When was the last time you looked at improving your internal process? If it wasn’t reviewed within the last year, then you don’t need to be a six sigma black belt for this to raise a red flag.
You may have thought that since processes were previously reviewed that they are already optimized or you may believe your business process is working effectively and reviewing it is not a top priority but it should be.
With all the changes in technology, new business management practices, new manufacturing methods and quality initiatives, continuous process improvements initiatives result in straight gains to the bottom line. You should consider that one of the top reasons for business failure is that they keep on doing the same things over and over until it’s too late.
Once we start to dig into the details its common place to find failures rationalized as “simple errors” such as having the wrong product bill of material (BOM), inaccurate inventory on hand, lack of control of product quality, late deliveries, and inefficient resource heavy internal systems to name a few. While companies who fail eventually succumb due to a lack of financial resources, it all points to a single area: The failure to adapt and optimize their internal processes and procedures required to run their business more efficiently.
As an owner or General Manager, do you master the details of your internal business process and measure them with Key Performance Indicators (KPI) goals? Do you know if your process is optimal? Do you have an action plan to improve it on a continuous basis? If you are not or only partially certain, here is some direction on what expedites failure and here is some advice on how you can start evaluating your own business process.
Develop a Management review process with Key Performance Indicator (KPI) objectives
Determining the most important KPI’s is the starting point in reviewing your internal process. These are rarely the conventional financial statement indicators used and it’s important to narrow them down to no more than 5 to 10 indicators. These must be goals that through reaching them will ensure that positive financial results will be achieved.
In plastic processing, these KPI’s may include:
- New product sales
- Price per pound sold
- Production contribution generated (i.e. sales value less raw material costs) by shift
- % of available capacity used
- % of regrind generated per pound of virgin resin
- % of on-time deliveries
- Cost value of returns to name a few important ones
These KPI’s may vary depending on your type of plastic processing and on the type of products you produce for particular markets. It is extremely important that they identify results in order to enable managers to discuss what actions or controls must be put into place to reach their objectives. Doing so will quickly transcend into process improvements.
The business owners and general manager must take full ownership in establishing those KPI’s and must put in place a timely management review process with managers who are clearly responsible for those indicators. Managers must be empowered to take the responsibilities established in the management review meetings to suggest and proactively make the necessary process changes to in order to attain better results.
Optimize your sales, engineering, manufacturing/ data collection, distribution and accounting process
Have you ever taken the time to stop and analyse the way you manage orders internally?
What about examining all the steps involved beginning with the way new orders are created, how production is planned, tracked, (i.e. what cycle time and actual cost was achieved), capacity usage, rejects and regrind levels was realized. Maybe question yourself on how do we ensure, track and record quality, trace multi-step processes all the way to shipping. How much effort is involved in generating the paperwork including the order, work order, all the shipping documents all the way to the invoice and if it is done efficiently step-by-step to make sure nothing is missed and properly reflected in your financial statement.
Understanding where you rank in each of these processes is the key to finding improvements that can translate into the results you are trying to achieve. Like in sports, the difference between success and failure from first place to second and sometimes even last place is extremely small. It is a constant challenge to fine tune your processes to be number one. Before any system is put in place, a clear understanding of an optimal ideal process must be researched and identified. Here are some examples:
- Sales: inbound versus outbound sales prospecting, tradeshow activities, sales activities, from lead to prospect and to confirmed orders
- Engineering: steps in designing new products, interaction with production and customer in testing new products, QA tracking procedures and reports, preventive maintenance activities and engineering change process
- Manufacturing/ Data collection: production planning steps in order of priorities, tracking production raw material-rejects-finished good-regrind results in real-time, reporting on actual costs and profitability by shift using PLC and shop floor data entry devices
- Distribution: planning receiving and deliveries, planning sales and purchase requirements and forecasts, sales price review process of handling raw material price changes which is critical in the plastic industry
- Accounting: flow of transactions for payables and receivables integrated with sales ordering-invoicing and purchasing system integration, generation of general ledger results to financial statements and KPI production process, cost accounting interactions and automation of all these processes.
Having the right managers running key sectors of the company perhaps even with external assistance
Recruiting the right people into the right management positions is what all companies who excel have achieved. These resources must be experts within their sphere of activity and have a natural profile for the job at hand and possess the right attitude. Training and mentoring will help improve skills and attitude but it is important that you have the right people sitting around that management review table. The further away you are from the perfect candidates, the more risks you will have for failure.
While these managers might have the basic skills and attitude, it should not be assumed that they are experts in specific areas. Hiring an expert to guide you through what is considered excellence in specific processes or implementing programs like inbound sales generation, Six Sigma or lean manufacturing for example will only help in making sure you are investing your efforts in the right direction.
If you want to know more on how you can improve productivity:
Get your free demo today >>