Problem: Integrate existing eRetail sites, with full on-line catalog functionality and fulfillment, into new portal environment.

Solution: Identified existing and desired technology, defined business processes, and developed training materials to support the new business model.

Results: On-line ordering and fulfillment capability integrated into portal environment to create new revenue stream (and new revenue).

The client for this three-month engagement was a major, US-based household products company. The engagement encompassed two primary deliverables:

• a description of the client’s historical efforts to improve work flow and reduce costs; and
• an overview of current work simplifi­cation and cost reduction opportunities within the General Office functions of the client’s largest division.

The client’s departmental liaisons representing each of the areas within the division’s executive management team are as follows. Consultant contact with the liaisons focused on the current and past work simplification efforts and on coordination within their department. The consultants solicited input from over thirty individuals to understand the nature, impact, and priority of each opportunity. These in­dividuals assisted the consultants in the preparation of summary-level flow charts of key or core processes.

In general, these efforts were been within functional areas. This limited scope has limited the financial and pace impacts of these historical efforts.

Division General Office staff and management identified over 130 oppor­tunities for improving the way the client did its work. The consultants con­solidated these opportunities to a list of eighty. These eighty range from the broad and general to the narrow and specific.

The Division’s Directors and their direct reports ranked the eighty opportunities using ABC-like analysis. They then prioritized those ranked as the “A” or top priority opportunities. Three cross-tabulation views of these rankings were provided by Functional Group/Department, by SBU, and by position for use as tools for the Management Committee to use in prioritizing efforts within their own area or SBU to improve pace, performance, and the effectiveness of Division’s management and staff.

There were two broad categories of opportunities:  those that are far-reaching and cross-functional, and those that are narrower in scope and that predominantly deal with only one or a few functional areas. The highest priority opportunities, as identified by Division’s directors, were those which were multi-functional. There were other opportunities, however, which needed to be addressed because they would have a noticeable impact on the day-to-day activities of Division General Office management and staff.

The Top Priority Opportunities

Thirty-six opportunities were identified by at least one individual as being a “top priority” opportunity. Three oppor­tunities were identified by the Division’s Directors or their designees as “top priority” to be pursued. These are:

1.         Simplify the Forecast process and sub­processes to reduce multiple sets of numbers, level of detail, and frequency of update; to eliminate multiple recon­ciliations and duplication of effort; to improve timeliness, ac­curacy, and coor­dination of inputs and outputs. Simplify the forecasting of promoted items.

We saw a one-time opportunity to reduce capital re­quirements for finished goods inventory by up to $10,000,000 with an additional annual savings of $1,200,000 in inventory carrying costs for finished goods and an undetermined analogous savings associated with raw materials. The client expected to also see a reduction in ex­pediting and “surge” costs. Division Manufac­turing General Office staff suggested the expediting and “surge” opportunity exceeds $2 million annually.

2.         Simplify/reengineer the Written Recommen­dation process to elimi­nate duplication; to reduce the level of detail, sign-off, “bulk,” and labor intensity; and to eliminate al­together where unnecessary; to focus on the key ele­ments required for Management approval; to increase pace; to improve timing of manage­ment input and higher-level buy-in. Simplify the (cross-function­al) approval process. Clarify decision-making author­ity and roles between key management levels to reduce effort required to obtain approval while simul­taneously increas­ing business building activity pace.

We saw an opportunity to reduce labor costs and cycle time associated with the recommendations. This impact will be “soft” in nature because we anticipated savings in staff time being absorbed by activities not currently performed.

3.         Simplify/shorten the New Product Deve­lop­ment, the Product and Pack­aging Improvement (Brand Improvement) processes, and the New Label and Label Change proces­ses.

We saw the impact here as an opportunity to apply Work Simplification to the already-improved Product Develop­ment processes to reduce cycle time to typically less than eighteen months from reportedly close to three years. Enhanced responsiveness to the marketplace should yield significant additional competitive and financial benefits.

Inventory

A worthwhile “World Class” target for inventory turns for Division’s product line was fifty-two (approximately a 150% improvement). This represented a reduction in finished goods inventory of approximately $10 million.

Raw material inventory is generally in the neighborhood of $15 million. Through improved supplier lead times and forecasting, raw material inventory could be reduced by one-half to two-thirds of current levels. This is a reduction in raw material inventory of a range of $7.5 million to $10 million. Some of this inventory was not specifically considered the Division’s inventory.

In addition to releasing capital of from $17.5 to $20 million, savings would result from reduced inventory handling costs. Assuming average inventory handling costs of 11.4% (based on $40 per pallet divided by the current inventory valued at cost), this reduction in inventory handling costs would be within a range of $2 million to $2.3 million annually with expediting and “surge” providing an additional $2 million annually.

An additional $400,000 in identified savings associated with improved Forecas­ting was included in the above inventory-related savings.

