Tuesday, 17 April 2018

Why is monthly business(KPI's) review important ?


Monthly business key performance indicators (KPI's) review is meant to review previous month business and functional performance against the target and discuss, arrive the action plan to improve the business performance in the subsequent month.

Most of the SME business heads are not consistently conducting the monthly business performance indicators status review.

Some of the beliefs which hold business head not to review consistently

1.As I am spending full time here, I know  the P&L trend, and it is not required to conduct reviews with the team
2.The team does not have the time, or no people are capable of collecting and organizing all the data
3.Why should we discuss all the information along with the team?
4.Meetings are going to be time wasters as nobody is going to give solutions.


Emerging and a smart organization has the practices of setting the business and functional key performance indicators (KPI's) every year beginning and use to review the progress or status of each KPI along with the team every month before 10th of the month.

Advantages of reviewing KPI's status along with the team

1.The team is aware of the goal set and status at any point in time 
2.The team becomes accountable for results as they are being questioned on the performance every month
3.Ownership and engagement improves as data is being shared and communicated to all
4.Helps the organization to improve the performance in the subsequent month. In the absence of monthly KPI reviews, response time would become less (P-D-C-A cycle)
5.When the monthly reviews become a culture, all the functions are keen on the data accuracy, timely sharing the data.In the absence of monthly routine reviews, data capturing and analysis itself a major task for the business head

Relook at your business practices and beliefs on monthly business and functional KPI's and initiate performance-based culture in your organization !!

Tuesday, 10 April 2018

My thought process on initiating lean manufacturing in small and emerging organizations

         Lean is achieving “more with less.” That is, making more production with

given resources or increased efficiency or achieving with less cost.


      Lean manufacturing system can be understood by relating to a human body. If the person is lean means general understanding is that he is free from unnecessary FAT in his body, hence free from unnecessary side effects like BP, Pain in joints, laziness, and the person is perceived as healthy, more flexible, and active.The same way if the organization is lean means, it is free from unnecessary fats like high inventory, high rejection, high breakdowns or line stoppages factors, etc  which leads to more flexible in delivery, less lead time , low cost of manufacturing and free flow of communication ( This is the way I introduce lean to new forums in my consulting workshop).Hence making the organization ( across all functions), extended supply chain system, any functional units (like machining, assembly, painting) need to be lean for increased efficiency, low cost, quality at first time and reduced lead time.

Lean is not a tool for cost reduction or cutting manpower or increasing efficiency alone, it is a culture building process or way of thinking and running a day to day business activities.When the lean is understood only as an application of tools like 5S, SMED, Visual management, poke yoke, it results in short-term impact in a particular cell or unit on a short time basis. It becomes difficult to sustain. Most of the organizations are keen on learning the tool and applying without understanding the big picture of linking with business objectives or culture building process.

Any lean initiative must start from CEO or head of the organization and more importantly, it has to be linked to the business need or goal.Moreover, lean should not be driven as separate initiative without linking with the business / functional objectives.When we drive as a separate initiative under one lean champion, lean efforts will be continuing as long as the champion is intense and driving as long as the entire team is undergoing a lean period in production or sales. Once demand /volumes pick up, the lean initiative takes back seat as it is perceived as EXTRA work for the organization.That is the reasons a few organizations are not taking the lean-to next level from grand inauguration ceremony and except few improvements on housekeeping and visual systems

In my consulting role, I am insisting lean implementation when there is full conviction from CEO, and there is a compelling need for driving efficiency, improving the bottlenecks for business growth and management agrees to work with us minimum six months to 2 years.
In some organizations, we failed to bring the momentum when the leadership team looks at lean initiatives as a quick remedy for their inherent problems.



To summarise, key ingredients I used in all lean initiatives are
  1. Form cross-functional team
  2. Involve CEO in reviews
  3. Develop Business / Functional KPI's which are important for business / CEO to drive
  4. Educate the team to see the waste in the system through VSM workshop or interviewing process
  5. Make priority list along with the team to focus on waste elimination
  6. For the identified waste, apply suitable lean tools starting from housekeeping (2S), Visual management, SMED, Best Maintenance practices, Daily work management like tracking hourly, daily output/quality issue tracking and reporting
  7. Create forums for review meetings with operating team, cross-functional meeting among heads and weekly review meeting with CEO or business head
  8. Review, Update KPI and tracking 
Becoming a lean organization is not a one-time event, it is a continuous journey.

