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Business Systems & Really Great Chili: Part 1

Posted by Jim Tennant on Tue, Mar 10, 2015 @ 08:03 AM

On last Wednesday’s blog, I outlined the similarities between really strong business systems and really great chili. (For those of you who missed the post, find my world famous chili recipe here.) Today, I focus on how to build out really great business system.

Step 1. Begin by understanding where you are right now

What is your current business system? Don’t fall into the trap of saying “we don’t have one.” You may not recognize your current system as a system but it’s there. Map your process. When an order hits your door, inbox, mail box, etc., what happens first? What happens second? What happens next? There is great value in defining your current state. If you don’t know where you are, you will not know what direction to move your system.

3 Key increments in this step include:

  • Start point and end point: Sounds simple but there can be many differing opinions on when and where these two points occur. Collect individual descriptions from all team members.
  • Handoffs: Who, what position, does information or direction come from? What triggers the next person in the chain to act? A very wise man, whose company had just endured a yearlong implementation of a new ERP system, said that one of the biggest lessons he learned was “know all your handoffs before you even begin to select an ERP system." With chili it’s pretty simple if you’re working alone. Working alone is rarely the case in any business that needs a formal business system. The best way to identify handoffs is to see where information accumulates. Don’t forget to consider electronic accumulation. Too many of us consider a task completed when we send the email instead of when we see the result of the message sent.
  • Metrics: What can be measured to quantify your current system? For example, if you want your new business process to be faster, you have to measure time. If you want higher accuracy what errors do you need to count? What defines an error? Also, carefully consider and define what will be excluded. People are often surprised by what isn’t counted or measured. Here’s a tip, count or measure just like your customer would. Internally your business may not start the “order processing” time clock until the first Wednesday after the first full day after the receipt of the hard copy purchase order, but you know the customer starts their clock as soon as they hit “SEND” on the email with the P.O. attached.

Step 2: Define where you want to be

This may seem deceptively easy. If you’re making chili, you want to end up with chili. If you’re building a business system you want to end up with a business system. But what kind, how extensive, how directive, how flexible, how will it be administered, who will facilitate changes, and will it be certified? Without a specific shared goal, you and your team are bound to fail to achieve satisfactory results.

3 Key increments in this step include:

  • Start point and end point: Specifically define “start” and “end”. OK, look at the chili.  Do we start our chili when the steak hits the grill? When the grill starts heating? When we head out to the store for ingredients? Same with your business system. Manufacturing starts their clock when the router hits the floor, or when the material is delivered, or the first full shift after all the data is entered. And they have very logical and valid reasons for doing so.  Purchasing on the other hand starts counting when the MRP system gives its first prompt to buy. The MRP of course is driven by the entry of the P.O., not the receipt of the P.O. What about Sales, does a project start when the customer agrees to buy, when they submit an RFQ, or when an actual hard order is issued?  Have a common understanding of “start” and “end”. Time spent on these two terms is time well spent.
  • Handoffs: When you began to consider the handoffs, you recorded the places (and people) where information accumulated. Review that list making a full discussion of every single accumulation point in the current system. It exists for a reason. Maybe not a reason anyone wants to say out loud, but there is a reason. Ruthlessly search for that reason. Only when the root cause for the accumulation is known can you and your team intelligently decide on the necessity of this handoff. One special note here; if you have handoffs in your process that occur as “special” cases, eliminate them. You all have special cases where “Well, when one comes in that is really difficult, we all just know that we have to give it to Joe/Esmeralda/Ivan/Julie and they get to it as soon as they can.” That isn’t a handoff. It’s a dungeon for customers who don’t have sense enough to give you only easy orders.
  • Metrics: You don’t have to measure everything; you don’t have to measure anything. You only have to measure things that you want to work. Measure to manage, that’s all I’m saying. By the way, these metrics are what you will use to see if the new system is working later on. One key measurement that is often overlooked is user proficiency. Your new business system will be useless if your team doesn’t have proper training. You won’t know if they have proper training unless you have a way to assess the knowledge and skill level of the users. This is especially true if you use consultants to train.

Be sure to check out our blog next week for more tips on planning and executing great business systems.

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Topics: Circuit Board & Assembly & Manufacturing, Contract Manufacturing, Original Equipment Manufacturing

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