Tag Archive: investment

Is there an ROI on a Forecasting System?

September 12th, 2019

A Client Question
Since forecasting can deliver significant benefits with increased levels of service, inventory turnover and margin improvement, the question that inevitably arises is whether it makes sense to purchase a forecasting or demand planning system. Of course, the answer is: “It depends”.

In one client situation, goods were manufactured in Mexico and purchased from Asia. Key customers were large retail outlets. Demand seemed to change daily.  Yet, lead times were in the months if the ‘right’ stock wasn’t in the ‘right’ place at the ‘right’ time. Of course, they could cover some small changes by adding freight costs but that isn’t a recipe for profit. Improving the forecast would improve their success. So, the question turned to whether a system would have a ROI.

The Answer
In their case, they could achieve a rapid return on investment by using a forecasting system. However, let me say upfront that more often than not, I do not recommend a system. It completely depends on whether it will drive the appropriate level of improvement and associated results or not. In this case, we could easily drive dramatic forecast accuracy improvement since we started out at such a low level of accuracy due to the business environment, industry and key customers. The people understood the importance of the providing forecast feedback and although the key customers didn’t have “good” forecasts to provide, they could provide data we could analyze. In these types of situations, we are able to reduce inventory by a minimum of 20%.  It should be noted, though, that results can be far greater.

Food For Thought
Although forecasting systems can be a great idea to drive service, inventory and margin improvement, they do not always provide a return. Take a step back to understand your industry from a forecasting point-of-view:

  • Is demand constantly changing?
  • Are you supporting small numbers of customer/location points with less than 25 items or is it 100 fold?
  • Are you able to gain key customer input and/or point-of-sale data?
  • Do you have anyone familiar with demand planning and forecasting to be able to make sense of what a system is telling you?
  • And, last but definitely not least, have you found the appropriate scale for your forecasting system?

Trying to kill a fly with an assault rifle is overkill. If you are interested in running your situation by us, contact us.

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Do You Need An ERP Upgrade?

June 2nd, 2019

A Client Question
A client was getting a lot of complaints from her team about the ERP system used to run the business – from taking orders to ordering materials and producing product to shipping and invoicing customers and reconciling financials. She was ready to throw the computer out the window when she called to find a new system so that they could build value in the business instead of suffering endlessly.

The Answer
In their case, there was no need for a new ERP system.  This was GREAT news as this investment is often-times the most significant undertaking a company can make. When they go wrong, which is statistically over 80% of the time, they go wrong in a BIG way. Lost customers, hundreds of thousands if not millions underwater (depending on the size and scope), unhappy employees and more.

Although the situation was dire with no hope for resolution (financials that didn’t reconcile and it couldn’t be used in any meaningful way to manage production and inventory), all wasn’t lost. The system itself would work for their type of manufacturing environment although the way it was implemented wouldn’t.  As a result, we found a new partner who had significant impact.  The partner helped them navigate through the clean up of their system, upgrade to the latest version and learn how to utilize the upgraded functionality, which was key to going beyond the base to new frontiers that would increase the value of their business.

Food For Thought
This executive is one of my favorite executives.  I’ve known her since I started consulting 14 years ago. She has an extensive background and is a business valuation expert in addition to being a business leader. If she can get caught up in the ERP maze, anyone can. Take a step back and make sure your assumptions make sense. Should you reconsider how you are using your system or whether it is the right time for an upgrade? If you are interested in an ERP assessment, contact us.

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Let’s Spur Innovation

September 24th, 2018

Last month, I led a manufacturing roundtable on the topic of innovation.  Undoubtedly, if we want to be successful over the long-term, we must innovate. Problem solving only gets us back to our standard level of performance.  Although necessary, it will not be enough!  Instead, to exceed our customers’ expectations while enabling profitable growth in today’s Amazonian marketplace, innovation is a requirement.

Innovation is raising the bar to an entirely new level of performance.  It doesn’t require you to develop the next iPhone or 3M’s famous sticky pad.  In fact, the best innovators might not even think they are creative.  The great news is that everyone can innovate.  It doesn’t have to require significant investments.   What it does require is a culture that enables innovation.

An Innovation Culture
Here are a few “musts” when creating an innovation culture:

  1. Engage your people -You aren’t going to be successful innovating in isolation – at least not for long!  Involve your employees – view each employee as a valuable asset.  You never know what ideas can be unleashed if you have a culture of innovation that values each employee’s input and ideas.  Start here. Until your people are engaged, there is no point in going further.  How long do you think you’ll have happy, innovative customers with unhappy, not engaged employees?  NOT long.
  1. Engage your customers – One of our clients is creating an innovative culture.  They recently purchased a clay manufacturing company and are working to raise the bar.  The owners and executives value the input of their people and extend that to their trusted advisors, customers and suppliers.  I happened to be in Hawaii last month and my best friend wanted to see a pottery shop of an artist she really liked.  So I went along for the ride. When we arrived, I brought up my client because I thought the owner know of them. They were so excited.  They said they were a customer for life of Laguna Clay  (my customer) because they provided exceptional service.  They proceeded to provide input, ideas and much more. I took pictures and texted them back to my client. My client had engaged their customer in the innovative process.

