Tag Archives: profit improvement

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.

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

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!

£6,000 of Business Improvement – FREE!

Despite the daily feed of cuts and budget reductions, there is still one source of funding for business improvement available to businesses in the UK.

Manufacturing businesses can access up to £6,000 worth of FREE business improvement work.

So who is eligible?

  • turnover less than 50m Euros?
  • less than 250 employed?

Then you should meet the criteria. Design and distribute from the UK but get items manufactured elsewhere? this is okay to.

If you’re based in the East Midlands (Northampton to Lincoln, Skegness to Burton) or Yorkshire & Humberside (Worksop to Kirbymoorside, Flamborough Head to Halifax) then give us a call and we can help you access this help.

The best advice?  if you’re in the East Midlands or Yorkshire & Humberside is to give us a call, 07712 669396, or drop us a line info@resqmr.co.uk and we’ll see if we can help you.

We offer a FREE one day consultation, where we work out exactly how much this investment could return.

So who have we helped? FMCG companies, small batch producers, furniture manufacturers, electrical panel producers, fabrication companies, printing companies, joinery manufacturers etc 

We’ll take you through all the paperwork to get at the funds (there aren’t too many papers and most businesses can find the information required easily.)

This match funding comes via the Manufacturing Advisory Service. This is the national scheme, administered on a regional basis, which can help your business to develop and grow.

Give us a call and we’ll see if your business can get £6,000 towards finding the hidden improvements to increase profits and customer satisfaction!!

Mark

www.resqmr.co.uk

www.twitter.com/theleanmanager

Barista to Fashionista

It’s been a busy few weeks but these two stories came to me that demonstrate how the improvement techniques that Lean Thinking includes may be holding up in these difficult times.

They both relate to the application of Lean and business & customer led improvement in the retail trade – Lean Retail if you like.

  1. Starbucks To Test “Lean” Operations……   – apparently Starbucks are testing lean in some of their stores in the US. So next time you’re in the queue remember someone is trying to work out how they can improve the speed of service, the quality of the product and utilise green practices. What appear to be Starbucks staff seem to have a lot to say about this on the original blog posting, some them even sharing the ideas that have been tested so far; so I’ve posted an excerpt and a link to the comments at the bottom of this post. 
  2. As the lastest retail sales figures for February are released in the UK, a somewhat depressing picture is beginning to emerge – not really surprising when you consider that a lot of the major layoffs/shorter working time (Woolworth’s, Honda, Toyota, M&S, Wedgewood, the banks etc) didn’t start to kick in till January. 

The one ray of hope again appears to be Zara, especially when compared with similar companies in its’ sector, clothing. Two competitors, Next and H&M both posted reduced profits whilst Zara’s remained constant.

The excerpt from the BBC website stated;

“On Thursday, home improvements retailer Kingfisher said retail profit in the UK declined by £24m to £129m as it closed its subsidiary Trade Depot

Next said revenue and profits declined and that it expected sales to be negative for 2009 [revenue fell by 1.7% and profit by 13.9%]

Swedish retailer H&M, which has stores on many UK High Streets, reported a 12.6% fall in quarterly profit, blaming currency swings and lower sales

On Wednesday, the owner of the Zara fashion chain said its profits barely changed during 2008.   [Zara did actually record a 10% rise in sales as well, so they are attracting customers to spend more! – Lean Marketing ]”

You can read the latest performance press release as to why Zara is also upbeat about the rest of 2009.

So how come Zara are so holding up well? does it have anything to do with Zara being the Lean Fashion Leader?

As for the use of lean in Starbucks, well the quote below is from the comments on the blog, by a contributor named “JAVA JANE”  and gives and idea at to the journey they are starting on;

I work at a very large store in the NW – we started implementing Lean procedures last spring. The way it has worked for us:

We ran several “time tests” on daily processes, counting and timing each and EVERY step (making a frappuccino, ringing up and pouring drip coffee, making & storing prep, getting ice, whether the 4th register was necessary, sampling…) in order to weed out unnecessary steps. Also, we tried to rearrange certain stations to make them easier to use, for example, our cold beverage station was home to a couple of items that made more sense to keep at the bean counter or espresso bar as they were used there more often. Another example – we realized every time someone ordered hot tea, we were reaching around the brewing shuttles for the tea after grabbing the cup and then returning to the cup station to fill withhotwater…we just made room for the tea where the cups are. Basically – we stopped saying “It’s always been done that way” and started asking “Can that be done a better way? How?” We timed different methods of deployment, computed averages, came up with “lean” standards, and it’s been a great success! We definitely had some experiments that didn’t work, which is fine! You just have to be willing to change and go through a period of weirdness until it gets figured out. “

There are some additional posts from other contributors including a great one from ORSM, which details the first practices that have been trialled.

