Monday, 16 July 2018

Key Drivers of your Business

As a business head, you may be spending your time, effort and energy in many activities of your business. The more you effectively spend your time in critical elements, more your business prospects.

You need to understand the fundamental of your business drivers and your awareness about those drivers and the depth of your management on those drivers will bring profitability and growth.

Key drivers of your business:


Employee:

As one of the appreciating assets in any organization is PEOPLE. However, one of the challenging area for most of the business head is managing people.

It involves 

Manpower Planning for existing and future 
Attracting Right People 
Engaging towards organizational goal and culture
Providing Growth opportunities and learning

When you are not spending your time on this "People" factor, it costs the organization regarding losing skill, high attrition, loss in delivery, quality and so on. 

From our experience with small, emerging organizations, most of the chronic problems in the organization are due to "non-availability of right people in the right positions."


Profit :

One of the critical aspect for sustaining any business for a long term is " Profitability."Only when the business generates a decent profit, the business can survive and look for growth opportunities. As a business head, you must know how the business does generate profits and the factors contributing to or affecting the profitability of the business.

To know the causes or sources of profitability, you must be aware and have depth understanding of the following factors

1. Understanding your value chain or cost stack up in your products
2. Your pricing methodology and relevance with reality
3. Product portfolio and margin in each segment
4. Buiding cost consciousness culture in the organization
5. Your sensitive analysis on volume and variety or product portfolio mix


Cashflow :

As we have observed in some organizations with high profitability, the organization struggles to meet the working capital requirements, and the business head spends most of the time in managing the cash flow issues. The reason is lack of understanding on the aspects of from where / when / how much money comes in where/ when/ how much money goes out from the business.

Business head needs to know the fundamentals of money flows irrespective of his background, financial illiteracy. He must know to balance the payables and receivables so that the business can run smoothly.


Growth :

Growth is essential to sustain and increase the profit. Beyond some point of effectiveness, increasing the profit is difficult. If a business wants to generate more profit, then one of the ways is looking for growth in business topline revenue.

This growth is possible in multiple ways as follows
1. Increasing share of business or volume from existing customer base or product lines
2. Expanding into new product lines  from existing customers
3. Expanding to new customers or new demographic locations

However, managing growth phase is more challenging rather than running the existing operations with effectiveness. It calls for the marketing effort, new product development capabilities, competency building inside the organization to cope with growth challanges regarding technology, infrastructure, maangement process or practices, people, and capital.

careful planning and execution is required to migrate the organization towards next level grwoth.

Operational effectiveness & Flexibility:

To ensure profitability and sustained growth, internal operational effectiveness has to be maximized.

When we say effectiveness, it is all about Equipment / Asset Utilization, People efficiency, development and product quality.

As operational effectiveness has a direct bearing on the profitability and flexibility to the customer's requirment, your time and drives the organization towards " Lean way of working " as a culture is critical. One of the differentiator among the competitors is your organizational culture on continuously improving your operational effectiveness.

Customer:

A customer is a center point of focus for any organization. The existence of a business is only due to the presence of market and customer to buy from your organizations.

You need to understand the real reason for the customer to come repetitively to you for doing business. The reason could be

your price
your attitude
your delivery flexibility
your locational advantage
your attitude and approach towards them
your service quality 

once if you understand the real reason of your customer comes to you , you need to think interms of 

1. sustaining those factors and its feasibility
2. leveraging those factors and sustain it

Maintaince of quality relationship with customers will help you on a long term.


To sum up, 
the above factors are key drivers of your business, and how much time you spend on nurturing those factors determine your business sustainability and growth on a long-term basis!



Factors affecting people productivity in workplace


One of the concerned area in a workplace to improve the manpower productivity. Given the situation, automation or use of robotics is limited, how to improve the workplace ergonomics, thereby improving the manpower productivity?.

The following factors contribute to fatigue to the people. By optimizing either one or all of the factors will improve the productivity.

1.Person and his/ her posture
2.Type of work being done 
3.Tool being used by the person to do the work
4.Work Environment in which the work is being done


Saturday, 14 July 2018

Why FLOW is important irrespective of production system?

Any manufacturing organization can be classified based on the production system. The production system is primarily based on TWO factors

1. Volume

2. Variety.




As shown in Pic, any organizations production system falls under any of the categories

1.Unique / Project Type production
2.Customized, Job Order production
3.Standardised, Batch Type production
4.Mass / Flow Production


You can fit your organization production system in any one of the above production systems.

However, irrespective of your production system, what matters for business profitability is SEAMLESS FLOW.

The ultimate objective of any organization is to striving towards continuous flow from the upstream process( RM Procurement from suppliers) to downstream process ( FG dispatch to customers).


How is the flow measured in manufacturing?

