B2B Relationships: Trust, Transparency & Commitment; Revenue, Profit & Cash Flow

February 9, 2012 by Leave a Comment

Defining what a successful B2B relationship entails may differ depending on many factors. Some of those factors can include corporate mission, vision and values. Other influences might be determined by our particular role within our organizations. For me, I notice I feel and perform best when trust, transparency and commitment are present in the relationship.

Trust, transparency and commitment may not be viewed as typical ingredients to successful B2B relationships and often characteristics such as revenue, profit and cash flow are the rule of measure. Revenue, profit and cash flow are essential. A Business’ survival depends on the presence of these elements earned through its relationships with client companies. Since business survival depends on the presence of the revenue, profit and cash flow, what difference, if any, does it make if trust, transparency and commitment are not a component of the relationship?

I believe the difference lies in two things, choice and the human element. Organizations and businesses are more than a series of automated systems and processes converting and conducting transactions – every business possesses a human element. Next, there is the issue of choice. Today, businesses have more choices than ever to have their needs met – and ultimately, it is people who make business decisions from a myriad of choices.

If people, working inside businesses, do not have a sense of trust, transparency or commitment from our relationship with them, how can revenue, profit and cash flow be sustained? What prevents businesses from making a different choice?

Perhaps the best answer is that both sets of three: revenue, profit and cash flow and trust, transparency, and commitment are equally important ingredients of a successful B2B relationship.

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Achieve Target Price and Earn Profits Too!

January 25, 2012 by 2 Comments

Whether launching a new product or expanding capabilities to accommodate our clients growing needs, meeting the target price is a significant barrier to earning new revenue streams and potential profits. Sometimes we take on new business opportunities as a way to gain market share, deepen relationships or to gain an advantage over the competition. While these strategies for new business serve their purposes well, it remains essential not only to meet the target price, but also to be profitable at the target price.

Fortunately, approaching target price challenges from both a design improvement and process improvement perspective allows us to open ourselves to a path toward meeting our objectives. A design and process improvement course can make taking risks less emotional and bring us into the realm of rational decision making. What if a design and process improvement method was consistently employed, and the data collected from these efforts demonstrated that a 10%, 15% or even 30% gain in profitability is likely.

One step in achieving a data driven decision-making model is to create processes that deliver reliable data needed to incorporate into an existing decision making and forecasting model. A process that generates and delivers this kind of information is presented below. It is an iterative process that synergizes with a well known Six Sigma concept, Define, Measure, Analyze, Improve, Control (DMAIC).

Step One: Define Base Process

  • Define base process
  • Create value stream map
  • Delineate sub-processes and assign cycle times to each
  • Identify and document opportunities for improvement
  • Present per product price and improvement opportunities

Step Two: Perform Project, Provide performance Feedback and Improvement Opportunities

  • Actual cycle times
  • Yield reporting
  • Constraint analysis
  • Feasibility study
    • Incorporate actual data to engineer design for manufacturability model
    • Material & equipment suitability
    • Yield and process time optimization

Step Three: Adopt New Process

  • Define new process
  • Create new value stream map
  • Delineate sub-processes and assign cycle times to each
  • Identify and document opportunities for improvement
  • Present per product price and improvement opportunities

Step Four: Perform New Process, Provide performance Feedback and Improvement Opportunities

  • Actual cycle times
  • Yield reporting
  • Constraint analysis
  • Feasibility study
    • Incorporate actual data to engineer design for manufacturability model
    • Material & equipment suitability
    • Yield and process time optimization

This iterative process continues to deepen, creating an improvement perspective and can continue until all potential waste is removed, or can be finished when a desired target price and profit is met.  The data gathered from the process can then be integrated into our decision-making models.

While the decision-making model currently in use may not be well structured and documented, we are making decisions and are therefore using some sort of model. Enhancing our awareness regarding how we go about making decisions and adding a rational perspective to our new business strategies can support our efforts to increase revenues and profits.

Click Here to download a case study supporting this model.

Click Here to begin a conversation on how ASAP can help meet your target price initiatives.

