DriveYourSucce$$

Cycle Time Tracking & Variance Analysis in Excel for Small Manufacturers

Most small manufacturers simply can’t afford to have an ERP system that tracks manufacturing cycle times and the variances between those times. However, even for those companies with the most up-to-date software, there are some inherent benefits of witnessing production happen in person. In fact, even the best software isn’t intuitive enough to show you how to eliminate idle time and increase production throughput. For that, you have to see work being done for yourself. With this in mind, I thought I would include a cycle time tracking excel sheet for small manufacturers with a built in graph that shows average, median and mode cycle times in a given production work station.

NRE Multiplier, Custom Designs & Customer Change Requests

What role does your NRE multiplier play with respect to better managing customer change requests on custom designs? Well, while there are varying opinions as to how a company should manage these changes, the best advice I can give is to first determine what your non-recurring engineering multiplier is, and then focus on the fact that any customer changes are exactly that, changes driven by customers who should cover those costs. By this I mean that once you’ve moved past the design phase, and have gone to full-scale production, any and all changes requested by the customer must be charged back to the customer in order to cover your holding costs of inventory. The best rule of thumb is to remember that these stop-and-go changes don’t just affect your production of their custom-made product, but that they ultimately affect your ability to service your entire customer base.

Protect Finished, Semi-Finished & Raw Material Inventory in Contracts

Are you a manufacturer of custom-made designs? Do you manufacture these custom assemblies based on unique customer requirements? More importantly, do your existing supply contracts protect your finished, semi-finished and raw material inventory once these customers need to make change requests and revisions? If you’ve answered "no" to this last question, then you’ve likely decided to rework this inventory at your own expense. In this case, you’ve allowed your customer to continually make changes, changes they should pay for, but don’t because your contracts don’t protect your inventory. It’s time this change.

Today’s Sales KPI Must Measure Inventory & Receivable Financing Costs

It’s not uncommon for companies to go sales KPI crazy. After all, there are a number of ways a company could assess the value of a given sale. However, if there was ever one sales key performance indicator every company should use, it would most certainly have to be those benchmarks associated with reducing the company’s inventory and receivable financing costs. Why should companies use these two financing costs to measure the value of a given sale and the overall performance of their sales team? Simply put, these financing costs determine the gross profit on sales, and in today’s economy, these financing costs are substantial.

Blanket Orders and Kan Ban Contracts: Which Supply Agreement is Best?

Most of my customers make the common mistake of confusing blanket orders and Kan Ban contracts, with some referring to both as JIT (Just in Time) agreements. Unfortunately, it’s never that simple. Very few Kan Ban contracts are ever able to meet the strict delivery requirements of a JIT agreement. Granted, they are similar, but their differences must be understood in order to structure the supply agreement to meet each party’s unique needs. After all, there are buyers and suppliers who enter into these agreements and both must be cognizant of their appropriate roles, responsibilities and liabilities as they pertain to the inventory needed to make these orders work.

Explaining Productivity Rates to Manufacturing Employees

Is it difficult to increase production throughput, or does it merely involve determining the company’s existing manufacturing productivity rates and eliminating the causes of lost time? Now, by no means am I implying that increasing production is easy. It isn’t. However, in a large number of instances, the problems manufacturers face isn’t increasing production levels, or outlining how this can be done, but instead, it’s in finding a workforce that isn't threatened by change, one that understands why reducing lost time and improving cycle times is vital to a better bottom line. So, what can you do to better explain productivity rates to manufacturing employees?

Small Business Financing: Facing an Uncertain Future

Are you a small business owner who is suddenly facing an uncertain future, a future where financing is hard to come by and where delinquent customer payments aren’t the exception to the rule, but the only rule? If this is your first time visiting my site, then you’ve not read the posts I’ve included about some of the simple ways to improve your small business financing. It’s never easy to deal with an uneven cash position. Given the current state of the economy, the pending issues in the Euro zone and the prevailing concerns of businesses about the future of business financing, I thought it once again necessary to allay these fears. As bad as it might seem, there are solutions.

Lower Customer Acquisition Costs With Analytical Marketing Practices

Can marketing be used to lower a company’s costs of acquiring new customers? Can marketing justify the universal claim that it costs companies anywhere from three to four times more to find new customers, than to retain existing ones? Well, the simple answer to both of these questions is a resounding yes, it can. Most companies hear that it costs them more to find new customers, than to keep existing ones, and chalk up this statement as just another erroneous business cost that can’t easily be quantified, or one that is merely a soft cost not to be concerned about. Unfortunately, for them, and fortunately for you the reader, they’re dead wrong.

Meeting Customer Expectations on Product Designs: Don’t Complicate Things!