Monday, 9 April 2018

Why sustenance is important in workplace?



In most of the organizations, we can hear one common phrase “we have already implemented this initiative, but not continued or this will not work here”

Why do people come to conclusion as “no initiative will work in their workplace?". The reason is lack of consistency in implementation. 

In today’s internet world, there is not much ignorance of knowledge and know-how; it is only lack of consistency in implementation.

How this inconsistency will affect individual & Team?

When you implement some initiatives, not consistently follow it and eventually drop it, you are giving a subconscious message to yourself and team that you are not sensitive to results or incapable of execution. This inconsistency will impact the confidence of the leader at an individual level and encourage mediocre performance at the team level. The next time when you think of new initiative, old memory reinforces you about failure or low confidence pulls you down from taking action.The root cause for all consequence is inconsistency in implementation.

 So, in personal and organizational level, if you take any initiative, be sure that you are consistent in your implementation even though you are relatively slow in taking a decision. Ultimately your consistent actions push up your confidence and your consistent actions inspire others to follow. This is one of the traits of leadership, i.e. consistency in thinking; talking and doing.You are meant to be a leader for others!!!!

What should you know about your business breakeven point?


Even if you are not financially literate, as a business head, you must know the break-even point of your business and its significance on your strategic and daily management practices.

Break Even point is the indicative reference beyond which only you would make a profit after discounting your fixed cost and variable cost.

For example, if your break-even point is 10 T / day, that means, you are making a profit only if you produce more than 10 T / day.Till 10 T/ day, your revenues are compensating your fixed and variable cost only as there is no profit.

Hence, Breakeven point is a function of your fixed cost or overhead expenses and your average selling price of all varieties and your variable cost.

Academically, the breakeven point can be calculated using the following formula.


Breakeven Point   =                                       Fixed Cost 

                                 ------------------------------------------------------------
                                 (Avg Selling price per unit - Avg Variable cost per unit)


For example,

Your fixed cost = Rs 2,00,000 per month

Your avg selling price of all varieties = Rs 25 / Tonne
Your avg variable cost of all varieties = Rs 22 / Tonne

Hence your break-even point is = 2,00,000 /(25-22)/1000 =66 T

That means, given above cost structure, you would make a profit, only after you produce/ sell beyond 66 T.

Now, having understood the formula for arriving breakeven point, how will you use this KPI for improving your business performance?

1.Relook into your fixed cost elements for cost reduction through waste elimination and administrative controls
2.Relook into  your product mix rationalization or price increase in specified product lines so that avg selling price would go up
3.Relook into your variable cost elements for cost reduction through waste elimination techniques

once if you know your business break-even point, you need to ensure you are meeting that BE point at any point of time or maximize your selling effort more than BE point so that you make your business profitable.

Relook into your business cost structures and understand your break-even point for better monitoring and control your business performance!



Thursday, 5 April 2018

Why must continuous Lead-Time reduction be the focus for a Business head?


From customer's perspective, Lead time is the time taken between customer placed the order for product/service and the time the customer received the product/service.
This lead time may be further broken down into supply lead time, manufacturing lead time, distribution lead time and so on.Those classifications are internal to the organization, and the business head must focus on to reduce the overall lead time continuously.

Why lead time reduction is an essential focus for the business/business head?

Lead time reduction is important from four perspectives.

1.Working capital & Finance perspective
2.Triggering sales & operations teams towards growth performance
3.Operational Efficiency perspective 
4. Customer's perspective

