Category Archives: waste

Lean (Super) Marketing – Price & Promotion

Quiz question : Can (beer) you (nappies) think of (coffee) products (biscuits) that are (cereals) always (cordial squash) on price promotion in one (pet food) supermarket (toothpaste) chain or (deodorant) another?

Today it’s being touted in the Telegraph today that Tesco will start a price war by reducing prices.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8780284/Tesco-to-start-supermarket-price-war.html

The article also takes the view “Unlike most “price war” announcements, analysts expect this to materially alter the profits that Tesco makes in Britain”.

How could it be?  how will it affect profits?

Well the article talks about fewer buy-one-get-one free promotions and more low, round prices.

 Imagine you’re a supplier and a supermarket offers you the chance to take part in a “bogof” promotion.  Let’s look at the simple mechanics of these promotions;

You are selling at a rate of “packs of product per day”, [SKU’s to use the jargon] suddenly this rate can start to rise to 4, 6, 8 times that amount. (remember you are on bogof, so doubling of sales rate is a minimum!)

So where do you get all the spare stock from? you make it in advance of course on overtime.

You store the finished goods in additional warehouses ready to go out but remember you need bigger warehouses. You’re going to sell 4,6 times what you normally sell.

Oh and you’ll need to store the increased amount of raw materials as well.

You’ll have to try to forecast  the demand across your different flavours and pack ranges e.g. if you only offer the 500 gram pack on bogof what happens to the 1kg pack sales? 

As the promotion runs, you may well need to run production for longer hours and incur overtime costs.

And the supermarket, well they need more space to put your products out there, they need more transport to get the products out, so you see this “free” promotion seems to be increasing the costs to every one but us, right?

The consumer in the meantime is building a nice little stock of “free” goods at their end of your product, which leads to two behaviours. 

  1. they don’t buy your (or your competitors) product for a while, they’ve got a stock at home.
  2. they end up throwing it out and they didn’t need that extra pack but hey it was free.

So what happens to your business at the end of the promotion?

Demand drops back and probably to less than before, the customers have got spare stock in their cupboards right?

Another competitor starts a promotion in the supermarket, be it another brand or the supermarket own label.

So now you have production lines with not enough to do, so what do you do? you go to another supermarket and offer a price promotion, yeah!

Here’s the quiz question again : Can (beer) you (nappies) think of (coffee) products (biscuits) that are (cereals) always (cordial squash) on price promotion in one (pet food) supermarket (toothpaste) chain or (deodorant) another?

I’m sure you can think of the brands.

So what might your accounting team say about this?

Well you’ve given products away for “free” and incurred additional overtime and storage costs, never mind the raw material you started with. So will they drive up the normal cost of the product to cover these costs and to make the “free products” less of an effect on your business? You can decide that.

The benefit of going to Every Day Low Prices is two-fold, in our opinion, based on Lean Management;

  1. The consumer only buys what they need and not any thing extra because it’s “free” – this is better for our food waste figures and our waist figures.
  2. The suppliers stop having to manage major swings in purchasing patterns, when in fact consumption is relatively stable. Do you really buy use toothpaste twice as fast because it was on BOGOF? So they get on with managing the costs in their business and can focus on reducing these.

So moving away from free products can have a major impact on the whole supply chain. It can reduce the costs and complexity of managing the chain and affects all of our waste [waists]. The reduction in costs can be passed onto the consumers but if you don’t pass all of it on, then your revenues may drop but your profit & margins can increase.

How much waste is there in the Service Industry?

Over the weekend a question was posed to me via Twitter (@theleanmanager if you’d like to follow) about the amount of waste (wasted time) in the back office of banks/service/insurance operations. Now I took this to mean the call centres, data processing centres, mail rooms, customer response teams etc.

The guys asking the questions @wisemonkeyash and @channingwalton  wanted to know could it be as high as 90%? (Update: we do know that in some legal firms the time to process matters is being improved by 50%, by using lean thinking, indicating that wasted time could considerable in the professional services sector.)

I decided I should expand upon my 140 character replies, which were based on my experience.

Variation of demand is the first factor to consider i.e. what does the busiest day (for demand, not completed work) look like and what does a quiet day look like and what are the patterns the peaks and troughs for the demand.

What causes this demand, the peaks and troughs? Our experience? it’s normally another part of the business which generates and stokes the demand and therefore changes here can reduce the peaks.

This could be letters with incorrect details, mass direct marketing mailing, customers chasing progress etc

This variation often causes capacity (people) to be 50% more than required to achieve the current results.

