Distributor develops a series of productivity measures
This mantra has served me well for over 20 years in business, and it also fits well here at our material handling company, LiftOne, where we employ Six Sigma methodologies. These methodologies are so important to our company, that they are supported through seven trained Six Sigma Black Belts and numerous Green Belts, all led by a Master Black Belt. If you are unfamiliar with the Six Sigma process, it is simply a way of assigning a numeric value to an activity in order to determine its impact on a business. It helps us identify and place a focus on those tasks requiring the most resources and energy. With Six Sigma, you must measure, analyze, improve and go through a series of steps to complete and improve the process. Using Six Sigma as a platform, we came to realize how much more we needed to understand about our business.
As a kickoff to 2007, our CEO/president introduced us to the concepts in Jim Collins’ book Good to Great. This introduction prompted some pretty candid discussions within our company about exactly what that means. We know becoming a great dealer is our destination, but how will we know when we are there? How will we know when we are “great”?
- Manufacturers tell you you’re great by giving out awards.
- Customers tell you you’re great with their orders.
- Owners will tell you you’re great through your performance.
- Employees will tell you you’re great through satisfaction surveys and through their level of engagement in the company.
These are all important things to know, but we needed to learn more.
We began looking at how to measure what we do, how we do it, how complicated it is, the impact on the organization, how much each process costs (the cost of carrying a vendor, for example), and a host of other benchmarks. As we started to uncover these things, we realized that this was a really far-reaching project. In fact, we could have created an entirely separate department just to track the things we needed to know! That’s how we hit on our concept of Operational Excellence (Op-X, as we call it) that we launched last fall.
Op-X is the responsibility of every department, and each person in the department is an owner of one or more components of Op-X for their group. We shared our five-year growth plan with our people, and then asked for their ideas on how to figure out ways to get smarter about what we do, in order that we achieve that level of excellence. The success of the program is really dependent on our people who have taken their missions to heart.
The process works like this: Each department calls a monthly meeting to report to management the status of any number of projects. Some typical examples of things we want to measure are the number of documents produced by area, average prices per ticket, average gross profit per ticket, number of credit back-outs and re-bills, number of warranty claims by branch location and product type. We will even take it down to a level of measuring number of calls per day to and from each branch, as well as length of meetings per month. We have already seen some pretty interesting results.
Some departments listed 18 to 20 things they wanted to improve. We asked them to choose five that would have the biggest impact on the division, and then prioritized them using the following criteria:
- Issues that cause logjams and stress on employees
- Impact on customers
One of the topics we launched early on was called “Correct Billing the First Time.” Each department took all the invoices from the previous year and determined the cost to generate each one. Then, we measured how many of those invoices were credited and the cost of each one. Did it delay receivables? If so, how much did that cost us in interest? Doing this allowed us to determine a value for what it costs to bill correctly the first time versus what it costs to bill a second time. We then factored in employee time wasted and how it negatively impacted the customer. All this added up to a dollar amount and a percentage, which allowed us to set a target for improvement.
The Rental department succeeded in identifying a logjam in month-end billing on back-outs and credits due to incorrect sales tax. They exposed the root cause and then began a process to ensure the correct sales tax is consistently entered on each customer record every time. Rental coordinators called customers to verify their tax status, which the customers appreciated. Of course, on our end, any reason to make contact with a customer is a good thing. At the same time, we conducted a customer satisfaction mini-survey to garner feedback. Interestingly, a residual benefit was that we wound up generating five sales leads. After three months, the department had improved its back-out and re-billing ratio by approximately 40 percent, a significant reduction just by getting the sales tax right.
These are only a couple of examples of success stories we have seen since implementing our Op-X protocol last fall. Operational excellence will continue to be a goal for LiftOne, and it is one that any business can strive for and achieve.
|Andersen & Associates (Wixom, MI) President Jim O’Dette says he is always looking for ways to improve efficiency at his company. He is currently trying several steps that he hopes will show some promise as the year goes on. “We’re doing about 100 things. Time will tell if any one step has a big impact,” he says. “One percent more efficient is a lot.”
• Software — A new program installed on salespeople’s laptops helps them communicate and organize customer information. Also, new software specifically addressing parts issues is now in use at the company.
• Service Vans — Adding laptops in service vans eliminates the need for technicians to keep books. Moving to the computers means less space is required, so the company has tested smaller vehicles that give better gas mileage and more efficiency. Also, Andersen & Associates totally revamped the parts inventory on the vans. “We tended to let service technicians have their own stash, but now we better address the needs of customers.”
• GPS — The addition of GPS-equipped cell phones has improved dispatching efficiency some. “Our efficiencies have gone up some, but you can’t change the amount of traffic on the road. I think one of the things you have to do is make sure that you’re hiring techs in the areas that you need them so there’s not so much travel time.”
• Web Site — Andersen & Associates has a new Web site at www.andersenassoc.com that features more advertising and is customer-friendly. O’Dette says he wants to make it as easy as possible for people to get information. “We’re trying to put information on rental and used equipment on the Web so people can look at charts rather than make phone calls.”
|Meet the Author
Tom Klugh is fleet rental manager of LiftOne, a Division of Carolina Tractor, located in Charlotte, North Carolina, and on the Web at www.liftone.net.