Let us understand from each perspective.
1.Working capital & finance perspective:
When the product/service order fulfillment lead time is more, the expenses incurred to cover the product/service till getting payment from the customer will also be more. The business gets the cash only when the product/service is sold to a customer and converted as cash.
For example, if the lead time is six months, business will get the cash only after six months. Till such time, the business has to fund for all the expenses like salary, material procurement, and other overheads, etc .that is working capital is required for six months..(Pl ignore, advance payment, credit times, payables, receivables, etc. as those are all tactic arrangements by the business)
If the business team reduces the lead time by three months, working capital required only to fund three months expenses.
Hence, if you have high working capital, one of the causes and solution approach would be a LEAD-TIME reduction of your order fulfillment.
2.Triggering sales & operations teams towards growth performance:
Typically entire organizations' speed depends on the PULL.For example, If lead time is six months and the order execution capability of 6 months, say one crore, then the organization can make only two cr as sales turnover annually. Based on the execution capability or capacity of the organization, the sales and marketing function also behaves and operates. Once the lead time is reduced by 50 %, say by three months, then organization capability is also increased to 4 cr as sales turnover. The point is when Operations engine pulls more, the other parts of the organization also pull more from the market or customer.
The business head responsibility is to understand this behavior and must focus on lead time reduction.If your organization sales turnover is stagnant, one of the reasons could be high lead time and complacent in the organization.
3.Operational Efficiency Improvement 
When the lead time is high compared to actual value addition time, it means, your product/ service is held up in the value chain as waiting or delay. This results in accumulation of inventory in the form of WIP, which sometimes leads to rejections/ rework, making the communication complex, storage, handling, manpower deployment and so on.
Also, your strategic decision on supply chain leads to high lead time in getting the raw materials and high lead time in reaching the customer .Typically when the lead time is high; it brings all the inefficiency or wastes in the system. When the lead time is low, it brings flexibility into your production system as you can move from " Build to stock" to "Build to order."Also, the change in your production system will reduce your inventory and its derivative wastes in the system.
If you are struggling with low efficiency in your operations, one of the causes could be high lead time
4.From customer's perspective :
In today's fast-moving lifestyle, the customer does not want to wait, and he is willing to pay more for quick delivery than negotiating and followup with your team on delivery dates.Less the lead time, more customer's satisfaction and there is possibilities of further business partnership.If the lead time is high and non-negotiable, there is a possibility of your customer move to the competitor.

In essence, as a business head, your continuous focus must be on reducing the lead-time either in supply chain or operations or distribution. 

This focus will give tremendous benefits in terms

1.Capability to increase sales turnover
2.Reducing the cost of the product
3.Reducing the working capital


F

Proven Practices of Project Management in New Product Development

Most of the SME organization has a challenge on the new product development  viz

1.Developing the product sample on time
2.Meeting the quality requirements
3.Meeting the customer's price expectation

Even though new product development is more of technical oriented and organization specific, study shows that more than a development of the product, management of the development process plays a critical role in developing the new product on time, best cost, and best quality.

Some of the project management principles, tools and techniques and processes can be adopted in new product development, and we have seen significant success in different industries



some of the project management practices in NPD

1.Fixing Key Performance Indicators (KPI's) for each product development once order confirmed by customer
2.Depending upon the product development type, complexity, define MILESTONES / TOLLGATES 
3.Define FUNCTIONAL DELIVERABLES of all cross functions involved in the product development
4. Review the product development status w.r.t MILESTONES/ TOLLGATES along with the cross-functional team
5.Track the KPI's and make the people accountable and also involve the TEAM at the early stage of the development 

It is essential now to make management process for new product development if you would like to deliver on time, with best cost and quality.

Relook at your new product development process!!

Saturday, 10 February 2018

How SME's transformation are different from large size organization transformation?

SME 's are mainly different from large size organization based on the investment and sales turnover they make. Even within SME's , there are further classication as micro, small and medium size organization.

Recently Govt of India proposed to redefine SME's based on their annual sales turnover, replacing the current definition that relies on self declared investment on plant and machinery

According to the government’s new definition, businesses with revenue of as much as Rs5 crore will be called a micro enterprise, those with sales between Rs5 crore and Rs75 crore will be deemed as small and those with revenue between Rs75 crore and Rs250 crore will be classified as medium-sized enterprises. 

The above classification clealrly differentiates large size organization from SME's from turnover point of view.

However, apart from sales turnover, there are some other charactersitisc distingusihes the SME's from large size organization.

1. Most of the SME's are supplying to large size organization either as Tier 1 or Tier 2 vendor
2. Adding value to product with partial manufacturing content or assembly
3. Mostly scope is limited to manufacturing only
4. No banddwidth to design / development / procuring material at own identified source or reengineering on product design and material selection
5. Not much bargaining power on pricing 
6. Not much affordability to get the right talent and developmental efforts

Given the above context of SME's, the business transformational efforts are mainly on

1. Ensuring profitability or sustaining profitability through business process reengineering

2. Helping to stabilise the organization for sustainable growth by twisting business model and people engagement initiatives