Category: Operations

Continued from Part 1 of the article More Profits From On-going Small Improvements by Abe WalkingBear Sanchez.
Twenty two years ago my younger son, Andres, was seven years old and one night he was doing some school homework. He was sitting at the dinner table with a sheet of paper and in the center he drew a box. Inside the box he wrote “A boy and his dogs”. Then he drew a line from each corner of the box toward the edge of the paper and at the end of each line he wrote about something that had happened or been done, and by who. He then numbered these “actions” in sequence of events or priority. He then took a second sheet of paper and “A Boy and His Dogs” became the title and the “actions” became paragraphs…he was organizing and writing a story. A couple of weeks later while working with a distribution company on their Credit and A/R Management, the CEO asked if I could help organize and improve on how things were done in the warehouse…not knowing anything about warehouse operations I said “sure”.
I thought the best place to start learning about the warehouse and about areas of opportunity for improvement was to ask the experts, the warehouse guys. Not having a flip chart or white board available we broke down a box and put it up on a warehouse wall. I then drew a box in the center of the box and I drew lines from the center box toward the edges of the flattened box…and then we called in the experts.
“Every business function must have a clearly stated purpose that addresses the costs associated with the carrying out of that business function.”, I said to warehouse experts. They then led me through the costs involved with the warehouse function: inventory, heating/cooling, buildings, their paychecks, taxes, equipment and shrinkage/obsolescence. “So why incur the costs?, I asked. And of course one guy answered ,”To make a profit.”. “What’s the best way to “earn” a profit?”, I asked. We finally came down to “meeting or exceeding customer expectations” as being the best way to earn a profit and for the warehouse function that meant having “an acceptable on time fill rate”. In the box at the center of the flatten box I wrote “On-time Fill Rate”.
The next step in organizing the “warehouse story” was to break it into “actions” or major components. We came up with receiving, shipping, truck maintenance, and inventory control, in sequence of events. The last thing we accomplished that day was to establish a goal for each of the major components: receiving…take in right and put up right, shipping…take down right and send out right, truck maintenance …get what suppose to be where it’s suppose to be when it’s suppose to be, and inventory control…know what you need, what you have and where it’s at. In a follow up session we establish how the goals would be accomplished…the steps needed to be taken in order to achieve the goals, and we also established who would do the work. The management team and I were then able to establish “Performance Measures” based on the ”goals.”
Over the years I found that this method for organizing and documenting the knowledge needed to do things as right as possible the first time worked with any business function.
The Five Organizational Ps
Purpose: Every business function must have a clearly stated purpose which answers the question, “Why incur the costs that go with the function?”
Policies: Goal driven guidelines for each major component within the function.
Process: The step by step method for achieving the goals established by the policies.
People Requirements: The right people for the job based on the process.
Process Monitoring and Performance Measurements: Monitoring key steps in the process to ensure quality and measuring against the goals established by the policies.
If the established goals are not achieved either the process is wrong or you have the wrong guy in the job.
Financial profit is necessary for any business to stay in business and the best way to improve on profit is to do things as right as possible the first time. We will never achieve perfection because things keep changing and that’s why Policies and Procedures are never done and we need to place a cover sheet on them that says “UNDER CONSTRUCTION”.
One Size Does Not Fit All
Every person on the planet sees things differently, His Holiness, The Dali Lama says that there are six and a half billion of us and six and a half billion versions of reality and if you’re married
you know what the Dali Lama is talking about…it’s the same with companies. Businesses are a collection of many different people, none of whom define the business but collectively they make up the business. And what works at one company may not work at another… every company and it’s people are unique . The process for best business practices must be based on each company’s understanding of what is… is.
In Closing
It was time to rotate the tires on the pick-up and for an oil change and lube, I knew it was time because of the sticker on the corner of the windshield. I’ve learned it’s best to make an appointment rather than just show up at the tire place and have to wait if they’re busy…guess what? …no phone number on the sticker. This is a national tire chain and yet I had to wait and remember to look up their phone number when I got home. If I had been able to call them from the pick-up at the time I’d noticed the sticker I’d might have been able to get in sooner, and at my age they were lucky I didn’t space it out altogether. I mentioned all this to the asst. manager when I was checking in and he got it at once…he pulled out a note pad and wrote it all down
saying as he did so ,”This is one for corporate, we all use the same stickers.” Good for him…now lets see if Big O corporate gets it.
When people are told that on-going small improvements are desired and that they will be measured on coming up with them, they become different people. They find that they are capable of thinking outside the established box and that it gives far more meaning to their work lives, than just a paycheck.
Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