The implications here are that you can deliver improvement by changing something outside of the back offices, without changing what many individuals do – making continuous improvement more readily accepted.

Remember that so far we haven’t looked at the waste in the activities undertaken in these departments. Now as a lean person we look for the 7 hidden wastes, yes I know others have 8 or even 9 but we stick to the 7.

To give you just one example, have you rung a call centre, in the last 6 months,  to be told ” I’m sorry the system is a bit slow today”?

Sometimes that is genuine, the system is slow, it may be that the networking is slow or the server needs upgrading or the PC workstation is old. So say you have 50 agents handling 20 calls an hour? how much time are you wasting because the technology isn’t up to speed?

The more common reason for ” I’m sorry the system is a bit slow today”, that we see is that staff have two screens in front of them and they maybe running 4 different programmes at once. As the programmes can’t transfer information directly to one another, the staff take info from one system, send to their own e-mail, cut and paste it into another programme and then have to delete the e-mail.

This is just one example and adding up the rest we often find that 50% of the activity time is wasted.

What does this mean  overall?

If we start with 100% and 50% is waste due to Variation demand, this leaves 50%.

Of the remaining 50%, we reckon 50% is wasted time, so we get to the figure of 25% (50% *50%), or 75% of the work can be classified as waste.

Remember this is based on what we have seen, so not as high as the 90% the guys originally asked.

Within an hour I spotted this article all Aviva shakes up it’s Customer Service  from the FT, which shows the global serving UK based insurance firm Aviva put the waste figure in call centres as 60%.

It’s also worth noting that Aviva thought it was completing work in 5 days, in reality it was taking 39.

How can this happen? well sometime companies split activities into discrete chunks and add up the time each chunk takes, assuming this equals the processing time. They forget the handoffs and delays that each happen between each activity. We’ve definitely seen office work with activities of an hour take over 10 days to complete in reality.

Okay there is a variation in the figures but should we split hairs on whether waste in offices is 50% as in the professional services firms or 60% – 75% for the back offices and call centres, the reality is that the waste appears to be relatively large, though maybe not as large as the 90% that started the question.

Do you have any views on what the waste could be?

About the Author;

Mark Greenhouse has been working on the application of Lean management in Legal and design led Manufacturing companies for the past 5 years. His own Lean journey started back in 1988 when he started study of Production Engineering. He’s applied lean in many organisation types, finance, call centres, banking, FMCG etc. Mark also provides lectures on operational management at Leeds University Business School.

Venetian Warships, Faster Horses and Legal Firms.

When a US law firm wanted to find a way of becoming more efficient and deliver legal matters more effectively they turned to a set of techniques that have their roots back when the Venetians built ships at the Arsenale, techniques continued by Henry Ford, once he’d noticed his clients wanted faster horses.

Today that law firm is lauded as being “5 years ahead of every other AmLaw 200  firm” and now claims to deliver legal matters some 15 -50% faster than before. Not surprisingly this has driven down costs, driven up satisfaction and helped to secure new customers.

On the 6th April 2011 Mark Greenhouse of ResQ will be presenting to the Yorkshire Law Society on the techniques that can be used to improve the speed of delivery whilst reducing costs and how this will affect firm profitability and pave the way for true Fixed and Alternative billing to take place.

For details visit Yorkshire Law Society Continuous Improvement in Law.

If you’re not in Yorkshire and would like to find out more then drop us your contact details on info@resqmr.co.uk  and we’ll get back to you.

Thanks,  Mark

Lean Management & Continuous Improvement – Is your Law Firm ahead of this Organisation?

** You can get a FREE copy of our latest 2013 Lean Management for Law Firms  handbook by clicking on download** The original article continues below

Click here to download FREE Lean Legal pdf guide

The Association of Corporate Counsel has noted that the company in the article below is “five years ahead of every other AmLaw 200 firm” because of its Lean & Continuous Improvement programmme. The programme based on management principles already proven in many other sectors and departments to deliver;

  • lower costs, (increases margin)
  • faster responses, (improves cashflow)
  • better quality,
  • and improved customer satisfaction.

Get the article here; Continuous Improvement in Law Firms – LeanThinking in Legal Services (the article was first published in September 2010 in the Law Business Review).

Alternatively visit our new website at levantar.co.uk.

If they are five years ahead of US firms, what about the UK, do we have any organisations looking at this, who could claim to be five years into a lean thinking implementation within the legal sector?

We are presenting to the Yorkshire Law Society, on this subject in April this year.

Do you think that Lean Management programs will work in the UK legal sector be it, law firms or general counsel?