 

 

 

 

 

 

  1. Provide opportunities– Next, provide opportunities for innovation.  Do you provide a “safe zone” for your employees, partners and others to collaborate and innovate?  Most importantly, you’ll have to set aside time for them to focus on this priority.  Beyond time, provide your vision and get the process started by spurring idea generation and give them a few guidelines.
  1. Stick by your commitment –  Innovation will create failures which is why guidelines are helpful so the failures can be isolated within a reasonable tolerance.  There is something wrong if failures don’t occur. Thus, be prepared for them and celebrate the progress. Don’t be disappointed, or worse, beat up your people. That will mark the end of their innovation.

Creating an innovation culture is “the” key to innovation. Start there. End there.  We’ll talk through more of the details in the middle in future editions (or feel free to contact us to help you accelerate progress); however, this is the 80/20 of success.  It’s well worth raising the bar of performance.



Technologies: Paying Attention to What is Important

September 6th, 2018

There are so many new technologies and combinations of technologies, it is extremely hard to keep up.  How do you know which to pay attention to and which to ignore? Unfortunately, some clients have told us they get overwhelmed by it all and just go back to what they are expert in (running the business) and postpone the technology decision.

As much as we find that technology is NOT #1 to success, achieving scalable, profitable growth without technology is an uphill battle to be sure!  We also find some technology enthusiasts who get so bogged down in technology as the “be all, end all” to success that they actually struggle. Instead of either of these extremes, use a bit of uncommon common sense and determine which technologies are important.  A few points to consider:

  1.  Your Industry:  There is no point being an early adopter if unnecessary in your industry unless it is your competitive advantage.  Where is your industry headed? What would provide a benefit?
  2.  Your Position:  If your competitive edge is being on the forefront of delivering an exceptional customer experience, you better figure out what you need to succeed in this differentiator.  If this is the case, we bet you would need to invest in technology that would enable a superior customer experience. But it is unlikely you’d need other technology advances.
  3.  Return on Investment: As exciting as new technology can be, it pays to ensure you’ll gain an ROI.  Go through the exercise to determine if technology will enable growth, profitability, cash flow or another bottom line benefit.
  4.  Your Current State: A few of our clients have been in a position where they were limited in growth prospects without enabling technology.  Of course, they could grow by brute force with a stellar sales and marketing team; however, to grow in a scalable way, they will need to leverage technology instead of hiring just to ‘keep up’ with growth.
  5.  Your Strengths:  As with most priorities, focus on your strengths.   It can be tempting to “keep up with the Joneses” and buy the latest and greatest technology you think your competition is using.  However, instead of throwing good money after bad, think about your company’s strengths, your teams’ strengths and what makes the most sense to align those strengths with customer requirements.

In today’s Amazon impacted environment, evaluating technology to best support your business objectives is a “must”.  As much as can be accomplished through people and process alone, you will not thrive without at least thinking about technology.  

You want to be aware of what’s coming down the pike in terms of technology before you head over the edge in complete denial with your typewriter in hand.  After all, who would have thought network TV would trend towards becoming obsolete?



The Economy and the Inland Empire are on Fire!

April 17th, 2018

IE Forecasts
Since we attended not one but two economic forecast events last week (one hosted by Claremont McKenna and one hosted by the Inland Empire Economic Partnership), we thought it made sense to share the take-aways:

 

 

  1. The economy has never looked better especially in the Inland Empire – All the signs point up.  Even though folks are concerned about when the other shoe will drop, from an economic point-of-view, all appears positive.
  2.  Jobs at record levels with the Inland Empire leading California –  We are virtually at zero unemployment. Perhaps we need to be concerned about retaining our top talent!
  3.  Tax law is a boost for manufacturers! The Claremont McKenna economic forecast showed the progression and the definite boost from the tax law.  Not only is it increasing profit but it is also encouraging investment. It is likely to lead to interest rate increases as the Fed meets in 2018.
  4.  The Inland Empire is on fire!  First, did you know that just the Inland Empire is larger than 25 of the 50 states, let alone if we added the rest of Southern California?  It is leading California in many respects – job growth for one. And it is an attractive place to be in business, surrounded by tons of customers/ consumers, lower wages on average, more space availability at lower prices than Los Angeles and Orange County, access to a growing Ontario airport (with a new international direct flight to China soon) and with significant advances in technology and access to skills.We believe the IE is the place to be in manufacturing and distribution today! Amazon agrees since they have 21 of their 26 million square feet in Southern CA in the IE!
  5.  And a few cautionary comments…  There was a panel of CEO’s at the Claremont McKenna economic forecast that spoke about the California minimum wage hikes.  These are definitely not popular with manufacturers and distributors who utilize talent in the lower pay scales – challenging to compete with other states of course. At the IEEP, there was talk about the pace of automation and technology. From a profit, customer and competitive perspective, there are lots of advantages. In manufacturing, this is already prevalent and the impacts aren’t expected to be dramatically different.  However, in distribution, they are just getting started.  Although there are several positive points, it will be disruptive in terms of jobs and there will be a need to redeploy these blue collar employees.Lastly, trade can certainly impact the IE – stay tuned. In talking with two IEEP manufacturers, one said the tariffs helped, and the other said it could go well or really, really poorly depending on a few factors.

The IE is on fire and  growing!