundamentals and hard work. So, how do you and your organization develop or maintain a winning culture? There are three keys to success: 1) Define what you’re known for. 2) Consistency. 3) Involve the entire organization.

1. Define what you’re known for

This sounds simple but it isn’t. It isn’t what you’d like to be known for; instead, it is ensuring what you define is what you are known for or what you’ll become known for. Again, talk is cheap. The key to a winning culture relies on flawless execution – there are no free or easy rides in developing culture! In my experience with cultures ranging from ugly to winning, a few core elements emerge which are common to winning cultures.

First, the organization understands its core competence and focuses almost exclusively on it. As a part of this focus, the organization faces reality (one of the most overlooked issues in an ugly culture) but does not overreact to bad news by throwing out the baby with the bathwater (ie. core competencies). Also, it is vital to keep the organization updated and in the loop constantly.

Second, the organization is clear on its values and lives by them. It is easy to communicate values; much harder to live by them. Even the easiest-sounding of values such as “do what you say you’ll do” isn’t nearly as easy when it comes to implementation. Be careful to think through your commitments before you make them. Then live by them. If they must change, admit your mistake and ensure it occurs rarely.

Third, the organization has a rigorous performance management process. It is amazing how many times I’ve seen organizations not have time for this process yet it is #1 to achieving their goals. The right people are your #1 asset. Thus, it is essential that each person understands his/her goals, how they relate to the organization’s goals (and its core competencies), why their role makes a difference, how they are performing etc.

Positive and constructive feedback shouldn’t be provided once a year in a performance review; instead, provide it daily. Don’t get hung up in complex forms and paperwork. What matters is a simple understanding between the employee and his/her manager. I’ve found the best performance processes to be simple in terms of paperwork, backed by powerful conversations. By asking for their feedback and providing feedback on a continuous basis, you’ll show that you value them. What could be more important?

2. Consistency

The quickest way to build a winning culture is through daily consistency – blocking and tackling. Consistency refers to both communication and execution. For example, I’ve seen countless examples of poor cultures where the Executives emphasize communication but not consistency in application. Just as in children, employees listen to what they see, not what they hear. And, this can be much harder than it sounds.

A common example is when leaders say they value people; however, as soon as the numbers decline slightly, their first thought is to reduce headcount (people). It’s not that winning cultures never cut back on resources; however, they review their core competencies, examine profit drivers (which include items other than just people), and then develop solid plans of action. When accompanied by straight-forward communication, a rare headcount reduction aligns with the culture’s expectations. And, on the other hand, many times, the winning culture’s organization finds alternatives that provide an even better financial return and long-term result. One key distinction is that poor performers are continually weeded out of the winning organization, and so it is more efficient from the start.

3. Involve the entire organization

A winning culture can only succeed if it involves the entire organization. It cannot be an Executive mandate, and it cannot be a success in the trenches and not in the Executive offices. The only formula for success requires it to become a part of the daily working routine. This daily routine involves not only the people in the organization but it also involves key customers, suppliers, and other partners. To read further about involving your suppliers, refer to “Don’t Forget Your Suppliers” by Jim Strong.

One way to achieve this goal is to involve employees in the change and then monitor progress and refine / adjust as required. Exemplars are critical to success. Who will be most effective as a visible supporter based on expertise, position, respect etc? Identify your exemplars prior to the change, involve them upfront and ensure constant communication. The organization will follow. To read more about empowering your team, refer to “Workcell Empowerment” by Andy Pattantyus, and to read more about managing complex change, refer to “How to Support Change Management” by Carlos Conejo.

Culture can be a significant ingredient to delivering bottom line results and customer loyalty. Take the time to develop a winning culture, and you’ll be surprised by how much your employees enjoy work and the results that follow.

 

 

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Lisa Anderson - The Manufacturing Connector

© 2014 LMA Consulting Group

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Warehousing Thoughts

Posted by lisaanderson Mar 11, 2014

Warehousing is one of teh strongest links in the supply chain.

Warehousing is often overlooked for its simplicity, but it’s one of the strongest links in your supply chain.

Warehousing is an often overlooked area of the business.  We store and ship. How hard can it be? Well, there are plenty of ways to dramatically improve your warehousing service and efficiency.

1. The fundamentals – Every manufacturer has to do something in terms of warehousing and distribution, even if they cross-dock everything. One of the most overlooked keys to success is to look at the fundamentals.

2. Inventory record accuracy – Although a fundamental, I thought it deserved its own item due to the critical importance. It doesn’t matter how efficient your warehouse is IF you cannot find what you need when you need it.