About the Author;

Mark Greenhouse has been working on the application of Lean management in Legal and design led Manufacturing companies for the past 5 years. His own Lean journey started back in 1988 when he started study of Production Engineering. He’s applied lean in many organisation types, finance, call centres, banking, FMCG etc. Mark also provides lectures on operational management at Leeds University Business School.

Where is the Value?

In recent months I’ve met several managers, running departments (operations, marketing, HR, IT), all working for different companies (Sectors include: retail, banking, manufacturing, IT) who at some point have all said a very similar thing;

“one of my problems is, my department isn’t seen as adding value, we’re seen as a cost centre”

So my questions are

  • where is the value created in organisations these days?
  • does it matter that the departments believe they are seen as cost centres?
  • If you subsitute the word profit for value does this help?
  • Should it matter that we understand where value is created? is knowing costs enough?

Any views or examples (positive or negative) on this greatly appreciated in the comments below.

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50% More – are you getting it too?

In the last year UK Manufacturing grew productivity by 5.7% (source EEF), in the years since 1997 productivity growth has been 50%!! The two companies below achieved much more than that though.

Case Study 1 – Lean Manufacturing FMCG, Warehousing & Distribution Company gains 14% Productivity increase.

Case Study 2 – Lean Manufacturing Printing Company gains 40% more capacity.

What does this mean for manufacturing? simply (and on average) a manufacturing employee was completing 5.7% more work at the end of 2010 than they were at the end of 2009 + every employee involved in manufacturing in 2010 is capable of making 50% more products than in 1997.

So just a couple of thoughts?

  • Have your team (managers and staff) delivered similar improvements? a 5.7% improvement in productivity in the last 12 months or 50% since 1997?
  • Are you getting better returns, every year, from the same levels of investment in people, machinery, raw materials?

If not, how could that be? remember 5.7% is an average, so some companies will have gained much more than this*

If you haven’t had such gains,

  • Do your teams have the time to look for productivity improvements?
  • Do you think your teams know where to look for productivity improvements?

* the two companies in the case studies above gained 14% & 40% improvement by using Lean Manufacturing and Thinking techniques, we completed the work for them via the MAS scheme. 

If you’re a manufacturing business owner or a manager who’d like to find out whether you could be getting better returns for your investment and improve your productivity there is a FREE scheme that can help you find out.

A FREE scheme? well it’s the Manufacturing Advisory Service and in case you’re thinking “didn’t the Government pull all the funding for RDA’s, Business Link etc?” well for this particular scheme it’s full steam ahead. Just before Christmas the Coalition announced plans to extend the scheme and provide further funding.

What do you get for FREE then? you get to meet with an experienced manufacturing professional, normally at your own premises, so no travel involved, who will assess your needs and provide the names of accredited companies who can help you with improving your productivity.

Nearly forgot to mention the £3,000 FREE investment for productivity work. If you decide to invest in productivity projects, with an accredited supplier, then you could get up to £3,000 towards the costs.

Lots of paperwork? hoops to jump through? not normally, your advisors can help you with the small amount of paperwork to be filled in.

Do you qualify? Do you employ less than 250 employees? have a turnover less than 50M euros? see most companies will qualify.

ResQ currently complete work for MAS in Lean Thinking across Lincolnshire, Nottinghamshire, Leicestershire, Derbyshire, Humberside, Yorkshire (East, West, North and South).

If you’re in these areas, give us a call (01904 277 007 or 0115 711 7007) and we can see if we can help.

Outside of these then go to the MAS website and give them a call.

Who knows you could be making 5%,10%,15% even 40% more this time next year!

Starbucks Lean #2

From our search engine stats I can see that there is considerable interest in the lean programme at Starbucks. We wrote about it back here in our Starbucks Lean Improvement post and this one on Lean:Crossing the Atlantic with your Coffee and we could spend a lot more time writing and trying to understand the application and implementation of lean in Starbucks US, from over here in the UK.

However there are people closer to it, who “see” the reality on their visits to the stores, so if you are looking for insight on the latest lean thinking at Starbucks then can we recommend that you visit this page http://www.leanblog.org/2010/09/controversy-over-new-standardized-work-at-some-starbucks-stores/

Over at the Lean Blog, Mark Graban takes comments on the lean implementation from the Starbucks Gossip website and puts them into perspective, which can be afforded by an experienced lean practitioner.

So if you are looking for a good source of lean stories and the progress at Starbucks, you would be well advised to visit the Lean Blog and have a search around.

Does anyone know if Lean at Starbucks has landed on these shores yet? or when it is due?