This article shows you how a simple review of a process can save money and potentially make the difference between making money or losing it!
Many business owners, managers and leaders may think their business does not have an ‘Operations’ part to it, because they offer services rather than building something to sell and then selling it.
Operations is the ‘doing’ part of every business that transacts with customers in exchange for service, information or goods.
It is essential to
- know what the operations of your business are and
- ensure they are functioning efficiently,
to keep a business competitive and sustainable.
The simplest way to identify the key operational workings of your business is to start with a simple CUSTOMER JOURNEY PROCESS MAP.
Start with the activity that generates interest in your business (Marketing) and map the customer’s journey through to the sale or agreement to purchase, provision of the goods or services, invoicing and finally the cash collection and processing.
Once you have captured the basic process, it is easier to include the actions required at each stage to progress to the next, until the conclusion of the transaction.
The devil is in the DETAIL. This applies to any business, especially regarding operations.
Double handle = Double cost:
Simple efficiency gains such as NOT DOUBLE HANDLING a piece of paper or communication may seem trivial, but when you scale a business it becomes a potential money pit if not done efficiently from the beginning.
A sales lead may land in your generic Sales Inbox. It has no real structure, e.g. someone asking for a price, information, or with a general enquiry about a product or service. To find out exactly what is required the recipient asks the boss, who refers it to the salesperson, who asks the logistics person and finally back to the enquirer to seek confirmation.
This can be improved simply with a few adjustments and no real cost.
- Offer the potential customer a structured enquiry form on your website.
- Invite them to call to clarify anything that is not clear on the form or website – a phone conversation can be quicker than exchanging emails.
- Once the requirement is clear, specify what the next person in the process needs to do.
- Communicate this to the enquirer and ensure this action will fulfil their expectation.
- Execute the action and deliver the requested service.
- Send the invoice/collect the payment.
‘HUMANISE THE FRONT END AND AUTOMATE THE BACK END’ wherever it is possible and cost-effective to do so.
The process of paying invoices or collecting monies due can, in some businesses, be unnecessarily complex and therefore expensive in time. Look closely at who is involved along the way and why, as a good first step to improving the process, saving time, and putting money back to the bottom line.
Manufacturing has learned the lessons:
In manufacturing, Operations is generally regarded as the part of the business that builds the products which are then sold. There are many studies, programs, and methodologies around how to manufacture in an efficient, cost effective and environmentally friendly way. The fundamentals, however, are often missed through overcomplicating the improvement process, which is meant to simplify the actual job of making products.
The more complex a manufacturing process is, the more involved an improvement process is likely to be. So, lets stick to the basics.
From raw materials to finished product, the AIM IS TO MINIMISE HANDLING materials and move the item through the parts to be added, to eventually emerge with a saleable product.
As an example, consider modern car manufacturing plants. Robotic trollies carry the emerging form of a vehicle as it winds its way through a network of processes, each adding a critical part of the build. An endless stream of parts is delivered to a static station where a robot or person is firmly planted to conduct a single or multiple related tasks and actions.
This is the epitome of LEAN MANUFACTURING, with a place for everything and everything in its place.
The simple principle here is to be organised and prepare the path to avoid multiple visits to the same place for different tasks or actions.
This principle is best expressed in the phrase ‘RIGHT FIRST TIME’. Not only is this a quality catch cry; it means doing things only once.
In a jobbing workshop, there can be allocated stations where particular processes are conducted. It is unlikely you would see a welding and grinding bay next to a spray bay, or a goods inward dock in the centre of a building.
Even a well-designed domestic kitchen has a flow from storage to preparation to cooking, presenting/serving, and then clearing and cleaning. The objective is to minimise the cook’s movements, unencumbered by the previous step in the process.
This WHOLE-FLOW PRINCIPLE is applicable to all sections of a business.
Where you can save time, you reduce waste and increase productivity, resulting in more profit.
One process at a time:
Smart businesses will take ONE SIGNIFICANT PROCESS at a time and analyse (i) the NUMBER OF STEPS it takes to complete, (ii) the TIME TO COMPLETE the steps and (iii) the POTENTIAL FOR ERRORS to occur during each step. Reducing any of these points in the process will increase the overall potential to trim costs.
An organisation once asked for a review of their ordering process, including invoice reconciliation and payment.
The original process was as follows.
- The person requiring the parts asked Accounts for a purchase requisition number.
- They then raised the request which went to their supervisor.
- The supervisor checked the stock levels before potentially approving the order.
- The requestor then took the order to the purchasing manager to place the order with the supplier.
- The supplier sent an order confirmation to the purchasing manager, who forwarded it to the requestor and the Goods In supervisor.
- The requestor then asked the purchasing manager for an estimated time of delivery for the parts – generally because they had run very low or completely run out before anyone had noticed.
- The purchasing manager requested this of the supplier, then forwarded the response to the requestor.
- If acceptable, the requestor awaited the goods until they arrived at Goods Inward. The supervisor reconciled the original order with the shipping notes.
- (In the case of errors or back orders…. let’s not go there – we haven’t got time!)
- The order was logged as received and the purchasing manager informed that the goods were received.
- The purchasing manager informed Accounts of an impending cost to be accrued into the month’s accounts.
- The purchasing manager also informed the requestor who went to Goods Inward to collect the parts.
- The requestor had to raise a goods release request and provide this to the Goods Inward supervisor who then released the parts to the shop floor.
- The monthly account from the supplier was received in Accounts.
- The accounts clerk then searched through the information provided by the purchasing manager during the month to reconcile the order value to the invoice value.
… you have the picture!
Without spending any money on a purchasing software system or linking it to an inventory control system, there were some obvious PROCESS IMPROVEMENTS that reduced the number of times the information had to be passed around and reconciled.
Every business, WITHOUT EXCEPTION, including the major logistics and manufacturing companies, will have a similar scenario – maybe not to this extent, but there will be waste of people’s time and effort to do some of the most basic tasks.
Review not Relocate.
The message is clear: spending time to review the layout of your workspace and the processes that take place within it is ESSENTIAL NOT A LUXURY.
Businesses have been known to relocate at great expense and inconvenience because they believe they have outgrown the premises or footprint they occupy. They replicate the same environment on a larger scale and produce very little more as a result. Other businesses can remain in place for longer as they grow simply by reviewing the way they do what they do.
Some businesses outsource parts of the non-critical tasks to allow them to FOCUS ON THEIR CORE BUSINESS. This can include administrative functions as well as pre-assembly of components. This allows them to expand their core processes into the areas that once housed the now outsourced functions, keeping the same footprint and maintaining fixed cost as they grow.
Stand back from your business, look at it critically and act with confidence.