So whilst we can’t claim that Lean is the answer to all corporate ills, we do know that one Global retailer; who uses Lean and who is many years into the implementation has been able to maintain profits through this difficult period and another Global retailer has seen enough to give it a go! 

Could it help you?

www.resqmr.co.uk

 

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Transferable Skills – from the car to the office, shop, lab……

Lean Service

Lean Manufacturing which started in the automotive industry, with principle of removing the 7 wastes and it’s raft of associated process improvement tools including 5S, OEE, KANBANs, JIT, Line Balancing, Demand Management, Six Sigma, Poke Yoke, and Voice of the Customer (market research) has slowly been making its way across sectors and functions of manufacturing and non-manufacturing  (Services including professional) organisations as a business improvement strategy in recent years.

Is it any surprise when examples such as Lockheed Martin found that 75% of the improvement projects in one 4,000 employee plant, actually took place outside of manufacturing and generated $5m of savings in the second year alone – including reducing purchasing costs by over 50% and purchase order processing by 40%.  (Michael L. George “Lean Six Sigma for Service” 2003 p5)

And GE CEO Jeff Immelt reckoned that by applying the principles to their sales process they could save $50 billion by applying lean to their sales functions alone! (“Growth as a Process” an interview with Jeff Immelt, Harvard Business Review June 2006, pp 60-70)

Lean with…….

So now we are finding more and more examples of Lean Service, Lean Office, Lean Call Centres right through to Lean Laboratories, Lean Accounts and Lean Retail. You name it and you can find examples of lean thinking beginning to invade and succeed in all functions and sectors of business.

If you’d rather sit back and listen to an excellent insight into lean service then we can recommend this episode of Radio 4s “In Business” on LEAN SERVICE, hosted by PETER DAY, it focuses on lean in the Service sector (actually it’s the retail (Amazon), call centre (GEM) and financial sectors (GE Money)). 

When you get to the website click on the “listen to this programme in full” button 

All of the examples we have found about the above show, to one degree or another that lean will deliver;

  • lower costs,
  • higher profits,
  • faster customer response times,
  • higher quality,
  • a better customer experience,
  • and a more motivated workforce.

Lean does this by inviting ALL staff to confront the wastes in their jobs, whether it be

  • excess stock,
  • excess raw materials (work in progress, paperwork to be signed, e-mails unactioned),
  • excessive transportation (work/documents between sites, individuals, departments),
  • excessive moving (to complete work i.e. to photocopiers, post rooms etc),
  • wasting time (waiting for materials, decisions, meetings, approvals),
  • product or service features that the customer doesn’t value,
  • and producing poor quality solutions.

This approach, to include all staff isn’t surprising when you consider that at the heart of the principles of lean are;

  • to do only what your customers value, by default staff stop having to do all the things that they know (they get the feedback from customers) don’t add value!
  • and to continuously improve what you do, something you can surely only do by ensuring all the staff experiences are utilised to identify improvements.

The next blog that we issue will be on Lean in the NHS (Lean Healthcare), we’ve come across a video and a audio file and some practices on the benefits of implementing Lean in this sector, including information on the real GOLDEN HOUR, which is nothing to do with Simon Bates (for those old enough) or even Chris Moyles.

Be aware! moving lean from manufacturing into another function or sector isn’t about just taking the tools of Lean and applying them. So ending up with a desk looking like this one below really ISN’T the only answer.

 (This picture was published in a North East Paper and if you type “HMRC + lean” into a search engine you’ll get a plethora of stories about a lean office implementation in HMRC, which appeared  to follow the path of taking manufacturing tools and just transferring them). 

The taped lines on the desk show where office equipment should be placed

If you would like to investigate how lean could be applied to your organisation or function then feel free to contact us at www.resqmr.co.uk or info@resqmr.co.uk and we’d be happy to talk to you.

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