Making Business Improvement Happen: How Forty Dollars Saved $400,000

A company came to me with a problem. They were incurring\r massive penalties and waste when servicing two major markets and wanted to know\r why. Each month they were shipping 10%-15% more product than had ever been\r necessary to meet demand, and they were incurring heavy penalties for late\r shipments. I was asked to look at the problem and find a solution.
\r
\r Diagnosing the Problem:
\r
\r This company produced a product that had a shelf life of 10 days.\r Customers expected at least 7 days of shelf life when the product arrived, which\r meant that the product must arrive within 3 days of production to last for 7\r days on the shelf. Among its distribution points, the company served two large\r civic centers (City A and City B), which required 60 and 64 hours lead-time\r respectively.
\r
\r These cities required frequent replenishment. Four days a week, a double\r trailer was sent to each city to satisfy demand. Once a week, when demand\r dropped, the company sent only one double trailer to service both locations. The\r driver would drop the rear trailer in City A, and then continue on to City B.\r This split trailer strategy worked well, as long as the split load\r consistently took place on a given day. For months after its creation, the\r system worked, demand was steady and the loads were split on schedule.
\r
\r Unfortunately, the strategy didn\'t account for success. As market demand increased the system began to break down. Split\r loads became sporadic. Loads that were scheduled to split at City A would\r mistakenly continue on with both trailers going to City B, where product would\r spoil unwanted. Drivers even began splitting loads that were not to be split.
\r
\r Customers that were not receiving their orders would then fine the company; and\r to compensate, they placed larger than normal re-orders to build up stock levels \r - further throwing off the producers production forecasts and outstripping production\r capacity.
\r
\r Running out of excuses, the company began shipping free product via airfreight,\r just to keep customers from leaving. The cumulative result was not only an\r exponential increase in shipping costs, but unsatisfied customers and strained\r production lines. Stressed-out managers scrambled to fight the fires this\r problem constantly created.
\r
\r All told, this problem represented a direct cost of over $28,000 dollars every\r time it occurred; which historically happened an average of 14 times a year.\r That is almost $400,000 annually!
\r
\r By trusting in a system that had worked in the\r past, the company had accepted avoidable loss as a cost of doing business for almost 3\r years. Worse, my calculation cant even begin to account for all the indirect\r (soft) costs associated with the loss of goodwill, added production complexity,\r lost floor space, lost opportunities, etc.
\r
\r The Solution:
\r
\r The root cause was so uncomplicated it was routinely overlooked. Drivers were\r not being consistently informed when they were required to stop in City A for a\r split load, and could not identify when it was necessary.
\r
\r The simplicity of the solution might surprise you. There was no need to rework\r shipping schedules, to redesign existing documentation, or to re-train staff.\r The drivers simply needed to be made aware that they were carrying a split load.
\r
\r To distinguish a split load from a regular load, a stamp was purchased which\r printed, SPLIT boldly on the manifest. With this label, drivers knew\r immediately what was intended without having to be told directly, and without\r having to rely on what happened last time. The incidence of missed split\r loads was completely eradicated with the introduction of a $40 self-inking\r stamp.
\r
\r Too good to be true?
\r
\r Management was shocked. That was too easy, they said, anyone could have\r figured that out! They were confused that the problem had existed so long and\r had cost so much, while the solution was so obvious and inexpensive. It wasnt\r the grand explanation they had expected.
\r
\r I explained that the reason they failed to see the problem was because they had\r been too busy fighting the fires that the problem created. Further, they had not\r engaged their employees, their transport company or their customers in finding\r the source of the problem. Finally, they had trusted a system that was designed\r to cope in a static environment, where split loads occurred at very regular\r intervals. They were used to pouring money into a bad system to make it work. I\r provided a fresh perspective.
\r
\r Once in place, the company was ecstatic with the result - who wouldnt be\r happy with a 10,000% return on investment? The $40 stamp paid for itself within\r the first hour it was used. Big savings dont always require big investments.

Tim Sweet is the principal improvement strategist with Revolve Business Consulting Ltd.\r Revolve employs unparalleled creativity to help retail, energy, transport,\r manufacturing and foodservice companies across North America improve\r performance, quality and customer service. Tim\'s written work is currently\r required reading in business schools across Canada.
\r
\r To find out what Tim and Revolve Business Consulting Ltd. can do for you visit http://www.revolveconsulting.com

What Are The Most Popular Home Gyms
Once you have decided to purchase a home gym, you may begin taking a closer look at some well-known home gyms that are out there on the market. Taking...

Six Sigma As The Ultimate Management Tool
Six Sigma, The Stepping Stone To SuccessThe question that crosses everybody's mind is - what makes Six Sigma such a high caliber, fine quality process...

Leaving on a "Low Cost" Plane!
25 easy steps to fly on a "low cost" plane: Plan for a low cost plane travel.Know that it's not very pleasant, but still buy a ticket so that you can ...

Quick Wins
A Quick Win is an already developed solution idea linked to a known root cause. i.e., it allows your team to jump into the Improve Phase of Lean Six S...

Business Planning With Six Sigma
DMAIC stands for Define, Measure, Analyze, Improve and Control. Here we analyze how these steps can streamline the business planning process.DefineThi...

3 Tips To Reach Your Priority Performance Targets
Don't think you're being a hero by having dozens of performance measures and targets, and driving hard to achieve them all. You might say "well all th...

125 Second Mortgage: Consolidating Debt with a Simple Interest Loan
Home values across the country have begun to taper off. Some areas in California are reporting depreciation, and some areas in Florida, Virginia and ...

Save Your Precious Time and Money, Take An Online Business Loan
It is rightly said by Somerset Maugham that,Money is like a sixth sense, without which you cannot make a complete use of the other fiveMoney is import...

How Can You Create a Healthy Healthcare Organization? Treat It Like a Patient!
Quality improvement should be a system-wide initiative. Many healthcare facilitiesthink of quality only as it applies to the clinical side. They conce...

Options With Weider Max Home Gym
If you have tried out a variety of measures like cult foods, weights or supplements which haven't done anything great in terms of increasing your fitn...

Are You Missing Your Best Quality Improvement Ideas?
Last month I talked about keeping your quality improvement changes in placeusing a manual that you develop of SOPs, standard operating procedures. By...

Two Lean Tools You Can Use to Improve Processes at Your Site
In quality improvement engineering there are many tools. I would like to illustrate a few and show how they can apply to healthcare. I will be using...

The 3 Characteristics Of Six Sigma
Six Sigma basically aims at improving the efficiency of business processes by reducing the number of defects. The aim is to achieve near-perfect proce...

3 Ways to Quickly Improve Income and Patient Health at Your Site
I do not claim that I have already succeeded or have already become perfect! I like that quote from Philippians. It is a very accurate reflection of...

PIPS - Performance Improvement Plans Made Simple
Just about everyone has some of them: employees who just don't cut the mustard. Even after careful hiring, training and motivation we all eventually...