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The Painful Truth about the Temporary Labor Industry’s Business Model

December 5, 2011 by 3 Comments

Most of us use temporary labor agencies.  It seems like a pretty easy solution to managing variable demand.  And it is.  I just make a call and ask for laborers. An agency could have an office right in my building.  I just walk down the hall, or have them attend my production meeting, send an internal email or phone call.

Except that often, when I ask for 8 folks, I get 5. I ask for people with specific skills and 3 of the 5 actually possess the skill.  The other 2 folks, not the 3 as asked for, are coming soon and those people don’t have the skill set either.  Not only is the skill set absent, but the temps don’t really want to be here anyway.  Several of the people selected are not interested in productivity or quality and we hear about it in a very loud fashion.

These are just some of the frustrations we experience when contracting with temporary agencies, and we can’t really blame the people because the painful truth is that the industry itself benefits when their staff is unproductive.

I know this sounds harsh, but consider this: if my customer is expecting a turn time/delivery in 5 days, I need to plan and staff my project for this expectation.  If I plan the project as if it will run at 100% of productivity, then I need 5 people and I staff my project with temporary labor.  After the project gets started, I notice that productivity is at 60%.  Now I need 2 more laborers, or do I?  Since the 5 people I have are producing at 60%, what output can I expect from the additional 2 laborers and how will this affect my commitment to my customer?

This is a complex mathematical question.  First, I have to calculate lost time/productivity from Monday and if the crew continues at 60%, I have another calculation to make.  I figure I actually need 9.167 people working for the next 4 days.  Consequently, a project that should have taken 5 people 5 days, or 200 production hours to complete, now becomes a 333.33-hour, stress-filled project.  Not to mention the extra management costs working to avert disaster.

Whew, I avoided disaster with my customer and that feels great, but now I have a responsibility to my company to be profitable.  Let’s look at how this project performed:

Project

Budget

Actual
Hours

200

333.33
Revenue  ($30)

$6,000

$6,000
Labor Cost  ($15)

$3,000

$5,000
Gross Profit

$3,000

$1,000

This model demonstrates the actual labor cost due to an unproductive crew.  My company just lost $2,000 of gross profit.  In fact, I gave it to the temporary agency because instead of researching other alternatives, improving my process and or asking folks to be productive, I continued to add unproductive labor costs to the project.

Additionally, the temporary labor industry does not help me  improve my processes; offer fixed per project costs, or guarantee quality and yet the agency gains $2,000 in revenue.  The logical conclusion, painful as it may be, is that the temporary labor industry benefits from providing unproductive labor hours.

I’m thinking there is a better way to manage my variable demand and that now is the time to check into alternatives, especially before my next project is due.

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Relationships: Transactional or Strategic, which is Preferred?

September 12, 2011 by 4 Comments

The preferred relationship type is both!  Both transactional and strategic relationships have the potential to bring value to our organizations.  When determining which relationship types we prefer, the essential question is: “what business results are we looking to achieve?”

When focusing on the ability to obtain OEM and product components better cheaper, and faster, a transactional relationship may be preferred.  On the other hand, when focusing on broader business goals such as creating new revenue streams, increasing market share, increasing productivity and improving customer service, a strategic relationship may be preferred.

There are points along our supply chain that require different types of relationships.  The key is to understand what type of relationship works best given the specific business need.  The table below may help to identify which relationship type might work given differing situations.

Situation

Transactional

Strategic
Fix an immediate problem

X

  
Generate New Revenue Streams  

X
Increase core competencies  

X
Product pricing pressures

X

X
Leverage resources  

X

Once a relationship type is matched to a particular need within our organization, it may be useful to explore the attributes associated with the two different approaches to relationships.  The table below lists attributes of both relationship types.