This is Part 1 of the article More Profits From On-going Small Improvements by Abe WalkingBear Sanchez.
Save a step here and a penny there and then repeat it a hundred times, a thousand times, a million times and they add up. Now use/invest the time saved and the money saved to do something productive like looking for further improvements and it really starts to add up. And along with enhanced profitability, people’s lives are changed for the better.
The Japanese have a word, “Kaizen”. Kai means on-going and zen means better…the Chinese word Gaisan breaks down to gai, to correct and san, to benefit. These folks have a history of struggle in order to survive and tend to be pragmatic. We Americans, in our collective memory, believe that there’s always a new virgin forest to be exploited over the next hill. Our mindset about there always being “excess” makes us wasteful in our private and business lives and is a OBSTACLE to on-going improvements.
This is my 25th year of avoiding a real job by conducting seminars and training for CEOs and top business managers and I’m still taken aback to hear business executives say that the purpose of being in business is to make a profit, without any further explanation. There are many ways to make a profit, you can rip the employees off for their retirement plan or fail to fully fund the plan…sound familiar? A company can also make a profit by cheating customers and suppliers or by pulling an Enron. A better way to “earn” a profit is by “Meeting or exceeding customer expectations…at a profit”.
On average 25% of the Total Cost of Doing Business is tied to inefficiencies…the waste of time, energy or materials, and I’ve had many CEOs tell me that 25% is on the low end …that’s a bunch. Nobel Prize winner Ronald Coase , of Coase’s Law , says that there is friction/costs involved with being in business. There is the original friction or cost of finding suppliers, employees and customers. There’s the on-going friction or transactional costs, and then there’s the greatest friction of all… the friction of failure.
Prior to entering the training field in 1982 I had a real job as the corporate credit manager for a regional company based in Denver. My duties as the credit manager included the approval of new credit customers and the management (not collection) of past due A/R. I soon found that on average 70% plus of all past due customers had not paid on time due to “something going wrong somewhere.” In the process of fixing things that had gone wrong I found that I could identify areas of opportunity for improvement throughout the entire supply chain thus driving down everyone’s cost of doing business.
The New Guy Learns From the Old Guy Who Learned From The Dead Guy:
It may not be so in some companies, but all too often employees and business managers still operate from a “They don’t pay me enough to think.” mindset…like automatons they repeat how they do things over and over again until it becomes engrained. And all too often CEOs and top management are complicit if not directly responsible. If you are a business manager pull out your job description, if you’re a CEO pull out your managers’ job descriptions and check to see if it/they say anything about “Constant Improvement”. A business manager not focused on improvement becomes an administrator at best and a bureaucrat at worst.
Before improvement/change for the better can take place two thing must happen; first there must be an acceptance or acknowledgment that a business doesn’t have to be sick in order to improve, there is always room for improvement. Then there must be a commitment made as to who will do what when…and the efforts must be tracked and measured.
Change always generates resistance; expect it in others and in yourself. Tell the affected employees of the changes to be made and then ask why the changes won’t work…take notes for this will become a “to do” list. Keep changes small so that people can succeed, but once they mastered a change introduce the next small change…no stress no change. And of course pay people for doing what you want done…like thinking and coming up with improvements.
An old axiom says that “People respect (do) what is inspected (measured) not what is expected”. Can you imagine the chaos that would result if traffic cops were pulled off the roads? In much the same way business managers need to be told that a primary function of their job is to think, to always be looking for ways to save a step, a minute or a penny…and then they must be measured.
Continued in Part 2 of the article More Profits From On-going Small Improvements.
Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