Does your enterprise have a hard time meeting customer expectations on new product introductions? Do you often find that your engineering department includes far too many "bells and whistles" and that these added features do nothing more than raise your prices so high, that your product offering is no longer competitive? If you’ve answered yes to each of these aforementioned questions, then it’s time to define how best to balance real customer needs versus expected customer needs. Your engineering department may think they now what your customers need, but are they basing these opinions on factual assertions, or on assumptions? More importantly, are they taking an approach predicated on dictating what customers need, rather than listening to what these customers want?

A TOWS Analysis Can Make Your First Quarter Your Best Quarter

Can the TOWS analysis help your company navigate the upcoming year so that it's well positioned to tackle whatever challenges await? No doubt you want to make your first quarter your best quarter, but how does the TOWS analysis go about laying the groundwork to start every year off on the right foot? More importantly, how does this planning tool help define last year in terms of what went well, what didn’t go well, what market changes occurred and what your enterprise must do to replicate success from your first quarter, and every quarter thereafter? We’ll answer each one of these questions in detail by providing insight into how your company can use the TOWS analysis to define action plans, set priorities and lay the foundation for a successful new year. So how can your company use this strategic planning tool?

Sample Kan Ban Contract: Finished Inventory, Semi-Finished Inventory & Raw Materials Inventory

Today I decided to include a sample Kan Ban contract that specifies the liabilities for both a buyer and supplier as they pertain to the finished inventory, semi-finished inventory and raw material inventory within the agreement. These contractual agreements work when both parties clearly define these aforementioned liabilities and are willing to negotiate in good faith. However, it’s essential that these agreements are signed by both parties, as the amount of inventory needed to make these contracts work is quite substantial. Use properly, the Kan Ban agreement can help reduce the buyer’s inventory holding costs, while providing the supplier with consistent manufacturing volumes.

Defining Strategic Partnerships Between VARS, Integrators & OEMs

Is your business that of a VAR (value-added reseller) whose strength lies in how it manages large amounts of inventory? As a supplier of time-critical parts, are you looking to enter into a strategic partnership with your market’s largest OEM (original equipment manufacturer)? Or, are you an integrator servicing the equipment manufacturer’s end-user customer base, a customer base that forces you to rely upon the VAR for spare parts, and the OEM for technical expertise? Regardless of whether you find yourself in the middle as the integrator, as the VAR servicing the OEM’s customers, or as the equipment manufacturer itself, there are opportunities for each party to enter into a strategic partnership. So, what would one of these partnerships entail? More importantly, what must you do to ensure your partnership addresses your company's specific needs?

Using TOWS to Align Strategic Partnerships & Vendor Relationships

What does a strategic partnership mean to your enterprise? More importantly, how does one define a strategic partnership and shouldn’t that partnership be linked to your company’s overall strategic plan? When answering these questions, think of how the TOWS analysis helps to define your company’s internal strengths and weaknesses relative to your market’s external opportunities and threats. The TOWS analysis is a fantastic tool to not only support and define your company’s overall strategic plan, but to ensure that your partnerships are aligned with that plan. Used properly, and the tool can simplify how your company approaches planning.

Market Risk and High Financing Costs Within Your Strategic Plan

Does your strategic plan account for the possibility of increased market risk and high financing costs? If not, then consider the following. Just when businesses thought the damaging effects of the 2008 recession were over, along comes a new and more menacing threat posed by a potential Euro zone failure. Whether it’s Greece, Italy or Spain, one of these countries is sure to have a long-lasting impact on global financial markets. In fact, it’s happening already and either your company's strategic plan addresses this market risk, and possible higher financing costs, or it will suffer the consequences. 

TOWS Analysis and Your Supply Chain: Lower Costs, Better Service!

Can a TOWS analysis help lower costs within your supply chain and be the catalyst to secure better service from your vendor base? When answering this question, think of how most companies apply a simplistic approach to reducing their supply chain costs. Think of how these companies rarely plan or come up with specific strategies. These are the enterprises that try to use fear and intimidation to threaten their suppliers with lost business. To these companies, their volumes are the only tool at their disposal and the biggest lever to bending suppliers to their will. Unfortunately, rarely does this approach work. However, a TOW analysis incentivizes companies to think outside the box by forcing them to consider more than just their volumes. So, how can a TOWS analysis help improve your supply chain?

Inbound Marketing VS Outbound Marketing for Small Businesses

As a small business owner, do you sometimes find marketing to be somewhat overwhelming? Do you often question the wisdom of investing capital in approaches that are hard to track and whose results are hard to nail down? More importantly, have you relegated your marketing strategies to coming up with a new brochure, catalog, attending a couple of tradeshows & conferences and hoping that a onetime revamping of your website and company blog will suffice? If you’ve answered yes to these aforementioned questions then perhaps it’s time to understand inbound marketing vs. outbound marketing and why one has taken over the other in terms of increasing marketing return on investment. So, which one is it and what should your small business concentrate on?

