September, 2013

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Perfection Is Expensive


Perfection is the pursuit of any company that practices Continuous Improvement, Lean, Six Sigma, the list goes on and on.  Perfection should be the ultimate goal in any business.  Competitors will find a way to be more cost efficient.  If you don’t keep up they will steal your customers.  Perfection is not as elusive as you may think.  Just be creative in how you define it.

Let us suppose a manufacturing plant has a goal of 87% utilization.  They have determined that optimal throughput is X and standard equipment downtime is Y.  So given the amount of time machines have to be down for routine maintenance, the maximum amount of production would be 87% of the total amount machines could run if there were no downtime.

Too many companies allow themselves to start thinking 87% is perfection.  Others define goals well above reality.  This is really a half-full half-empty way of looking at it.  But what if the glass is just too big?  Instead of defining perfection at 87% or even 92%, why not set a goal to increase capacity?  The capability of the machine will not change unless you change the machine.

Managers often lose focus on what really matters.  It is all too easy to get buried in the trees and forget about the forest.  I know it’s cliche but it happens.

It’s all about priority, people.  Simple payback is a key measure for the small business.  As long as you have projects with paybacks of less than 5 years, you are not in danger of chasing perfection for the sake of being perfect.  If you are following David Allen’s “Getting Things Done” methodology, then you are documenting every possible project you have identified.  Now just sort that list by payback.  Pick the quickest payback and get to work delegating the project.

The amount of resources available will control the amount of projects you have open at any given time.  If you have more people, machine time, or budget for contractors, keep assigning until your resources are 75% full.  Don’t go over that because if all time is spent doing there is no time left for thinking.  But we’ll cover that in a future post.

But how do we know when enough is enough?  The last 15% is the most expensive.  The low-hanging fruit lies in the first 85% of possible projects.  Why should I allocate resources to research saving $300.00 per month in propane costs when I can allocate those resources to a project that will save $20,000.00 per month in wasted raw materials?  Just because we know we can save on propane doesn’t mean we should put everything else on hold.  Put the project in your list and assign it when it has priority.