1+1 = 100 by Rick Pay

Author:Rick Pay
Language: eng
Format: epub
Tags: Business, Business Communication
ISBN: 9781631575006
Publisher: Business Expert Press

Reduce costs

Increase quality

Improve customer service

Raise operating efficiency

Lower total inventories

Eliminate/minimize inspections

Eliminate scrap and rework

If partners are measuring different things or one side isn’t measuring anything at all, the relationship is out of balance; one partner thinks it is doing just fine while the other partner is worried. For example, a client company produced a medical supply item and thought their shipped on time was about 60 percent, which is not good. Several important customers were starting to look elsewhere for supply. When I went in, I found that my client was measuring shipped on time based on order line items. Using this system, if there were 10 items on the order and 9 were shipped on time, their score was 90 percent. However, the customer was unhappy because one of the items was late. Because each side measured shipped on time differently, they were not seeing eye to eye, and the company was at risk of losing valuable customers.

At another company, the order line items were part of a residential lawn sprinkler system. If one item was missing, even if it was a low-cost and seemingly less important “C” item, the system as a whole could not be installed. My client found that when they had a shortage, the installer often went to the competitor for the entire system, not just the one missing part. The client did not measure order fulfillment and they certainly did not measure lost sales. It turns out they could have increased revenues by 5 percent to 10 percent by simply performing better, but first they had to realize they had a problem.

My philosophy of shipped on time was that either the order was shipped complete and on time, or it was a complete miss. At the medical supply company, when we measured shipped on time on that basis, we discovered it was a dismal 24 percent. No wonder the customers were so unhappy. As it turned out, the VP, Operations, knew that the shipping performance was that bad, and he sandbagged the numbers. When that came to light, the CEO fired him. Amazingly enough, when we began measuring shipped on time properly, the problem became obvious and within a month, the real performance moved to 80 percent and eventually to 98 percent. Many times, people simply need to know what the real score is in order to improve it.

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