Three smart strategies to dodge the manufacturing downturn: part 3 of 3

Friday, October 7, 2016

AME Keynoter, Author and AME Volunteer. Join Anne at the AME Dallas Conference, where she’ll be delivering a 3 hour workshop on 21 Low Cost, Low Risk Paths to Innovation on Monday, October 24.

In the first article of this 3-part series, I shared Smart Strategy #1, Driving NEW Business from OLD Customers as a response to the looming challenges highlighted in the Purchasing Managers’ Index.  The second article showed you 2 Ways to Find 1 percent Everywhere to help dodge what may be a deepening downturn based to the plummeting results of the 2016 Return on People Benchmark Report, a measure of productivity and profitability which signals that your sales teams may be hearing ‘we don’t have the budget for that’ from prospects more than ever this Fall.

To complete the series, here’s the third strategy that you can take action on immediately to create a healthier bottom line before year end, and make sure you’re not saying 7 of the most limiting words in business: “we don’t have the budget for that”.

Strategy #3: Eliminate Surprising Costs That Shouldn’t Even Be in Your Business That Are Nowhere Near the Shop Floor, Without Resorting to Conventional Cost Cutting.

There’s a good chance that you’re already very accomplished at using Lean methods to eliminate waste on the shop floor, but that you may be stuck in conventional cost-cutting in other areas of your business.

As we head towards the final quarter of the calendar year, you may be tempted to cut back on travel, training, marketing, perks, and other visible costs.  STOP.  Each of those is actually an investment in the future of your business, and most of those expenditures are not enough to have a serious impact on your bottom line.

Instead, turn your knowledge of Lean to eliminating costs that shouldn’t even be in your business but that are hiding in your sales and customer service processes.  In most firms, just 5 categories of issues account for 80 percent of your unnecessary costs to serve, and they’re all within your control to address.  When you do, finding savings of 25-45 percent are not uncommon.

I call this “getting the sludge out”.  Just like you end up with dirty oil simply as a result of driving your car around town, you’ll end up with sludge in your customer-facing operations simply by virtue of being in business.  Here are 3 strategies to help you check your dipstick and do an oil change in your business:

Step 1:  Identify Recurring Issues

Talk to your Customer Service staff about the problems they’re solving over and over and over again – band aiding them instead of solving them for good.  Apply your Lean thinking to get to the root cause of each issue, and solve them for good.

Step 2: Identify Escalated Issues

Its estimated that a CEO may spend up to 40 percent of their time dealing with escalated customer issues.  And, research has shown that a manager dealing with an escalated issue will typically give away more than a staff member empowered to resolve the issue on first contact.  If those two things together don’t add up to significant waste in your organization, I don’t know what does.

Take that same root cause approach to the issues that are being escalated, use lean thinking to streamline or eliminate all the extra steps in the process, and get issues resolved on first contact.

Step 3: Get Proactive

The third highly effective strategy is to get eyeball-to-eyeball with your customers and ask them what drives them crazy about doing business with you or makes them roll their eyes – then fix it.  In previous posts I’ve written about an approach I use called a Value Creation Conversation, because you can’t get the input you need by sending out a customer satisfaction survey, it has to be personal.  In fact, its been shown that rarely do survey results correlate with repurchase behavior or actual satisfaction.

Use the same root-cause approach as above to eliminate these hidden sources of cost and dissatisfaction… because at some point they’ll become the straw that broke the camel’s back.  When you take the bull by the horns and potentially hear things you may not want to hear, you’re doing both your customers and yourselves a huge favor, and stripping needless cost out of the equation for both parties.

The 5 Categories of Sludge

In every case, you’re looking or listening for one of 5 sources of sludge:

    Tangibles:  think of poor packaging resulting in damaged product, or similar issues
    Reliability:  this has to do with missed deadlines or broken promises
    Assurance:  this relates to the confidence and competence a customer experiences at every touchpoint
    Responsiveness:  different from reliability, this is more about meeting needs and expectations
    Empathy: remember, they don’t care how much you know until they know how much you care.

Your goal is to use Lean thinking to get needless costs out of your system in a way that actually enhances your customer relationships by making sure that if you don’t get it right the first time, you make it right the second… without incurring all the costs of repeated fixes and escalation, or the client and staff aggravation that accompanies lengthy resolution processes.  You’ll see the impact on your bottom line when you strip those costs out of your system, and you’ll set the stage for driving top line growth by offering a better experience than your competition.