Feature Article
Operational Excellence
Accelerating Profits in Post-recessionary Cycles
History suggests those who survive economic downtimes are provided extraordinary opportunities for growth as cycles shift. Are you positioned to take advantage of this change in demand? Have you laid the operational excellence framework from which to leverage efficiencies and grow margin?
Operational excellence is about creating organizational alignment and driving waste out of processes in such a way as to create agility, efficiency, and competitive distinction. Companies focused on creating shared vision and eliminating waste are able to squeeze every bit of profit from their strategic investments and are able to move quickly from concept to deployment. It’s those companies that find themselves in the leader quadrant when performing competitive market analysis.
So what are some of the areas where companies employing operational excellence focus?
Clarity of purpose and strategic agility is understanding your company’s core competencies and the unique value you bring to the marketplace. It’s about being clear of what your company is, and isn’t, and ensuring everyone in your organizations stays focused on the core. Strategic agility is about focusing on your strengths, improving your weaknesses, and seeking ways to leverage these when faced with new opportunities or adjusting to market threats. It’s about knowing who you are, where you’re going, and being flexible as the landscape changes.
Fierce focus on deployment and execution is having the organization aligned and focused on delivering results. It’s about knowing what your customer want, and are willing to pay for, and ensuring your team delivers the results day in and day out to offer a compelling value proposition far exceeding that of your competitors. It’s about ensuring your teams are constantly looking inward to seek new ways to perform critical tasks and always focused on driving out cost and improving margin. It’s about creating a workforce that is passionate about finding a penny here, a nickel or dollar there, and taking those findings and continuously reinventing the process to drive customer and shareholder results.
Efficient and effective infrastructure< is finding an appropriate balance of administrative and management overhead, business systems, measures and controls to deliver repeatable, predictable and sustainable results. The opportunity is to develop an infrastructure that supports the efficient and effective delivery of services without creating an burden of compliance and regulatory oversight. It’s about developing a common understanding of what functions create competitive distinction and ensure a balance of other functions required to maintain a basic core infrastructure. It’s about simplification, standardization and elimination of redundancies and waste.
Why should your company focus on operational excellence and the elimination of waste? A recent article, published by Accenture, found high-performance businesses enjoyed “returns on investment capital 5x that of competitors capabilities” coming out of similar economic cycles in the mid-90’s (Logistics Management, The Five Hallmarks of Operational Excellence). Would that level of efficiency and return on investment prove useful for your business and would that capability enable you to accelerate your profits during the upcoming post-recessionary period?
If you find yourself questioning how you might employ operational excellence practices at your company then I invite you to consider engaging the Service professionals at ASIL. ASIL consultants are Service and Supply Chain professionals with over 100 years experience in various Service and Supply Chain roles. We have a proven track record of pragmatic solutions and welcome the opportunity to serve you and your clients. Call us today at 1-408-980-9904 and let us help you achieve new areas of profitability and success in this ever changing economic climate.
Contributed by Warren White
Spotlight
‘Barbarians to Bureaucrats’
Almost two decades ago I came across a book ‘Barbarians to Bureaucrats’, which profiled the levels of management evolution and compared it to corporations. The premise was that in the early stages of a company it required a unique approach and personality to grow and expand. As time progresses and the ideas flourish, the need to maintain and safeguard them requires structure. By and large, the book’s premise still holds true and my message is that we need to revert back to becoming Barbarians a bit more.
We all need a little of that barbarian drive and spirit in our companies. This is not to suggest that all characteristics and traits of barbarians should be emulated. Rather there are key qualities that can make a difference between the success and failure of our corporations.
The Barbarians routinely ventured into the unknown, which took courage and leadership. They knew that the new territories would have a greater risk and even greater rewards. Barbarians were quite calculated in their approach. Their goal was to expand the empire, to increase wealth and have control. Is this really so different than today’s Corporation objectives?
Whether it was establishing new markets or attacking the competition, maintaining that fierce drive and spirit, coupled with courage and leadership were critical ingredients to success. These are also vital elements in any new start up or a company that is trying to reinvent itself. Yet with all things that promote growth and expansion, the desire to continue to expand requires a level of bureaucracy in order to build a common framework to ensure continuity in beliefs, structure, and control.
ne downside of bureaucracy is it stifles growth and can paralyze change. Proof must be provided upfront, before it can be accepted and permitted as possible. This takes much time, resource, and money. The challenge is to create an environment that promotes both. The need to bravely explore and logically expand must co-exist with the need to provide a sustainable structure that has longevity.
o to all of you Barbarians that feel the need to challenge change, the time has come. Bureaucrats beware, the good fortune you now enjoy came at the expense of the Barbarians. Today’s economy is forcing this issue. Waiting to take the next step or deferring a change could be the door opening for your competition to spring ahead of you. The professionals at ASIL can positively impact your results through focused strategies and execution. Let’s conquer some new horizons together.
Contributed by Peter Pazmany
Industry Trends
Imrove Your 3PL Relationship
Are you looking to get better results from your 3PL? It all starts with building a better relationship. Whether you are building a new relationship or renegotiating an existing one here are some considerations to help strengthen your operational bond and improve your results..
Gain share with your 3PL. Taking performance to the next level often requires some investment on the 3PL’s part. You can encourage the investment if you offer to share in the profits and/or cost savings. This sets up an environment that will improve the business relationship and encourage process innovation.
Respect your provider’s expertise. Write contracts that specify what needs to be done and not how it is to be done. What matters is whether the 3PL achieves or exceeds the contracted service. It shouldn’t matter what resources are deployed or used in the outcome. You are likely contracting with an industry expert that has more experience in the area you are contracting so why tie them up with processes that haven’t worked for you?
Continuous improvement requires continuous attention. You might be tempted to back off and get out of the way if your 3PL is performing to expectations. That would be a mistake. Companies should sit down regularly to review goals, set new objectives, and exchange feedback (positive and negative) on contracted services. A Quarterly Management Review should be considered in the contract terms to ensure ongoing improvements.
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Identify the KPI’s at the outset. Key Performance Indicators (KPIs) are the backbone of the contract and can be the cause of disputes about performance. KPIs at the outset might seem obvious, but many times they are left to be determined later. Make sure both parties agree to the KPIs, frequency, and method of reporting before the deal is inked.
Make a long term commitment to the relationship. If the provider knows that the business is going to be put out to bid again in one or two years, there are no long-term incentives that you can leverage. You can’t expect your 3PL to invest significant dollars in systems and equipment to service your account unless you show that you’re in it for the long term. What’s long term? From 5 to 7 years.
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Have an independent a third party review your contract. You can’t be expected to render an objective opinion on the fairness of the deal after months of hard-fought contract negotiations. An outsider’s unbiased opinion can be valuable. There are many independent companies that can render this service for you at a nominal cost. Just be sure to use a company that has strong business knowledge in the area you are contracting.
ASIL has the background and expertise in all aspects of increasing Supply Chain performance and getting the most out of your partners. Give us a call at 1-408-980-9904 to help you along your journey of success and profits.
Contributed by Michael Singleton
Our Software Products
Click on the links below to view ASIL, Inc.'s MAX Partnering® self paced software demonstrations:
Strategies and Execution - This demo depicts the tools that organizations can utilize to embrace change effectively and implement it successfully.
Self Assessment Sample Questionnaire
- This demo will enable you to respond to a small sample of self
assessment questions focused on change management and create a Heat Map
of your responses to see areas that may need attention. The Driving
Complex Change® methodology addresses the six areas of Direction,
Ability, Incentive, Resources, Structure, and Action that can impact
your effectiveness of change management.
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