“There can be economy only where there is efficiency.”
– Benjamin Disraeli – Famed British Statesman
Last week’s blog focused on delivery system capacity. You must have enough production capacity to produce what you sell. But before you run off and spend precious capital on additional equipment and resources, it’s best to analyze how efficiently your current system is running. An efficient delivery system will yield higher profits without extra expense.
So how do you know if your current delivery system is operating efficiently?
Find the Bottlenecks – Almost every system has a component that slows down the entire production process. The first step is to find those bottlenecks and decide how to handle them. Let’s say you have a production rule that a senior manager has to sign off on all filled orders before they ship. What if that person is out sick or on vacation? How much time does it take to perform this task? Can this job be delegated to someone on the production floor? Can the system generate a report that can be emailed to the manager at certain times in the day? Find your bottlenecks and see if there is any way to eliminate them.
Is the Staff Working at Peak Performance?An efficient system is only as efficient as the people working it.Is your staff giving you 100% effort?Have you studied industry averages for producing your product?How would you know if your people are working hard?
Specific and Measurable Targets – In answer to the previous point, you need specific and measurable production targets in order to tell if your system is efficient. How many units per day? How many orders filled? What measurements can you put in place that would tell you that you are operating at full speed? How often should you measure for them? Good reporting is a hallmark of the efficient delivery system.
Incentives – A good way to keep the production team operating optimally is to have some games or incentives in place to reward them for good performance. If we make our quota of 1,000 units per week, everyone will receive a Starbucks card. Individual goals and quotas are great ways to measure for outstanding performance and identify who really has company interests at heart. A more motivated production staff will tend to be much more efficient, creating more profit for the company in the long run.
Is the Product Profitable? – Are you producing the product as profitably as possible? When was the last time you looked at vendors or re-negotiated materials pricing? Could you be getting your material cheaper? Could you be outsourcing one of your processes that is currently a bottleneck? Is it cheaper to do it somewhere else? An efficient delivery system should maximize the profit potential for the product.
Lots of companies are trying to be lean in these challenging economic times. The best way to approach efficiency is to start by analyzing your current system and looking for ways to improve what’s already there. A re-energized production team that’s clear on the company’s intentions and their role in achieving them is bound to be more efficient and more cost effective. These days, that’s half the battle if you’re going to win the game of business.
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