3. Flow - Although you can go down the Toyota Production System or Lean path in terms of flow, if that sounds Greek to you, don’t despair. I’ve found flow to be uncommon common sense. Take a step back and observe how your product moves through the building. How does it flow? Does it make sense? Do you happen to drive in circles? Sounds silly but frequently occurs.

4. WMS light - One of my colleagues introduced me to this term, and I love it. In essence, whether or not you need a fancy software solution down-the-line to optimize your warehouse, there’s no reason to jump from crawling to running the marathon in a day. Which WMS (warehouse management system) tools can be of benefit to drive results? How do you make progress in that direction without having to jump full in to a complex WMS system? WMS light – focus on what makes sense with tools that support it.

5. Mixed mode - In today’s environment, you must understand your business. Is it pick and ship? Do you ship 1 piece at a time or in bulk? Do you support retail, distribution, etc.? In today’s world you might need to do 2 or 3 completely different processes. You must set your warehouse up to support each of them – and it’s unlikely to be the same setup for each.

 

 

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Lisa Anderson - The Manufacturing Connector

© 2014 LMA Consulting Group

manufacturing_complexity.jpgComplexity abounds!  Supply chains are extended. Risks must be mitigated. Rules and regulations are increasing. Talent is in short supply.  95% of business is outside the U.S. yet expanding internationally brings challenges and complexity. Customers are demanding more for less – with quicker turnaround times than ever before. We live in an information overloaded society and must be able to pull together the “right” information at the “right” time to make informed decisions. Thus, manufacturing management must rise to the challenge.

 

In manufacturing, I’ve found few “quick fixes”. Success almost always boils down to a day-to-day approach of combining continuous improvement with a touch of radical change from time to time. Unlike sales managers who might grab the elephant deal and be the “hero”, manufacturing managers must keep many balls in the air to navigate the daily grind while continually pushing for operational excellence and customer loyalty with exceptional customer service, just to remain in the game.  Thus, when you find the select few leaders who can successfully manage in today’s complex world, recruit them, retain them, and develop them.  A few of the keys to success to simplifying the complex to accelerate results include: 1) Lead by example.  2) Focus.  3) Metrics rule!

 

1. Lead by example: People are your #1 asset.  Look for folks who lead by example.  Begin with the company’s principles, vision and goals. Tie manufacturing’s goals to these. Communicate, communicate, and communicate. It is critical that people understand why the company’s vision is important (how the product or service helps humanity, customers, etc.) and how they fit into that big picture and add value to it.

 

Principles are not a “touchy feely” topic.  Only the best organizations communicate and live by core principles. Have you noticed that they become the successful ones? Culture is key. For example, is the company passionate about customer service? Integrity? Teamwork? Manufacturing management must lead by example. Do what you say you’ll do.  That alone can make you stand out in the crowd. In my experience, I’ve found that 80% of success begins with people.  Lead by example.

 

2. Focus: Focus alone can achieve wonders. Vast results follow. It sounds quite simple yet is rarely done. The day in the life of manufacturing management includes many conflicting priorities and fires to fight. Instead of jumping into the fray, it is essential to remain focused. Give me focus any day over expensive capital improvements. Undoubtedly, new levels of performance will be achieved.

 

For example, at one mid-market manufacturer, a team of operational experts succeeded in increasing production efficiencies by 20% through focus alone.At first, it seemed an impossible feat requiring many equipment upgrades, additional resources and complex analyses; however, after stepping back and creating a focused team, the results occurred within a three month timeframe with a focus on the basics – people and process.

 

3. Metrics Rule: The only way to win the race is if you know where you’re going and whether you are on track to get there. Again, simplify the complex. What 2 or 3 key metrics will tell you whether you are making progress? Ignore the rest.

 

Think about the key cost drivers for the facility. Is the majority of your product cost based on materials? Labor? Freight? How important is cash flow? Why would you spend countless hours measuring production efficiency to get an idea of your labor utilization if your #1 cost driver is freight?  You might think, “Who would do that?”. If smart people such as Board of Directors who have successfully run many companies can make this mistake so can you. It’s easy to get sidetracked with what is popular, talked about in the news, what was important at a similar company.

 

Instead do a deep dive on the key metrics which will have the largest impact on your business success. Discuss during a daily meeting. Make progress visible.  Identify roadblocks to improvement. Identify internal best practices. Set goals, track progress & celebrate small wins.

 

Manufacturing has become complex. Those who simplify and focus will thrive amidst the chaos.  As manufacturing continues to gain momentum, those who are ready for success will grow their business and will attract top talent. Will it be you?

 

 

 

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Lisa Anderson - The Manufacturing Connector

 

 

 

© 2014 LMA Consulting Group