Flow is measured as Lead time. (Definition of lead time)

why flow is affected in any production system?


  • Cycle time imbalance between work center
  • Rejections / rework  at each stage
  • Machine Breakdowns
  • Changeovers or setting time
  • Lack of  resources (material/man)
  • waiting for decisions



Impact of poor flow on the business :


  1. WIP between work centers
  2. Long lead time
  3. More Space
  4. More Movements and Handling efforts
  5. Rejections / Rework
  6. Communication issues
  7. Low productivity
  8. Low flexibility to the customer



Solutions approach to improving flow in ANY production system:

Continuous-flow manufacturing (CFM) is an approach 


Continuous improvement efforts to integrate all elements of the production system.
The goal is a best possible balanced production line with little waste, the lowest possible cost, on-time and defect-free production.

Benefits of Continous flow improvement approach is as follows


  • WIP inventory reduction
  • Space utilization
  • Set up time reduction
  • Lead time reduction
  • Reduce material handling distance
  • Productivity improvement
  • Quality improvement
  • Better teamwork and communication
  • High Flexibility 
  • Better Visibility


To sum up, irrespective of your production system, you need to continuously improve the flow for sustainable business profitability !

Steps in Structured Problem Solving Process

As you are aware that any chronic problem in the organization can be solved only through structured problem-solving methodology. The tactic or ad-hoc solutions won't work, that is why the problem became chronic!

The chronic problem could be stagnant in sales turnover, the repeated quality problem in the product, High attrition rate, high failure rate of new products and so on.

In those chronic problems, if you systematically approach the problem, you can arrive at the right solutions.

Typical steps in solving chronic problem-solving method as follows

1.Define the problem and set the desired target
2.Data collection from the past  few  months or years
3.Analysing the data and finding the pattern or prioritizing
4. For identified pattern, collect further data to understand the reality
5.Identifying the causes of the occurrence
6.Validating the causes with real-time experiments or documents
7.Propose the solutions approach
8. Make an ACTION PLAN to implement
9.Implementation on trial basis
10.Learn from the Implementation
11.Track for the progress or improvement
12.Make the new solutions as standard

Irrespective of the problem-solving methodology you choose to solve the problem like 6 sigma approach, QC tools approach, 8D approach, A3 approach, the essence of steps are almost the same as above.

To learn more about problem-solving methodology, tools and techniques with real case study example from the manufacturing organization, pl visit.

https://www.udemy.com/structured-problem-solving-methodologytools-and-techniques




Friday, 13 July 2018

Why do you need to focus more on NPD( new product development)?

Why do you need to focus more on NPD?

This can be answered by understanding the changes happening in external and internal to the organizations.

Changes in Internal to the organizations :

As a Business head, your prime concern is sustaining profitability and ensuring future growth.

Conventionally , sustaining profitability calls for efficiency improvement,cost optimization and so on. Beyond some point, process optimization does not yield much improvement unless you revisit and re-engineer your product portfolio.

Hence, you can sustain your business profitability by creating an environment for continuous New product development and position yourself as the first mover or the preferred source to your customer on new product developments and ramping up. 

As you are aware that when you are manufacturing the same parts over a period of time, it will become a commodity and you lose the competitive advantage, in turn, you lose your profit margin. To compensate or sustain the profitability, smart organizations, equally focus more on New Product Development (NPD).

Also, the existing product portfolio dries out, the only way for growth is bringing out more new products.

Changes in External to the organization :

External to the organization, the consumers are changing fast. Thanks to awareness, affordability and enhanced lifestyle, consumers are looking for more varieties and prefer to change the product frequently to keep them update in the society. 

For example in the case of mobile devices, laptop, automobile, there were fewer varieties and more volume when they were introduced to the world than now. 

This change in external environment results in more new product development focus inside the organization.


Going forward, the organization which equally focus on both efficiency and new value creation will sustain the profitability and growth.



Causes of New Product Development (NPD) Success or Failure


Having discussed the strategic importance of New product development (NPD)  on business growth and profitability, now let us understand the factors contributing to NPD success or failure.


1.Planning :

Before starting a project, planning as an activity plays a significant role on project success or failure. This includes all the aspects of NPD like

a. Understanding the customer's requirement clearly by involving all stakeholders in the projects and understanding the requirements
c. Planning of time horizon and risk involved
d. Planning of resources, competency and risk involved
e. Planning of expenses both capex and revex, the risk involved
f.  Planning of conversion process either in-house and outsource
g. Planning of communication / MIS / KPI's and review mechanism

When we do not plan of above activities, by nature, we face the failure modes while executing the projects. Managing the failure modes during execution takes more time, cost and affect the product quality than during the planning stage.


2.Identification of project leader:

Even though NPD is a cross-functional activity, it is very much essential to identify a person as a project leader who is accountable for coordinating and existing the product development.