Bill of Materials Essentials: Substructure & Subassembly Analysis

How important is it to properly manage your product's bill of materials? As a manufacturer, do you take the time to perform a substructure, or subassembly analysis in order to segregate your most common subcomponents and incorporate them in future designs? Do you understand the importance of isolating commonality at the part and raw material levels in order to reduce inventory skews, counts, costs and manufacturing cycle times? If you’ve answered "no" to each of these questions, then this is a definite must read. Identifying common subcomponents often holds the key to increased production throughput. So, what are the critical steps to performing a subassembly analysis?

Identifying Value-Add & Non-Value-Add Process Steps in Product Management

As a product manager, do you take the time to isolate those value-add (VA) and non-value-add (NVA) service features that may or many not be needed by your customers? Are you a manufacturer of custom-made parts who needs to weed out those processes that do nothing other than add unnecessary time and increase costs? More importantly, when trying to nail down those product and service features customers are willing to pay for, versus those they aren’t, do you take the time to isolate your value-add versus non-value-add business processes? If not, then this might be worth a look. We’ll explain the importance of isolating VA and NVA process steps within your product and service offering.

VOC Data and Simplified Kano Analysis Steps for Product Managers & Marketers

If you find the above title a little intimidating, don’t worry. We’ll simplify this entire process. Using voice of customer (VOC) data techniques and employing a Kano analysis can be daunting. However, while the tasks themselves are involved and the process of gathering data somewhat laborious, they are very straightforward methods of quantifying those product features and benefits that customers want, versus those they don’t need. Every company has its internal and external customers. Each push their own solutions and their own initiatives. As a product manager, your must isolate those VOC data points that dictate what your product must have for market entry.

Bad Credit Customers: The Cure for a Cash Strapped Business World

Conventional wisdom dictates that bad credit customers are just that, bad. After all, it’s nearly impossible to plan inventory purchases against customers who might be here today, gone tomorrow. Most companies shy away from customers who must prepay orders, or those customers with a less than stellar credit rating. However, there is another school of thought that espouses pursuing bad credit customers at all costs, especially in cases where cash flow is a going concern. 

This doctrine dictates that in a cash strapped business world, where credit is hard to come by and delayed customer payments are the norm, companies should refocus their efforts on customers who’ll reduce their receivables financing costs and improve their cash position. So, given the reality of today's economy, should your company pivot and start looking for customer who must prepay orders?

Benefits of Customer Consolidation Through Multiple Distribution Channels

Most businesses have heard of the benefits of vendor consolidation, but few have considered the benefits of customer consolidation. The approach is to reduce the customer base in order to reduce the company’s sales transaction costs. The mechanism that makes this possible is to use multiple distribution channels to market, or multiple sales agents. This is often a goal of companies whose costs on sales transactions are simply too high, whose manufacturing is fractured by infrequent customer orders and cyclical demand, or whose customer volumes are too small to service. Imagine the costs of selling 3 units to 100 different customers, as opposed to selling 300 units to a single customer. Obviously the second transaction has lower costs and is therefore easier to manage. So, how can companies benefit from customer consolidation through multiple distribution channels?

Manage Your Customer’s Expectations and the Rest Should Follow

What’s the most important part of a new customer relationship? What must all salespeople be able to accomplish with respect to how they sell and service your customer base? More importantly, how can your sales team set the table for your customer service department to succeed and for your company to position itself as your customer’s vendor of choice? In order to answer these questions, think of the importance of managing customer expectations. Think of how the expectations of customers vary and how these expectations are based on prior experiences. If your company doesn’t properly define your service capabilities, your customer will do it for you!

Four Vendor Management Strategies to Reduce Costs in this Economy

One of the more valuable lessons emerging from this economy has to be the importance of maintaining strong vendor partnerships. Unfortunately, a large number of companies take an adversarial approach to vendor management. While some do make an effort to find a middle ground, the vast majority don’t. In fact, most rarely take the time to define how best to work with their vendor base. However, it’s those companies that excel in vendor management that are ultimately able to weather the storm and emerge stronger. Given today’s business climate, it just makes sense to adjust your company's approach to this new reality. So, what are the four strategies you should adopt with respect to how your company manages its vendor base?

