Direct Marketing, Mail Order, and E-commerce News from the National Mail Order Association
Five Speed Bumps that Halt Your Company’s Profits…and How
to Eliminate Them
By Jay Arthur
If you want to be competitive in today’s marketplace, you have to do one main thing: Serve customers ten times faster than you do now. “What?” you may be thinking. “How is that possible? I’m already too busy and overworked.”
Realize that everyone thinks they’re already too busy. Unfortunately, a large part of people’s busy-ness is the fact that they’re repeatedly picking things up (products, parts, paperwork, etc.) and putting them down. In the process of picking the thing up, you have to remember what you were originally doing with it and what you need to do next. In the process of putting it back down, you have to bookmark it somehow so you can continue working on it later. On top of that you have delays and redundant or unnecessary processes that slow you down. So while you are indeed very busy, you’re often not productive.
The fact is the slower you are to meet customer demands, the more money your company is losing. Things like long lead times, slow turnaround times, unnecessary steps, and sheer carelessness cost you in terms of repeat business and referrals. So what exactly is causing all the redundancy and slowness? The five speed bumps of business. Beware of these five things in your own company so you can reclaim your lost profits.
1. Making products before customers ask for them is expensive.
Granted, if it takes you a long time to make your product, then you may have to manufacture the product well in advance of customer demand. For most companies, however, actual production time is minimal. What takes a long time is the sales process. To save money, make your products right on time. For example, on average, General Motors has a six month inventory of cars sitting unsold, eating up both capital and time. Toyota, on the other hand, only has a three week inventory of cars. Week one is on the floor; week two is traveling to the car lots; week three is being built. Which company do you think has better cash flow? You want to get to the point where you can produce something when a customer wants it, and not a moment before. So stop overproducing and making big batches of things. You’ll be better off making one or two products that are specific to what people want. Remember: Don’t keep your people busy; keep your products busy.
2. Stocking large amounts of inventory is expensive.
How much inventory do you have sitting on your shelves or in your warehouse every month? Many people think that large warehouses and fully-stocked shelves are a good thing. In reality, it’s a huge money-waster, because the carrying costs of inventory are expensive. Not only are you paying people to make the unused product, but you’re also paying for warehouse space, people to manage the inventory, utilities at the warehouse, etc. The costs quickly add up. If necessary, close down production for a week so you can use up some of your inventory. Have the production workers clean the plant or fix the machinery—anything other than make additional products. Let your inventory get down to a manageable level that requires less storage space and therefore less money. Remember: If you don’t make it, you don’t have to store it.
3. Unnecessary movement of products is expensive.
When you make too much inventory, you often have to move it around. Whether you need to rotate the stock so the older items are upfront and newer ones in back, or you have to find a particular model for a customer, your warehouse likely has numerous forklift operators moving things back and forth. Product movement increases your chances of having damaged goods, which you then must either scrap or rework. Additionally, forklift accidents increase worker’s compensation costs. The less inventory you have stored in your warehouse, the less movement (and less damage) your products will face. Remember: If you don’t store it, you don’t have to move it.
4. Unnecessary movement of people is expensive.
Many people complain about their commute time to work. But how much commute time are you or your staff doing while at work? For example, do people have to walk across the office or even to a different area of the building just to pick up their printouts from a central printer? Are they walking from workstation to workstation to complete a simple task? In many companies, commute time while at work can be immense. In fact, it’s not uncommon for people to walk the equivalent of over five miles a day in a 2,400 square foot space just to do their job. Anytime people are moving too much, you need to redesign the space. This may mean using a number of smaller printers rather than one big central printer. Or it may mean bringing workstations closer together so there’s less movement. Think of your work area like a kitchen, where you have your stove, sink, and refrigerator forming a triangle. The closer that triangle is together, the less distance the chef has to travel to prepare a meal. When you can cut down on people’s at-work commute time, you’ll see a marked increase in productivity. Remember: Walking is waste.
5. Unnecessary processing is expensive.
In many company’s processes, people are doing unnecessary steps. For example, one company had an inspection process for incoming goods. However, in the many years they’ve done the inspections, they’ve never found a single bad product. So the question is, if their suppliers have proven to be good and reliable, why is the company still doing the inspections? Any step that proves to be unnecessary wastes both time and money. Think about how many reports you receive that you never read. Why is someone still creating that report for you? Consider how much customer information you gather that you never use. Why are you still gathering the data? Just because your company has always done something a certain way doesn’t mean you’re doing it the right way. Examine your processes to discover what’s really necessary and what’s simply waste. Then get rid of the wasteful steps so you can speed up your process. Remember: Forget how you’ve always done it; do it right.
Reach Your Profit Goals…Faster
While many people believe they can’t be any faster because they’re already too busy, the truth is that you can be a lot faster without being busier. The key is to examine every aspect of your company to see where you have waste, redundancy, or just downright slowness. The good news is that you’ll likely find that only four percent of your processes are causing fifty percent of your troubles. In other words, you won’t have to fix a lot to see a marked improvement. In the end, the more productive you can make your people, products, and processes, the greater profits your company will realize.
ABOUT THE AUTHOR
Jay Arthur, the KnowWare Man, works with companies that want to double their profits by plugging the leaks in their cash flow. Jay created the “Lean Six Sigma System,” a collection of audio, video, books and software, is the author of “Lean Six Sigma Demystified” and created the “QI Macros SPC Software” for Excel. For information about how to plug the leaks in your cash flow, sign up for free lessons online at: www.qimacros.com/freestuff.html or call (888)468-1537.
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