Startup Students: When pricing your product or service, you should put some thought into the strategy you utilize. Are you going to undercut your competitors? Would you rather target the upper echelon? Maybe you just want to price with the market. It really depends on what you are offering, but here are some different strategies you could employ.
Penetration Pricing
This is when you want to quickly get some traction in your market by offering a lower (and sometime insanely lower) price. Benefits would obviously be the quick market penetration. But be careful, you dont want to undercut yourself out of business!
Skimming Strategy
This is somewhat opposite of penetration pricing. Do you have a relatively new technology that nobody else is offering? Why not “skim” off the customers who are willing to pay more in the beginning. Once demand from the early adopters falls, you can then lower your prices.
Follow The Leader
Sometimes it makes since to just follow the crowd and price your product competitively. Obvious products here would include commodities.
A Pricing Strategy for Everyone [Startup Students]

Small Business Buzz: Those of us that own a business know that, at some point, there will be cause for expansion. This can be both exciting and scary. Exciting because it only means that our business is doing very well and demand for the product/service we provide is growing. Scary because it is practically common knowledge that, next to tapping into the wrong market, the transition from a small business to a not-so-small business is one of the top reasons businesses fail.
There are some clear indications that it is time to expand your business, and being able to recognize those signs will help to eliminate some of the anxiety that accompanies such a change, since you will know it is necessary.
New Challenges
One of the first signs that your business is in need of a change is the fact that you are facing challenges and struggles that you have never faced before. There may be an overwhelming feeling that your losing control of the business.
Ineffective Management
Another indication that your business may be outgrowing itself is that your current management (which may even include yourself) is just not cutting it. As a business develops and grows, the dynamics and needs of that business change. The manager or CEO you hired when your business employed 5 people and your product limited to state wide distribution, is not going to be as effective when the demand for your product expands to a national market and you’ve had to hire 20-30 more employees.
Revenue Plateau
If your revenue has been within the same range for the past two or three years, chances are the demand for your product/service has increase, but your business is not currently capable of meeting that demand. Not only do you have too few employees, but it is likely that many of the ones you already have don’t have the ability to perform at the level the business needs to succeed.
How You Know It’s Time to Grow [Small Business Buzz]

BusinessKnowHow: Cash. Most people want more. When running a small business it’s particularly important to monitor how cash is coming in and how much cash is going out. This month, I’d like to take a few minutes to share some ideas on cash flow management as in how you can keep more cash in your business for a longer time.
Periodically re-evaluate your expenses. If you are anything like me your business changes and shifts every 4-6 months and this prompts a necessary re-evaluation of the products and services you are using to run your business.
Hold off on electronics and other purchases for as long as reasonably possible. If you need to invest in a new computer or printer or copier you can save money without sacrificing quality if you can wait a few months to purchase.
Use credit responsibly. If you have access to lines of credit you can use these to finance business purchases rather than paying cash outright. This, in many cases, can give you 20-30 extra days on your money enabling you to save or invest it for maximum return.
Watch out for hidden fees. Yes, there are some “costs” of doing business. However, at least once every 6 months, review what you’re paying for services like office cleaning, credit card transactions, long distance calls, liability insurance, etc.
Get paid more. Another way to manage your cash flow is to charge more for what you do. Institute planned increases in your payment rates over a year or two. Raising your fees as a cash flow strategy only works, though, if your spending remains less than your earnings.
Buy in bulk. This applies to physical products/supplies as well as non-physical ones (such as services). You can often realize a significant cost savings on items bought in bulk especially if you were going to buy them anyway.
Keep track of your discounts and other rewards. We are inundated with special offers, promotions and discounts. Use these wherever you can.
Give special consideration to your customers who pay early and in full. Customers who routinely pay their bills ahead of time, and who are rewarded for doing so, are more likely to continue this behavior which results in more cash inflow for you.
Invoice before, or soon after, performing a service. Don’t wait to send out bills just once every 30 days. This can delay cash inflow for months.
Invest in the growth of yourself and your business. Spend money to market your business, invest in your own learning and get help as soon as possible. The more you put into your business, in a thoughtful and measured way, the more you will get out of it.
Cash Flow Management [BusinessKnowHow]