May 28, 2020
What’s the difference between your average Joe and an Olympic athlete? If you got them both to run a marathon, the former would probably start sluggish, struggle to make any headway, and then collapse halfway through; likely because they’re in poor shape. The professional athlete, however, would be off like a shot and likely breeze through the whole thing – they’re built to be lean, light on their feet, and capable of long periods of sustained effort.
Most businesses have a tough time running lean because they have inefficient processes in place. While the job gets done, it doesn’t get done as quickly as it should be and sometimes with too many resources being used up. The result is a slow start, several hiccups along the way, and generally a tough time making the finish. These inefficiencies are nothing but wasted time and money, which every business leader needs to eliminate. Even the most well-run of businesses can make improvements to become more lean and efficient.
What’s getting in the way of you running lean? In our experience, many businesses have inefficient processes in place, often employ outdated business strategies that don’t work in today’s demanding economic climate, and sometimes rely on outdated technology to get things done. Below are some possible obstacles in the way of you getting the maximum bang for your buck:
Data that’s not up-to-date might as well be useless. If the data was collected last week, for example, you can’t trust that it’d be true today. This makes it difficult to make important business decisions. If you miss an order completely or ship out late because of old data, your business suffers and your reputation drops in the customers’ eyes. They may come to view you as unreliable and may even choose to turn to a competitor instead for their needs.
In the real world, there’s often a “lag” or a period of delay between something happening and you learn about it. When you’re running a business, this delay often causes you to go off track by making decisions on information that is already obsolete and incorrect at that moment. It’s one of the biggest causes of inefficiencies in production, shipping, procurement – take any process you can think of. You’re always waiting for answers because of the lag. Your operations team might have the wherewithal to run lean but the logistics team might not be able to keep up.
When you make decisions on old data – data that is slow to come in or takes too long to collect – you end up making mistakes. You find out that you didn’t have enough room for what you produced or ordered, causing you to ship it off elsewhere or free space you’d allocated for something else. You end up wasting time waiting for answers and correcting the decisions you made on misleading data. You end up wasting time and money shipping the materials to another location that can accommodate the product. The waste can be astronomical and ends up hurting your efficiency and profitability.
When you have faulty data or are forced to make changes on the fly in response to lag, you may experience a stock out. For example, your plants say they need more inventory to operate, but when they do receive their delivery, it turns out they weren’t truly short. In the meantime, another plant has a shortage that they couldn’t anticipate in time. Your dispatch decisions are based on unclear, unreliable data. It all results in stops and even breakdowns in the supply chain, which translates to a loss of productivity.
What’s the opposite of running lean? It’s running heavy –using too many resources or investing too much into producing something or deriving a certain outcome. If you want to run lean, you’re going to have to identify all the various ways your business does too much for too little. It could be that you’re employing too many people in production and too few in customer relations. Or it could be that you’re losing too much raw material in storage because of natural deterioration or you are storing too much inventory. If it doesn’t give you sustainable returns, it’s not worth doing.
Said a different way: The goal is to run a supply chain with minimal friction between stages. This is accomplished by knowing your inventory levels and the exact replenishment needs in real-time. When you know, you have the power to make lasting changes and make your business more efficient.
One of the ways to acquire real-time data is by choosing the right inventory approach for your business. We recommend a robust IT system that makes it easy for you to manage your “reorder point” strategy.
What would this robust IT system do for you exactly? It would aid you in auto-replenishing as soon as your minimum threshold levels (as determined by the reorder point) are reached, without exceeding your max thresholds. Essentially, you would always have just the right amount of material at hand – enough that all your production needs would be met but not so much that you’re overspending on material or losing material due to deterioration.
Additionally, the right solution would also automate your inventory to a high degree. That means you would have the data you need to make real-time business decisions. You would be able to measure factors like real-time production rates, storage levels, incoming deliveries, space restrictions, production capacity, transportation capacity, and much more! Stockpile Reports offers a powerful, capable IT system that’s capable of all these things. It’s easy to implement and gives you insight into all your stockpiled material at every point in your supply chain. Please reach out to us for more details!
Of course, we also recommend you follow other best business practices to run lean. That involves creating a strong organization, hiring the right people, treating workers right, continuously adapting, embracing innovation, and generally constantly improving. Becoming lean doesn’t happen overnight, as you’re no doubt aware. It takes constant training, time, and effort. It’s a lot like training for the Olympics.
It’s always a good idea to address the 8 common forms of DOWNTIME waste:
Being too lean isn’t good for your business either – it’s at the opposite end of the spectrum from doing everything in excess. If all you focus on is efficiency, you run the risk of becoming too calculated and stifling innovation. Experimentation and innovation always require an initial investment, and the reward they offer is more than worth the investment. Be prepared to invest your resources where necessary.
The economy isn’t doing very well, as you’re probably aware. It shrank by a worrying 4.8 percent in the first quarter of 2020, after the coronavirus crisis wreaked havoc worldwide. Countless businesses are struggling and millions of people are out of work. Most businesses don’t have enough money in the bank to weather a single interruption, let alone a multi-month crisis. Running lean could offer a dependable way out of the crisis, not only surviving now and into the future. Reach out to us to learn how Stockpile Reports can assist you in running leaner with our solution for insights into all your stockpiled material at every point in your supply chain!
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