Enhanced Profitability and Competitive Advantage Through New Efficiencies
A friend of mine, Abe WalkingBear, developer of a copyrighted profit system that focuses on improving cash flow, has agreed to share some of his insights (some are truly unique) on how manufacturers can help distributors. He’s written books, is an international speaker and co-authored STAFDA’s Foundations of Business 2007.
Today, WalkingBear will talk about how efficiencies affects both profitability as well as competitive advantages. Enjoy.
Efficient…To be powerful in effect with little waste of effort.
When I first went into business consulting in 1982, the first thing I’d ask a new client for was their Operations Manual or written Policies and Procedures. I wanted to see what they had defined as “goals” and “methods” for achieving the “goals.” Many if not most were stunned, they got that “deer in the headlights look” and then they would start looking through desk drawers and cabinets.
28 years later little has changed, and if you have to look for your P&P, you don’t have any…at least not any usable ones.
Many if not most businesses operate on a “word of mouth basis,” the new guy learns from the old guy who learned from the dead guy. It’s a lot like the game kids play where they sit in a circle and the first kid whispers something in the next kid’s ear and so on. It’s real funny when kids do it, but “word of mouth” is not an efficient way to operate a business.
HH the Dalai Lama says that there are almost 7,000,000,000 of us and almost 7,000,000,000 versions of what is is. And if you are married or have kids, you know what the Dalai Lama is talking about. It’s not just Bill Clinton.
Word of mouth operations is not efficient and drives up the total cost of doing business for everyone in a supply chain…manufacturers, distributors and downline business customers all pay for any inefficiency in the supply chain; like strawberry jam, a little inefficiency spreads to everything it touches.
Studies have found that on average 25% of the total costs of doing business are directly tied to inefficiencies. When I speak to CEO and business owners’ groups, I put up a slide to this effect and every time I do, someone will say something like, “I wish it were only 25%.” 25% of the total cost of doing business is a whole bunch and most especially when it’s paid by everyone in a supply chain.
Twenty-five years ago I learned a great tool from my younger son who was then in the second grade. I learned how to use an organizational web to organize and document unique and specific knowledge. Based on this organizational web, I developed and copyrighted “The 5 Organizational Ps,” a set of methodologies for organizing and documenting the unique and specific knowledge found within every business so as to achieve new efficiencies and drive down the cost of doing business for everyone in their supply chain.
The Five Organizational Ps
Purpose: Every business function must have a clearly stated purpose which answers the question, “Why incur the costs that go with the function?”
Policies: Goal driven guidelines for each major component within the function.
Process: The step by step method for achieving the goals established by the policies.
People Requirements: The right people for the job based on the process.
Process Monitoring and Performance Measurements: Monitoring key steps in the process to ensure quality and measuring against the goals established by the policies.
If the established goals are not achieved, either the process is wrong or you have the wrong guy in the job.
In business, there’s a cascading effect to improvements. If a manufacturer, distributor or downline business customer can do something better, it lowers the total cost of doing business for all; a good business relationship at best is a partnership.