April 24, 2009
There is a New Paradigm for Profit
There’s a new sheriff in town, and you’ve met him. It is the new paradigm for making a profit. It used to be that you would add a markup to your cost, baking in your profit, and that would be your selling price. “Cost plus profit equals price.” Not any more. Today the market sets the price, you subtract your cost. Your profit is what’s left over, if anything. “Price (market driven) minus cost equals profit.” For funeral products and services today that are highly competitive, the way to profit is to reduce cost. That’s the pressure you’ve been feeling.
Service Processes Can be Full of Waste
Did you know that business processes, especially service processes, can be full of costly waste? It’s true. Here’s what Michael George, another leader in this field, says in his book Lean Six Sigma for Service: “Service processes are usually slow processes, which are expensive. They are slow because there is a lot of “work in process” (WIP). When there’s too much WIP, things can stop and wait up to 90% of the time. But, there is hope. In any slow process, 80% of the delay usually is caused by only 20% of the activities. You may need only to find and improve the speed of 20% of the process steps to effect an 80% reduction in cycle time and achieve 90% on-time delivery.”
Why Processes are Full of Waste
Can you think of some examples of office process waste? (As a funeral director, do any of these sound familiar?) Too many approvals required. Unclear process steps. Unclear job descriptions. Obsolete databases/files/folders. Purchase orders don’t match quotes. Errors/typos. Waiting for information. Too many meetings. Poor office layouts. Unnecessary emails. Your list may be longer.
It is Not About Working Harder
To get these kinds of improvements, you must change the way you do things. You’ll never get there by working harder. Where might you look for waste to remove? The waste is not found when you are moving forward in the process. Look for waste when things are stopped, waiting, or sent back for rework. Then, remove the barriers that cause the waste.
Others Have Made Dramatic Improvements
By employing a process improvement technique called Kaizen, others have made dramatic cost reductions and improvements in service, as well as getting more things done with the same size staff. It’s more than that. Those who have done it will tell you about the renewed pride in their organization and how their results will translate into even better service for their customers.
For example, in three week-long Kaizen events one organization applied the tools and made immediate improvements of 30%-70% vs. previous baseline measures.
Admin. Process (+ 30%)
Payment Process (+ 70%)
New Product Time to Market (+ 30%)
A Personal Postscript
If I could tell you one thing about modern strategies and tools for enhanced business performance, it would be this: THEY WORK.
I believe process improvements are designed and implemented by people, not in spite of them. In my 30 years of business experience, from factory floors to board rooms, I have never seen any concepts so simple work so well for all types of organizations. People are winning 30% to 50% improvements every day.
John Prentice’s 30+ year career has touched financial services, manufacturing and the automotive industry, and includes experience in P&L management, strategy, planning, start-ups, marketing, and continuous improvement (Six Sigma and Kaizen). Most recently he was an Executive Director for Hillenbrand Industries, a global Fortune 1000 company, acting as an internal consultant on merger & acquisitions and other strategic issues, as well as consulting for the company’s European operations. For more information about John Prentice and Prentice Consulting, Inc. visit www.PrenticeConsulting.com