CASE STUDY #1: Continuous Improvement at a Financial Management company.
Joanna, the CFO of Company XYZ, a large financial management institution, completed a review of the service delivery of financial reports to their clients.
She identified that more than half of the reports take 35% longer to compile than the allotted time. This extra time is not billable to the client.
The extra 35% time spent is not an obvious “waste” for each adviser. An extra ninety minutes of non-billable time may not be seen as significant, but, as Joanna has established, when looking at the bigger picture, this extra time has
to be applied to 250 advisers nationwide and quantified holistically. When seen in these terms, it clearly does make a difference.
Not only this, but the average turnaround time was up to 11 days, which is six days more than the service level agreement to their clients.
The company realises that these problems incur a loss of margin, due to non-billable time, and could compromise service quality due to the lateness of submission.
Joanna launches a continuous improvement program that engages and involves everybody in the organisation, so that everybody can work towards fixing the problems. She begins with a small group of people, championing one project, which is to reduce the turnaround time, initially from 11 days to seven, with the ultimate target of five.
The savings for this objective may not be as great as reducing the 35% non-billable extra time spent completing the reports, but the priority was to ensure customer satisfaction. Joanna’s decision was a good one, because reducing the total lead time (total days taken) would allow people to focus more attention on the reports, which should also result in a reduction in the overall time taken to complete this task.
The team, led by one of the principal advisers, runs an improvement project for three months. At the end of this time they have implemented a system and brought the average turnaround time to six days.
Although they haven’t reached the customer’s expectation of five days, this is a massive improvement. What is more important is that they have implemented more sustainable and realistic actions.
This pilot team was a catalyst to the launch of Phase 2, which saw the commissioning of three other improvement projects aligned to Joanna’s master plan of cost improvements.
Having this program has promoted greater engagement, ensured problems are solved at the coalface, and encouraged personal growth and development by moving people outside the framework of their usual day-to-day jobs—all of which leads to having a continuous improvement culture and mindset.
The changes that Joanna implemented were not a one-off exercise. Not only have there been direct benefits as a result of specific projects, but the way in which the projects have been managed has instilled a mindset to think of improvements—whether a project is launched or not.
CASE STUDY #2: The Changing Needs Of A Steel Metal Sheet Company
This well-established company manufactures and sells mainly to the building industry for construction of commercial and residential infrastructure. They are well-known and well-respected throughout the industry by everyone from master builders to tradesmen and architects.
The company has been trading for close to 30 years, over which time the directors have built good, solid relationships with related associations and organisations within the building industry.
Sales have been progressively good, with a sales growth of 8-9% each year, and profit is almost within, if not exceeding, target.
The company’s customers love them and trust them with repeated orders. This is largely because the company is very dependable and flexible and will “bend over backwards” for their customers. Well, for their major customers, anyway!
On occasion, the major customers place their orders past the cut-off time yet request delivery within 24 hours—and, very often, the company complies with this “one-off request.” The problem is that this “one-off ” request happens at least twice a week.
This unofficial arrangement has been going on for months, and, because the customers hold major accounts, the problem has always been overlooked.
The company believes they are serving their customer well, because they always hold up their promise to deliver within 24 hours. The question the company has failed to ask themselves is: “Do they have a service level agreement?” This would enable them to see why cut-off times are not being respected, by the customer and by the customer service team who accept the orders.
I can almost picture the faces of the production and logistics managers whenever they receive this demand for a quick turnaround, as they madly rush to get it done and delivered in next-to-no time.
This extra pressure causes stress, frustration and increased safety hazards due to rushing. It also causes small orders from other customers to get pushed back, because the major client takes priority.
The dynamic of big account holders placing orders after the deadline has become the rule, rather than the exception. As a result, the teams are not engaged or happy.
Can you imagine what the production and logistics teams are saying about the customer service team who accept these orders?
Occasionally, the operations/sales manager gets notified of these situations, but because they are important customers, the level of “trust” overtakes everything else, because when customer and company managers talk to one another, trust is taken for granted and it is assumed that all orders must be fulfilled, regardless of the details of the internal processes.
The unhappiness and lack of engagement is ignored. The customer service team always applies double standards— to maintain “good quality service” to the customer no matter what, while overlooking the impact on the internal customers, their colleagues.
The big customers always get their delivery, but the experience is not good for the customer or the company. While the customers’ needs are met and taken care of through immediate manufacture and delivery, the way in which their needs are met is unhelpful.
