Category: Change Management

Inventory or Capacity?

November 18th, 2019

Inventory has emerged as a hot topic lately. In today’s Amazon-impacted business environment, customers expect rapid, customized deliveries, the ability to change their mind anytime and easy interactions (placing orders, returns etc.). Since clients are growing, they are also concerned with keeping up with the increasing volume. Thus, they have responded  by stocking more inventory to support increased sales and to respond to these increasing expectations.

However, as clients are taking a step back, they see inventory tying up bunches of cash unnecessarily.  Just because they have more inventory doesn’t mean they have the ‘right’ inventory in the ‘right’ place at the ‘right’ time. Inventory not only ties up cash, but it also increases costs. We are hearing about concerns regarding space, efficiencies, transportation cost impacts and more. In essence, there is a double hit to cash and profit yet the appropriate level of inventory (varies by network and strategy) is required to meet customer expectations.

In addition to pursuing inventory improvement programs to maximize your service, cash and margins such as SIOP (sales, inventory and operations planning) and proactive vendor managed inventory/ collaborative inventory programs, you might want to consider your capacity.

We had a client a few years ago who called because service issues had started to arise and customers were angry. Leadership thought the the operations team was under-performing because there must be something wrong with them since sales revenues were not increasing over 5% a year.

As we dug into the issue, we found that the product mix changed significantly which drove a greater level of operations requirements for the same dollar volume. When this occurred in the past, it didn’t create a problem (lending support to the perception that the operations team was at fault).  Yet, it turns out that as people left, they stopped replacing them because they wanted to bring down costs.

In the past, since they had excess capacity (machinery) and a small excess level of trained, highly skilled direct labor resources, they could produce what was needed as conditions changed without a problem. They no longer could use this magic bullet!

Would it make sense to maintain excess capacity/skills in a key bottleneck area of your operation (whether manufacturing, technical or office)?

If you’d like to talk about your inventory and/or capacity situation further, please contact us.



Value Based Pricing

October 21st, 2019

calm leadershipAn overarching theme from our pricing and profits presentation relates to value based pricing. It was unanimous – every CEO believed that value based pricing was the best direction to go.  Yet, it became muddier in figuring out how to move towards value based pricing in his/her particular situation.

Let’s start by defining value based pricing. Simply stated: prices are based on the value the customer receives.

Everyone wins. The customer gains more value and you gain a higher price. Of course, that higher price should carry a higher margin.  It isn’t set up so that you win at the expense of your customer. Instead, both parties win with extra value and margin. So, if everyone wins, why don’t more of us utilize value based pricing? According to the CEOs, it isn’t simple. Yet we all agreed it is worth it.

Perhaps we’ll be talking about this for months and years to come as it can do something far more important than increase margins. It enhances customer value which can lead to customer engagement and loyalty. There are lots of statistics.  Suffice it to say, we will be much happier and are willing to spend more to do business with companies that deliver excellent customer service. And, more engaged and happy customers are dramatically more profitable.

After all, it can be 2 to 25 times more expensive to acquire a new customer than to keep a current one.

Start by figuring out the value of your product or service. Don’t listen solely to your R&D department, sales resources or anyone else while trying to understand value. Don’t even listen to your customers. Instead, think about your target customers and probe the value to these customers. Ask. Listen. Observe. When you ask questions, listen to what else they say. What would improve your customers’ situation? The value will emerge.

 



Manufacturing Summit Recap: Innovation & Top Talent

August 27th, 2019
My videos from the Manufacturing Summit, had key themes along with insight into the exciting opportunities for the Inland Empire and advanced manufacturing and how it all tied in with LMA Consulting’s “2019 Predictions from Manufacturing & Logistics Executives” document.