Labor costs

Activity analysis suggested that “Long Range Planning and Forecasting” by client Brand Management costs approximately $.9 million annually. Forecasting and Production Planning by Manufacturing’s General Office management and staff cost somewhat less than that. Sales Planning and Forecasting costs by field and General Office Sales management and staff could be somewhat less than Manufacturing’s costs. Estimated total labor associated with Forecas­ting and Production Planning was in a range of between $1 million and $1.5 million annually. Ten percent or more of these annual costs, within a range of $100,000 to $150,000 annually, was indicated as realistic for savings associated with improving forecasting.

Expediting

Although actual expediting costs are “buried” within the Division’s cost systems, up to $700,000 annually was estimated as potential savings in expediting costs. Expediting costs include changeovers, redeployment, and material upcharges. The consulting team recognized that labor savings in the plants would only be captured to the extent that expediting results in overtime.

Total savings associated with improving forecasting is thought to fall within a range of $2.4 million to $3.7 million annually plus a one-time reduction in capital requirements for inventory of from $10 million to $20 million.

Total Savings Potential:     $18,113,100 of which $3,963,100 is “annual” in nature

The client was one of the five largest web printing firms in the United States. The culture of the organization was such that the division president felt the need to introduce a more participative management style. The decision was made that the development and implementation of a closed loop reporting system would be the appropriate vehicle to introduce this organizational change. 

Over a period of several years, various consulting organizations had implemented numerous separate reporting systems, primarily for the purpose of managing production and productivity. At the end of each reporting period, senior management invariably got a surprise:  rarely did periods, during which the daily, weekly, and period-to-date numbers looked good (or bad), turn out as expected. Too frequently did management and, through the invariable “trickle down,” supervision suffer the rude awakening and embarrassment of reporting a profitable period throughout the period only to have to admit to the corporate offices that they had actually incurred a loss. 

Assembling a team combining seasoned consultants and client staff became the first order of business. The client personnel ranged from supervisors-in-training to area managers to a division vice president. After training “the staff” in various problem solving techniques, the team tackled its mission. 

Each staff member was assigned to separate functional areas:  one in which they had significant experience and one in which they had relatively little. The feeling here was that their participation was meant to be a learning experience not just in project-oriented techniques but also in expanding their horizons within the organization. Within each functional area, work teams were recruited, mostly from a list of volunteers. One or more of the eight project staff members was assigned as a participant, but not necessarily a leader, of each work team. 

Each work team was assigned the following tasks: 

• develop a floor plan of each functional area;
• develop a work flow diagram showing each operational step;
• examine the work flow for bottlenecks and operational problems;
• with input from management as needed, prioritize the list of problems for solution;
• design, using all necessary and available resources, solutions to identified problems;
• review the problems and the proposed solutions with all affected management personnel for approval;
• implement the solutions to each problem in order of its priority;
• collect each and every piece of “paperwork” which flowed through the area regardless of source or destination;
• assemble the collected paperwork in such a way as to provide relatively easy examination of the flow or lack-of-flow of information;
• examine the “paper flow” to identify redundancies, information gaps, and lack of flow;
• design new reporting documents to eliminate redundancies, fill identified gaps, and enable a timely, accurate flow of information;
• review the new documents and the new flow with all affected management personnel for approval;
• write detailed procedures in a uniform format to de­scribe:
• who completes each document
• why each document is used
• when it is used
• where it goes and to who
• how it is stored and for how long
• review the new documents and their procedures with all appropriate personnel in each area;
• install the new documents in each area, on each shift providing on-the-floor training and follow-up; and
• revise and re-install each document as necessary.

The problems identified included: 

• excessive clutter causing damage to raw materials;
• inadequate documentation of raw materials;
• improper techniques used in determining the amount of product produced against the target volumes;
• poor communication between operating departments as exemplified by regular “finger pointing” between depart­ments in response to resolving day-to-day problems;
• inaccurate scheduling of work based on negotiated standards rather than anything resembling actual produc­tion rates;
• inability to track performance by magazine title (analo­gous to brand or model number in other environments);
• poor inventory management; and
• little or no feedback to previous departments – most feedback that was given had little credibility because it was generally provided without sufficient documentation. 

The easiest problem to solve was that of excessive clutter. The plant was relatively filthy. Waste paper, scrap lumber, partial rolls of paper, cups and cans, outdated equipment and a host of other unnecessary items were scattered throughout the facilities three production buildings and two warehouses. The clutter led to the perception that nobody cared about the mess. This became somewhat circular in its effect because it seemed to lead to more clutter. In less than one week, all plants were relatively tidy. This immediately improved morale:  first that of the project staff and then of many of the remaining fifteen hundred employees. The other result was that damage to materials being transported within the facilities was reduced substantially. 

