Most of the companies with which we work would really like to "win 'em all." They'd like to have the lowest costs, the best sales, lowest operating expenses and highest profits in their league.
The problem is that no matter how much they try; no matter how many metrics and incentives they put in place; they just can't seem to achieve the results they are after.
They've got sourcing and production people pounding away at reducing costs and improving efficiencies. They have given them powerful incentives to do so.
They also saw to it that their sales and marketing folks are incented to deliver the kinds of sales they need to be profitable.
And, of course, the whole C-suite keeps accounting, finance, and the whole management team focused on holding the line on operating expenses and improving profits.
But, maybe the whole scenario described above is the problem!!!
When manufacturing and distribution organizations are conceptualized—when the idea evolves into a business concept—the underlying purpose is understood to be FLOW.
That is to say, products are…
Interestingly, in the early entrepreneurial days of the enterprise, the focus is almost entirely on FLOW.
It is only as the enterprise grows and the bureaucracy of departments, divisions, and functions evolve that the FOCUS becomes something else.
As a result, soon the wonderful unity of the organization becomes one of politics and finger-pointing.
Meetings end up sounding like this:
It's "a house divided against itself." But it is altogether too common. You have probably lived this—and maybe are living it today.
You really need to get back to this focus on FLOW.
Interestingly, the evidence is in that when the whole supply chain is focused on FLOW in an effective way, then…
It's sort of like driving your car.
Stop-and-go traffic reduces your mileage. Everything is less efficient.
But, when you get out on the highway, stops and slow-downs are reduced or eliminated, and speed is increased, your car automatically delivers more miles-per-gallon. Efficiency increases without a focus on efficiency.
In your business and supply chain, viewed as a system, system efficiency can be measured as
System Efficiency = Throughput / Operating Expenses
or
System Efficiency = (Revenues – Truly Variable Costs) / Operating Expenses