 

I’ve included the quote from Roy Paulson, president of Paulson Manufacturing to kick us off on the state of manufacturing. As Roy says, US manufacturers are thriving and will continue to thrive, assuming they have a focus on innovation.
Innovation is one of the key themes that emerged from the keynote speakers at the summit from Fender and Tesla as well as through the innovation award winners. Going hand-in-hand with innovation is a focus on people. Listen to my recap about the summit and what’s relevant to manufacturers today:
As Lance Hastings, CEO of California Manufacturing & Technology Association said at the summit, the Inland Empire is thriving. There was greater growth in the Inland Empire than any other area of California.  However, far more impressive than that is that the IE beat out the nation (in a state that typically isn’t too keen on manufacturing).
The Brookings Institute agreed with the conclusion in their recent study on the Inland Empire. One of the key recommendations was to create a consortium for advanced manufacturing and logistics success. You’ll be hearing more about this exciting, once-in-a-lifetime opportunity in the coming months. In addition, Governor Newsom is supportive of this path forward and so we are ‘jumping on it’.
If you are interested in staying in the loop on this initiative, please email me so I can add you to the distribution list.


Is Your ERP System Scalable?

August 14th, 2019

erp successSince we happen to be working on 3 or 4 ERP system projects concurrently, the topic of ERP is top of mind.

Let’s start by saying upfront that we turn down ERP selection project requests. Not everyone needs a new system. Perhaps a process upgrade and better utilization of your current system will sustain your business for 3-5 years. If so, why divert attention? On the other hand, waiting “too long” will quickly spiral into disaster. How do you know which of these is your situation?

An ERP upgrade is one of the most significant initiatives a company can undertake, and the statistics aren’t good. 80% fail to achieve the expected outcome! Yet, if your ERP system isn’t scalable, hiding your head in the sand will lead straight to unmitigated disaster. Thus, it’s best to be proactive, diligent and strategic when it comes to this topic.

Selecting a system isn’t something to delegate to your IT person. Instead, it is something you must “own”. After all, if your system will support your resources so that you can grow the business with the peace of mind that your system will enable a high level of customer service with additional customer-friendly capabilities (such as a customer portal), support your #1 asset (your employees and partners) behind the scenes and allow your business to scale with minimal if any investment of time and resources, it suddenly becomes quite relevant.

The 80/20 of success relates to just two items:

  • Your critical success factors – what is unique to your company or industry and/or what drives customer differentiation and profitability
  • Your design and implementation partners – although the focus typically goes to the software, as with business, the 80/20 of success is with people and partners.

Having an ERP system that supports your business objectives is another key component of creating a resilient supply chain. If you’d like a rapid assessment on whether your ERP system will support your growth and business objectives, contact us. And please check out our resilient supply chain webpage.



Do You Have a Resilient Supply Chain?

August 11th, 2019

supply chain strategyThere is extreme volatility in today’s end-to-end supply chain.  Are you keeping up with all the changes?  For example, think about the following:

  • Tariffs & trade impacts
  • Data & security breaches
  • The Amazon Effect
  • New technologies such as 3D printing
  • Natural disasters, port strikes and more

The Resilient Supply Chain
Instead of allowing each of these incidents to impact you, we must create a resilient supply chain.  Are you proactively thinking about these topics?

  1. Agility– Instead of seeing agile as an IT or project management concept, we should be thinking about how to incorporate agility into every step / every piece of our end-to-end supply chain.  If a customer changes his mind, are we flexible enough to handle it?
  2. Speed – Is your supply chain set up for speed?  Customers are unwilling to wait.  I’ve found that I’m unwilling to wait anymore.  If I wait for a trusted advisor, service provider, subcontractor or even a client, it delays LMA Consulting. For us to be on the leading edge with clients, we must be ahead of the curve; not waiting for something that will be obsolete before we get it!  That is one thing we appreciate about our webmaster; he is speedy and understands priorities which is how we are able to announce a major content upgrade (thanks Scott).
  3. Predictive – In today’s complex world, we must also be predictive so that we are prepared from an 80/20 standpoint for the most likely unexpected events, trends and bumps in the road.  Thinking three steps ahead can go a long way in creating resilience.
  4. Collaborative – One of key components to creating a resilient supply chain with multiple partners is to collaborate.  There is no time to establish relationships and find ways to navigate volatility together if you haven’t already set a collaborative tone.
  5. Adaptive team – No doubt; the core to resilience is having an adaptive team where each members understands where he/she is headed and feels empowered to handle obstacles as they arise.

Have you thought about each interrelated partner, piece or parameter in your end-to-end supply chain?  How can you set it up to be resilient?