Strategic Relationship Attributes

Transactional Relationship Attributes
High relationship participation Limited relationship involvement
High commitment Specific requirements
High level coordination Easy Role definition
High level of trust Contract driven
Collaborative problem solving Little training needed to purchase
Conflict resolution Concrete outcomes
Open communication Limited communication
Shared risk Low risk
Complex information sharing Simplistic information sharing

Interestingly, when examining business needs, matching relationship types and reviewing relationship attributes; it may be possible that a combination of both is the best option.  Understanding what kind of relationship works best for our specific business need enables us to include characteristics and attributes from both relationship methods into our selection processes.

Combining desired business outcomes and relationship types into selection processes has the potential to help our businesses operate more effectively.

What have your experiences been with strategic and transactional business relationships?

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Why Not Minimize Labor Expenses and Maximize Sales Revenue Today?

April 13, 2011 by 6 Comments

A great way to minimize labor expenses and maximize sales revenues is to improve our processes.  Strategies such as, Business Process Improvement (BPI) and Total Quality Management (TQM), encourage organizations to change,  to communicate and to involve the whole organization in meeting the business objectives set in strategic planning sessions.

Supporting the strategic goals are the methodologies used to create change and improve processes.  However, even when a direction is set, and balanced scorecards and key performance indicators are established, it can be difficult to know where to start.  What processes need improvement, and where can we get our best return, are questions we might ask.

For those of us acquainted with Lean Principles, the answer might be to use Kaizen, for continual process improvement. Yet, for others it might start with processes that continue to produce poor quality.  Poor quality frequently indicates variability in our processes and where there is variability; often there is excess labor expense. Where this is the situation, perhaps a Six Sigma approach is employed.

Regardless of the strategies, methodologies or process used for improvement efforts, the implications of Return On Investment show how important it is do the work.

For example: If my fully burden labor rate is $30 per hour and I improve a labor process by 20 seconds, and the process produces 20,000 parts per month, I save $3,333.33 per month and $ 40,000.00 per year!

Process Time Saved Monthly Quantity Monthly Labor Expense Savings
20 Seconds 20,000 $3,333.33
Process Time Saved Annual Quantity Annual Labor Expense Savings
20 Seconds 240,000 $40,000

Taking this concept one step further is to consider that the opportunity described in the table above is only one process.  We all operate more than one process in our businesses.  What if we were able to save 20 seconds on 2, 3 and 4 other processes?

Process improvement is an investment and it can be difficult to develop initiatives, communicate, implement and maintain our efforts.  However, the benefits of our efforts surely out weigh the alternative.

We want to hear from you! What has your experience been with process improvements?


Click here to download your free Return On Process Improvement tool to start understanding how small process improvements can produce large savings throughout the life of your product. Get the information needed to start making process improvements today!

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Process Improvement: it is not WHAT we do, it is HOW we do it

February 11, 2011 by Leave a Comment

“A Corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation.”
- Andrew Grove, Intel Corporation

You know how it feels, being in the flow: completing tasks, checking items off the list, solving problems, producing our products and engaging in productive behaviors. Activities are moving fast and we believe, in this moment, there is no room and no reason for process improvements.

Except that nagging feeling –the one that emerges with stunning regularity. The inclination, that, completing these tasks again, checking this item off the list again, producing these products in the same tired ways and solving these same old problems again, may be a great waste of effort.

It is in this moment of dissonance, a great opportunity exists: to shift our focus from what we do, to how we do it. This pause, this small opening, gives rise to an occasion to ask bold, new questions:

  • Are the activities we perform adding value to our product? Or, are employees performing unnecessary tasks because of inadequate training, tradition, or inefficient work cell layout?
  • Is our throughput maximized and downtime minimized? Or, do our materials meet bottlenecks in processing that create limits on our ability to fulfill orders?
  • Can we find ways to improve quality so we do not need to spend excess time looking for and fixing defects? Are processes understood and reproducible to minimize the occurrence of defects?
  • Is our supply chain optimized to reduce costs? Is the movement of our product necessary or minimized to create the best cost to value received by the client?

While it may seem impossible to break out from the flow and find the time and courage to ask difficult questions, we need to ask difficult questions to develop competitive business processes and implement the correct changes to transform ourselves, our colleagues, and our businesses into 21st century success stories.