As we witnessed in most of the small and emerging organizations, NPD is driven by technology or design person. It is nothing wrong with driving by those people, they need to ensure the development completes successfully until it meets the customer's scope, cost, and time aspects.

It is advisable one person can play a role as project lead and coordinate all functions with more focus on internal and external deliverables.


3.Formation of a cross-functional team:

As said in the project lead, the establishment of a cross-functional team with a focus on product delivery is vital to speed up the NPD process. Typically, the people involved in the NPD are more oriented towards their functional ROUTINE activities, and NPD gets second priority. The reason could be organizations are wired and encouraged for functional or departmental success or deliverables rather than product delivery success which relies on many functions. To bring organizational focus on NPD, it is advisable to form core cross-functional team members who will be working on the project till it ends under the guidance of both project lead and technical lead.


4.Change Management :

Unlike Operations, New product development as a project calls for a lot of changes during execution. The change will come from either the customer or internal stakeholders. The challenge for the project lead and team is to manage the changes.

The critical challenge for all of us is how to manage the change and its impact than avoiding the change at all as it is impossible in a project environment.

This calls for proactiveness and experience in predicting the changes or risks and managing the changes. In mature organizations, there is a review forum, wherein the project team is encouraged to present the changes and its impact in a professional way. When the environment is created to discuss and review the changes and its effect on cost, scope, and timeline, eventually either team is getting involved proactively in the development process at the early stage and thereby reducing the possible changes that happen during the execution.


5.Top Management involvement :

Senior management's involvement in the NPD process is critical for the success. In my opinion, the involvement can be demonstrated by conducting fixed, preplanned reviews of the NPD progress along with project leader and team members. Periodic reviews of project status and taking timely decisions on important factors like scope, cost and any other people related issues or any other risks will save the NPD from failures.

The Top management can design suitable Management information system about the project with Key performance indicators at the initial stage of the project and tracking during the execution will save a lot of time of all and also improve the communication process among the team and shareholders.

Since unlike operations, NPD process itself is uncertain and risk involved, the team gets demotivated whenever there is a slowdown in progress. It is natural and the top management involvement and motivating the team behind helps the team to work with more enthusiasm.

In a nutshell, top management involvement through reviews of KPI's, timely decision on any risk, motivating the team are critical to the success of NPD.



As said, the project is all about managing the risk and people. Realising this fundamental, smart organizations adopt project management approach in New product development process and we have seen the improvement in the quality of execution. However, it takes time, and commitment of all stakeholders as delivering new product seamlessly is a way of working or culture building process!




Why P&L Analysis must be done EVERY MONTH?


One of the best management practices, most of the smart CEO or business head use to do every month is review P&L (Profit & loss) statement along with the key people. In fact, some organizations have a habit of reviewing P&L before 10 the of every month and accordingly all the financial accounting is completed, and the process of bill collection and accounting is set in place.

Benefits of doing P&L Analysis every month:

1. As a business head, notionally, you come to know the business profitability either positive or negative in the month .that give you more response time to take countermeasures in the subsequent months.

2. Analysis of P&L every month will give you a lot of insight about your profitable product mix. For example, in one month, an organization made High turnover compared to the previous month, but the Operating margin is lesser than the previous month. When analyzing the expenses, there is not much variance between months. However, when the team analyzed further on the product mix, they realized that even though they produced more of a particular product, say X, the price was low. The team had realized that more you produce product X, more loss the organization makes. This kind of analysis will give a lot of insight about your product mix and accordingly, you can take a call on optimizing the product mix.

3. Also, when you analyze P&L along with cost variance of each expense, that improves the cost consciousness in the organization, and in fact, you can take countermeasures to control the cost. We are witnessing in many organization,, where the business head reviews the P&L every month, the culture of the organization also moves towards cost consciousness.

Limiting factors of not doing P&L review every month :

1.one of the reasons people use to say is P&L statement may not reflect the real numbers as there is variation in inventory accounting, tax provision, depreciation, etc.

Yes. As said this P&L statement is just notional and indicative of your operational performance only. In the year-end, with all provisions, your auditor will make right P&L including right accounting principles. This monthly P&L will give you an instant picture of your business performance so that you can take timely actions.

Regarding inventory accounting, when you regularly do every month, will get eventually normalised. You need to ensure that you are using a standard format and input/output mechanism and the source must be the same. For example, if you are using TALLY software, use the same source and format/assumptions to prepare P&L statement every month

2. Lack of discipline on accounting all the bills on time and preparing P&L statement on time.

Rather than blaming the people and system, it is the discipline of the business head in showing interest to analyze the P&L every month before 10th matters a lot!!



The point is reviewing P&L analysis is a prime responsibility of business head, and it must be done every month for taking corrective action on business performance on time!