Best Practices in Operation: Do Nothing is No Option

04/19/2006


In the good old days, it seemed as though profit margins were high and demand was upward and predictable. While business inefficiency was always a topic of some concern, it was overpowered by the need to never stop the production juggernaut. Where inefficiency was recognized and addressed, the attention was clearly on improving the means of production, not on the business as a whole. The traditional business school rules that governed product and process decisions reliably delivered acceptable profit and growth. So, why change?

Looking back, the certainty of after-the-fact analysis lets us cite many reasons for needed change. How about dramatic increases in global competition, or the explosion in commodity and energy prices to record levels, or the rush to bankruptcy by industry leading companies struggling under the burden of wage structures and legacy costs casually negotiated during happier times. In retrospect, the old ways are clearly not the long-term answer.

Businesses today must scrutinize every aspect of their operations to determine what really matters, and what doesn't. Continually working to optimize a business, be it manufacturing or service, needs to be embraced and is embraced by those successfully competing, and winning, on a global scale.

The time-honored premise of workers watching over each other to provide internal checks and balances, of inspectors serving as scorekeepers for knowingly flawed production processes, of measuring a business's success by the size and quantity of its brick and mortar or capital equipment, don't cut it any more. Today's measure of business success is a company's ability to rapidly, efficiently, and profitably, adapt to their customers' changing needs.

The means to this end is determining and embracing best practices that promote lean and agile operations, and stressing customer-paid value-added work instead of traditional paradigm-based feel good activities.

The words defining success in the new business lexicon include lean, agile, quick, pull, short, straight, clear, simple, clean, at-hand, velocity, and value-added. Ironically, today's kiss of death words are often the very same words that used to describe business dominance—inventory, capital-intensity, work-in-process, and the like.

To survive and prosper, businesses must determine who in their industry does what best, and how can they implement industry-leading practices that they can improve even further. They must understand their customers and competition like never before, and be able to service their customers better than anyone else. How rapid, simple, straightforward, and quickly can their operations be; and it doesn't matter whether the activity is processing insurance applications or manufacturing cars.

Unfortunately, traditional activities can become so tightly woven into the fabric of a business that it becomes difficult, if not impossible, for these businesses to internally recognize the need for change. Intelligent and well-intentioned employees at every level can become protective of their space and function, very often to the detriment of their employer, the company's performance, and its customers.

These employees develop a pattern of work they like to do, typically increasing in volume and complexity over time. Their work is intended to ensure that they remain a critical and irreplaceable part of the process. Often, no one else knows what they actually do as the work is seldom documented, but it seems to be a vital step. Nearly always, this additional effort is non-value-added and simply adds cost to the product without generating value that the customer will pay for. Multiply this added effort generated by a single employee over a large number of employees to fully understand the magnitude and impact of this creeping complexity. Most internal efforts to challenge and remove this added work are unsuccessful, as personalities, tradition, available time, and internal politics hinder any review process.

This paradox of adding layers of non-value work while intending to be more efficient is evident in most businesses. It impacts processes and manufacturing cycles, ultimately separates the efficient from the inefficient, and is the dividing line separating the winners from the losers. The added work ultimately drains the company's bottom line.

This is where the techniques employed by consultants specializing in operational improvement and business simplification can be of great benefit. Whether under the title of Continuous Improvement, Lean, Kaizen, 6 Sigma, Value Stream Mapping, or some other creative combination of these headings, the mission is to objectively assess the flow of the business and remove obstacles to quick and efficient value-added processes.

Regardless of the target, the front office processes in a service business, a complex manufacturing cycle, the routing of order fulfillment through a hospital pharmacy, the interaction of departments within a city government, or the ebb and flow of activity at a call center, a successful consultant (or astute internal facilitator) will quickly separate what matters from what doesn't. They will identify and promote a critical path process that includes what must occur, and specifically exclude what doesn't contribute to a high-value outcome.

Here's the punch line. If your company feels confident that it can perform a critical review of its internal processes that can lead to significant improvement—go do it! If there's any doubt, hire an expert.

Just keep in mind that the do nothing option disappeared with the 5-cent candy bar.





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