Improper documentation of the individual rolls of paper led to unnecessary delay in the production schedule. Fork lift drivers had a difficult time identifying which rolls of paper were to be delivered to which presses for which production runs. Frequently, the rolls did not reach the presses when needed. This led to idle presses (before the run began) and sometimes to presses stopping (in the middle of a run). While a press sitting idle is expensive because it is not in use while its work force is “on the clock,” a press which has come to a halt in the middle of a production run causes excessive waste, downtime, and occasional machine damage. New four-ply tags were designed and put into use to eliminate this problem. The previously-mentioned reduction of clutter combined to make the rolls of paper easier to find and easier to reach. 

One of the reasonably universal problems facing the high speed printing industry is that of inaccuracy when it comes to counting their production. As basic as it may seem, when you are producing in excess of several hundred thousand copies of sections of magazines or books, it can be very problematic to ascertain a reasonably precise production count. Printing presses, just like common office photocopy machines, come equipped with counters. These counters, because of speeds approaching 40,000 units per hour, are somewhat inaccurate. Adding to the inaccuracy is the question of quality. If a printing plant needs to produce 950,000 good finished copies of an entire magazine, the bindery section of the plant may need 1,000,000 good copies of each particular section of that magazine in order to complete the order. This may mean that the presses need to produce 1,050,000 copies of that section to assure that 1,000,000 of them to be useable by the bindery. Unfortunately, the accuracy of the press (and bindery) counters and the speed of the presses (and binders) is such that overruns and underruns are relatively common. To compound the problem, it is not unusual to encounter press and binder operators who intention­ally overrun their targets by 10-20% in order to be sure that the work does not have to “go back to press” because of a shortage. 

One solution to the problem is to weigh the production. Fairly accurate counts can be determined by weighing a sample of the production. The drawback to weighing is that it takes time. The time involved is such that the pressman can certainly overproduce before he has the backup count from the scales that he has overshot the mark. However, the combination of weights and counter counts can yield acceptable accuracy; through several trial runs it was demonstrated that the increased accuracy more than made up for the increased time. The key was in training the pressmen to use each of the two measurements to gauge the other. By implementing a system by which all production was both counted and weighed, over-production and under-production was substantially improved to the extent that paper usage was reduced by almost ten percent (up to two hundred thousand pounds of paper per month at a value of over thirty cents per pound). 

As a corollary to the poor count problem, poor communication between operating departments was common. The most frequent example of this was related to claims of under-production directed by the bindery department toward the press. Of course, since the pressroom really didn’t feel too comfortable with their counts, they really couldn’t stand up to the criticism. As a result, it became the convention to quantify the amount of the bindery waste as whatever the standard for the job was; the remainder of the waste for the entire production effort was “credited” to the pressroom. The pressroom “knew” they weren’t producing all the waste but couldn’t prove it. The bindery could literally see the amount of waste that they were producing but lacked the incentive to own up to it. 

Once the new “counts system” was implemented, the pressroom had a better basis by which to justify its production amounts. The bindery, on the other hand, had less room to claim that the pressroom hadn’t provided enough product. This new system gave management the ability to somewhat accurately determine the amount of bindery waste. It also provided realistic data for the estimators and the schedulers to use in setting up the jobs. 

Additionally, once the real production and waste figures became accurately measured and known, the problems in each of the areas could start to be addressed. Production problems which had gone ignored and unresolved for years started receiving attention and getting solved. Accurate production rates and, later, accurate schedules could start to be calculated. 

Even though the production rates were not actually known, schedul­ing of work was based on negotiated standards rather than anything resembling actual production rates. Every year, production supervision and management, finance, and union representation would meet to determine the production standards to be used for the next contract year. Because “management” had poor data to work with, its bargaining position was poor. Every year, actual rates versus the standard rates were almost unrelated. The inaccuracy of the reported production data led scheduling and estimating to start “seasoning” their standards with recent history. As reported rates became more accurate, the “seasoning” of the estimating and scheduling rates led to more accurate estimates and schedules. 

Historically, production information was tracked only by press, by binder, and by standard classification. There was no provision for reporting by individual magazine title or by paper weight or paper brand. This inability to track performance by some of the potentially key indicators had proven to be a drawback, especially when the client was negotiating new contracts with publishers or with paper suppliers. A system, integrated with the “counts” system, provided several reports which, summarized in several ways, provided management with necessary performance-based information to be used in the negotiation of contracts. 

The client had accumulated a large inventory of both completed magazines and printed individual sections. This inventory represented a substantial investment in labor, materials, machine time, and floor space. Most of it, however, resulted directly from the inability of the client to count production. There was essentially no market for this over-production. The publishers were under no obligation to buy the product. 

One of the first project actions was to discard all the product which had been identified as not sellable. The immediate impact was visual; just the sight of a large amount of “useless” inventory being discarded was a morale booster. However, as a result of the inventory reduction, the client was soon able to eliminate the rental of an off-site warehouse saving $26,000 per month.

Total savings for this six-month project totaled in excess of $86,000 monthly.