Define Your Inventory Carrying Costs on Custom-Made Products

Does your company manufacture custom-made products and if so, have you taken the time to define your inventory carrying costs on these custom designs? Perhaps you're unaware of how the carrying costs on one-off designs might differ from say, standard product lines. Sales of conventional product lines typically dictate that a company manufacturers a product, holds it in inventory and then proceeds to go out and make sales. However, for custom-made assemblies, it’s entirely different as your company might not order raw materials or start production until an order is received. In addition, your company must adjust its manufacturing schedules when confronted with customer change requests. Ultimately, it's the customers who must sign-off on these modifications before the product moves to the next stage of production. Either way, these changes directly impact your company’s carrying costs of inventory on these custom-made products. The question is, by how much?

The Bell Curve of Inventory Management: Finding the Middle Ground

Finding that middle ground between having too much inventory, and not enough, is never an easy endeavor. On one end of the spectrum are high inventory holding costs that accompany holding inventory without sales. On the other end are lost sales due to low inventory counts and levels. One involves high financing costs and the risks of inventory damage and obsolescence while the other involves losing sales and possibly customers, due to a lack of available inventory. One is a constant reminder of the company’s cost of capital and the other is a reminder of the costs of lost opportunities. Neither outcome is acceptable and finding that middle ground is paramount to success. So, what does it take to find that middle ground in inventory?

The Institute for Supply Management, ISM, Calls Upon Drive-Your-Success

I’ve contributed to several industry trade magazines for engineering, manufacturing, production planning as well as multiple publications covering purchasing and operations. I’ve written as a ghost writer for some enterprises, been used as a reference in others, sold content to companies and have also contributed to thousands of articles and white-papers. My work is spread out throughout the internet. However, for the most part and for a multitude of reasons, I’ve been unable to use my own name in these documents. However, a consulting company I've worked with recently forwarded my name to the Institute of Supply Management. In the recent issue of Inside Supply Management, the magazine publication for the Institute of Supply Management, I was asked to contribute to an article covering Dell’s “Push-Pull” supply chain management approaches. The article entitled “Finding the Push-Pull Balance” is available to download. Please note, this is Copyrighted to ISM - “Copyright Institute for Supply Management, October/November 2011” – Here is the article:Download Feature Push-Pull Oct-Nov2011[1]

Sample Customer Scorecard Excel Sheet: Grading Your Customer’s Value

What factors do you consider when it comes to grading your customer’s value to your business? Like most enterprises, does yours simply base this value on the amount that customer spends? Or, do you base it on other criteria, in addition to how much they spend? To help you answer these questions, I’ve decided to include a sample customer scorecard excel sheet that not only accounts for how much your customers spend, but also takes into consideration their payment habits, their contribution to your inventory turnover rates and their impact on your inventory and receivables financing costs. 

Sales Negotiation Training: Never Sell on Price, Sell Savings & Solutions

When discussing sales negotiation training with my customers, I always tell them to never sell on price, but to instead sell savings & solutions. Now, most business professionals are convinced that salespeople sell on price because they lack the ability to sell properly. However, in many instances it’s the company itself that forces the salesperson to sell on price. This often happens because the company views this approach as the only way to guarantee the order. Unfortunately, lowering the price does nothing more than lead to the dreaded price war, and nobody wins a price war! Declining prices do nothing more than reduce gross profit margins and force your company to pursue a portion of the market that nobody wants. So, what can your business do to correct this?

B2B Customer Management: Moving Customers up the Value Scale

In my recent post entitled B2B Customer Management: Determine a Customer’s True Value, I covered four criteria companies could use in order to determine the true value of a customer. These four criteria included, 1) how much the customer spends, 2) the products the customer purchases, 3) the customer’s payment habits and 4) whether the customer helps to increase the company’s inventory turnover rates. The company would apply a grade to each of these criteria and then use a weighted average score to determine the customer’s true value. The focus of this post is how a company can move customers up the value scale.

B2B Sales Management: A Full Sales Funnel Maintains Customer Urgency

Have you ever notice how much more effective salespeople are when their sales funnel is full and they have more than they can handle? Granted, this is a fairly obvious statement. However, it’s important to note that some salespeople are more effective at creating that sense of urgency with customers than others are. It’s this sense of urgency that is so conducive to closing orders. It’s this sense of urgency that often forces customers to act. The intention isn’t to strong arm the customer into making a decision they normally wouldn’t. No, in this case, it’s to use the salesperson’s natural abilities to identify and close on more opportunities by keeping their sales funnels full.

The Inventory Conundrum: It’s Either Too Much or Not Enough!

One of the more contentious issues my customers face is the constant concern of having too much inventory or not enough. Why is this such a constant struggle and a going concern for today’s businesses? Well, it’s often because companies want to be able to capitalize on sales when they’re available but not have so much inventory that it eats away at their gross profit. While this explains the struggle companies face, it doesn’t necessarily explain why companies constantly find themselves in this mess. So, what’s at play here?