 

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The USPS Price Increase and What It Means For Your Business

September 9, 2010 by Leave a Comment

By Summer Seidenkranz, President of National Refund & Marketing Services, Inc.

July 6, 2010, the United States Postal Service (USPS) proposed a price increase to the Postal Regulatory Commission (PRC) to change rates effective January 2, 2011. The proposed increase is above the rate of inflation, spurred by the ongoing recession that has rocked the economy, which coupled with their eroding customer base and the flight to electronic alternatives, has left the USPS with a $7 billion projected shortfall for fiscal year 2011.

All businesses should carefully consider the impact of this proposed increase. The highlights as presented by the USPS include a moderate 2-cent increase in single piece First Class mail (4.5%) and introductions of Reply Rides Free and Saturation Mail incentive programs. Doesn’t sound too bad, does it? Dig a little deeper and you’ll find alarming statistics for the business mailer.

If you mail catalogs, the increase is over 5%. Postcards will increase over 7%; periodicals (magazines) face an 8% increase, and Standard Mail parcels face a whopping 23% increase – and a direct mail unsolicited parcel will be assessed an average 14% higher cost than a solicited package with the exact same contents.

What can you do? While eliminating it from your bottom line is not possible, there are several ways to mitigate the increase.

• Work with an experienced fulfillment or mailhouse that can guide you to the best rates. Their technology will provide you with the lowest postage possible.

• When you’re planning a mailing, engage all parties from the beginning. Packaging/mailing optimization works best when applied at the development stage of a project, and understanding shape-based pricing is critical.

• Clean your mailing lists – there’s an additional reason beyond the required NCOA processing to keep your lists current and clean – every duplicate or undeliverable piece mailed is money wasted.

• Drive your customers to your website for additional detail – mail that letter and sell sheet, but don’t include the 12 page report…post it on your website and provide the link in your letter and you’ll save by minimizing the weight of your mailpiece.

• Consolidation of mailings will drive deeper discounts and faster delivery.

The PRC will issue a ruling 90 days from the July 6th date. The increase can be accepted, rejected or modified, but industry experts are preparing for an increase – and so should you.

____

Summer Seidenkranz has over 30 years of experience in the fulfillment and mailing industry, and is the President of National Refund & Marketing Services, Inc. Summer can be contacted at summer@nrmsinc.com.

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Primary, Secondary or Tertiary – All Processes Impact The Client

August 13, 2010 by Leave a Comment

“Secondary and tertiary do not imply unimportant”

Every process a business performs has an impact on the client, regardless of how it is prioritized.  When we are engrossed in our day-to-day lives, it is easy to get caught up in our own mind space, task lists and email responses; forgetting perhaps, that our work effects others and is part of a larger process, system and ultimately a deliverable to the client.

When considering an organization, we tend to think in terms of what types of products and services the entity provides and attach a preconceived prioritization of its processes.  This prioritization is amplified by the way we are taught to think about organizations as we catagorize companies into various segments such as manufacturer, whole sale, retailer and professional services.  Whirlpool Corporation, for example,  triggers thoughts about appliances such as washing machines.  Manufacturing processes come to mind as its primary or core process.

The tendency to catagorize and prioritize work performed occurs inside our own organizations.  Depending on the products and services the entity produces and where we reside on the organizational chart, processes get identified as primary, secondary and tertiary.

However, the business entity is a whole organization whose purpose is to provide value to its client. Each process creates deliverables, either inputs into the next process or an output directly delivered to the client.  For example, a product’s features are shaped from information about the client gathered from marketing processes. Those features are incorporated through engineering processes, executed through manufacturing processes, sold through sales processes, delivered through distribution processes and invoiced through accounting processes.

Each of these processes impacts the client by how well these processes are performed. It is important to correctly process an invoice; clients would like to be billed acurately.  Likewise, clients would like their preference incorporated into products and services.  While processes may need to be prioritized for planning, resource allocation and improvement efforts, the ranking a process receives does not designate it as irrelvent to the client.

 

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