It causes complacency, as the customers believe they don’t have to bother making an effort to get their order in on time; miscommunication, as different standards are applied to different customers; and compromised relationships between external and internal customers.
Because the goal posts have gradually shifted from the usual 24-hour cut-off, there is now an expectation that no matter how late the order is placed, the products will still be delivered the next day.
In reality, about 30% of the orders placed after the cut-off are not delivered the next day because the company simply cannot fulfil the demands being made.
However, because the practice has been in place for quite a while, the customer no longer sees it as their fault. This means that they feel the late deliveries are unreasonable. As a result, this adds to the major clients’ bad experience, even though they are the ones making unreasonable demands.
But what about the experience of the smaller customers whose orders have been pushed back, even though they diligently place their orders way ahead of time? Clearly, their experience is also going to be bad.
Everybody works madly on the symptoms, without ever looking at the root causes of why these customers are placing their orders late, and why the customer service team always accepts the orders after the cut-off time.
Not only this, but the company has failed to analyse their internal production order and planning processes. They haven’t even begun to look at the reasons why they are unable to deliver within the specified time.
If the industry is really demanding such quick turnaround times, are there reasons why the company is not meeting these times? Are there ways in which they could optimise further? Are there opportunities for them to improve their systems and equipment, so that they can respond to the changing demands of the industry?
CASE STUDY #3: Fire-fighting Cereals And Snack Bars
This third-generation, family-owned business employs about 180 staff, working on a three-shift/seven-day operation across 14 production lines. The company produces over 220 stock-keeping units and sells their products in most major consumer retail stores nationwide.
They don’t compromise on new product development and always ensure that they quickly respond to their market. This means they often innovate with their formulation, as well as producing creative packaging for their products.
They also don’t hold back with capital expenditure, regularly spending on new equipment, to manufacture and pack new products.
This company focuses well on product and equipment innovation. I admire them for being very innovative in these areas!
But what about process innovation? What about people growth and development?
In spite of their fantastic product and equipment innovation, this company still thrives on daily fire-fighting. And they’re very good at it!
Everything is urgent, and problems get fixed through a correction and re-work mindset. In most cases, they do succeed in delivering to their customers, but it takes a lot of hard work, stress and frustration.
This is not sustainable! They deliver the results, but they are on their toes all the time, putting in long hours, repeating tasks, and giving the same answers to the same questions every day.
So, what does this look like?
When materials are required for production, as a matter of course, they call the forklift operator on the phone to do the task. There may be times when this is necessary, but that should be the exception, not the norm.
Why isn’t the system set up for him to deliver at the right time?
Whenever there is a machine breakdown in one of the critical lines, which is a recurring problem, they pull a fitter out from another breakdown elsewhere in the factory, because this particular line is “more important.”
Why does this machine keep breaking down?
When they run out of storage bins, they call the production line manager each time to order more.
It’s a routine task, so why are they involving the manager?
During set-up and start-up of a production line first thing in the morning, direct supervision is required to organise the crew, the tasks, the materials, and the output requirements from the production plan, which is often unclear and unrealistic.
Set-up and start-up is an everyday occurrence, but on days where direct supervision is not possible, it takes twice as long.
Why is supervision always required to organise everything?
This is a situation that I find is quite common with passionate, hardworking, and dedicated business people. Basically, the owner of the business is overly hands-on. He comes in at 5am every morning and leaves late every night.
And while he is there, he is involved in everything! When a truck arrives unexpectedly early in the morning, he jumps on a forklift to unload it. When a key machine operator is ill, he takes his place for the rest of the week.
He grew up in the business, and he knows how to run most of the different operations in the place. He is working in the business and not on the business.
Key lessons for this company
The first thing they need to work on is preventing fire-fighting. They need to start by putting the right systems in place. As Abe Lincoln said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
The next thing they need to do is focus on setting the standards and building systems to support these. The problems they have are not hard to solve. They simply have to go back to basics and be good at them.
Once they have the standards in place, they need to think about how they use their time, so that they can create the perfect balance between routine work and improvement and innovation work. As a rule, the more senior you are in the business, the less routine work you should be performing.
Finally, they need to focus on recruiting the right people for the business. They also need to empower them with well-defined responsibilities and make them accountable for the results.
To ensure continuous growth, they can then implement a learning and development program for all their employees.