A presentation for apics chicago january 21 2003
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A presentation for APICS – Chicago January 21, 2003. Why companies compromise results and what to do about it. Speed Unrealized. Ideas to Action. The Potential of Speed. What's obvious Higher customer satisfaction Increased profit margins Higher employee job satisfaction

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A presentation for APICS – Chicago January 21, 2003

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A presentation for APICS – ChicagoJanuary 21, 2003

Why companies compromise results and what to do about it

Speed Unrealized

Ideas to Action

The Potential of Speed

  • What's obvious

    • Higher customer satisfaction

    • Increased profit margins

    • Higher employee job satisfaction

  • What’s compromised

    • Whole company alignment

    • A pool of available cash

  • What's missing

    • A framework for managing change

What’s Obvious - The Definition

What’s Obvious - The Process

  • Establish an overall cycle time measure

    • Order to bill

  • Establish sub-cycle time measures

  • Establish value added time of each as a goal

  • Define the pool of savings available

  • Use change management as framework

The Burning Platform – The Pool of Savings

Pool definition assumptions:

  • Cost of inventory 30% of total

  • Cost of accounts receivable (AR) 30% of total

  • Cost of quality is 30% of sales

  • Labor reduction proportional to cycle time reductions

  • Value added time 2 hours

  • Cost changes with improvements

  • Revenue does not change

Cost Pyramids

Cost of Carrying Inventory

Cost of Carrying AR

Projected Pool of Savings

Material saving of $73K (COQ – reduced waste)

Labor saving of $273K (increased throughput)

Inventory savings of $20K (30% cost of inventory)

AR savings of $10K (30% cost of AR)

Actual Product Line Results

What’s Compromised

  • Alignment of the tough areas

    • Sales

    • Customer service

  • The savings pool

Inventory Makes Life Simple …

  • Takes the burden off customers to plan

  • Provides manufacturing with cushions to cover quality problems and lack of planning

  • Provides illusion to customers that company is fast and demands can easily be met

  • Takes the burden off customer communication

  • Keeps everyone busy

Common Excuses

  • I don’t want to get hammered for running out of product.

  • It’s those sales guys in the front office.

  • I’m OK, you’re not, and who cares.

  • I need to keep Joe busy.

  • It’s less work for me if I have long production runs.

  • What do you mean – apathy? We’ll sell it eventually.

  • We know we can’t make budgeted sales, but we haven’t reduced the forecast.

  • But the EOQ tells me to buy a ton of this stuff.

  • I’m supposed to be accountable but I can’t control it.

  • Our past sins are hidden in that old stuff. I’m not going near it!

From Culture Shock, John Cranvenho

APICS – The Performance Advantage

July/August 2002, pp 49 - 51

Why a Framework for Change is Needed

The LaMarsh Approach

  • The LaMarsh Managed Change™ model and methodology increases the quality and impact of the change.

LaMarsh & Associates, Inc.

Closing Thoughts

  • We have the knowledge to force speed in our companies

  • We understand the full potential possible

  • Our efforts are sometimes compromised because sweeping changes are required within our company

  • If you approach the changes knowing and planning for resistance you will have a higher likelihood of success

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