Proving Continuous Improvement with Profit Ability

Russ Jones

Description

The goal of this book is to demonstrate to manufacturing, distributor, and service businesses that there are only seven critical business elements from which continuous improvement projects can be discovered, financially evaluated, and ranked before implementation. They are: Increase sales by increasing the percent of market coverage. Reduce expenses by reducing the percent of labor and non-labor expenses per sales dollar. Reduce lead times to reduce work-in-process inventory investment. Reduce setup costs to minimize product and component inventory investment. Maximize capital asset utilization percent. Minimize asset investment for invoice payment by controlling the collection period within the contracted time period. Maximize employee knowledge worker utilization by empowering them with financial and practical training related to these seven business elements. The information is uniquely organized so it can serve as a frequent reminder for both the experienced and inexperienced of the few principles and financially-based formulas that must be built into company culture if both customers and stockholders are to be satisfied. Project teams are shown how to discover and financially evaluate and rank a vast number of continuous improvement projects.

Sujets

• Business
• Qualité, hygiène, sécurité, environnement
• project management
• Gestion et management
• management
• Economics
• QMS

Informations

• Publié par: ASQ Quality Press
• Date de parution: 30 juin 2008
• Nombre de lectures: 0
• EAN13: 9781636940724
• Langue: English
• Poids de l'ouvrage: 3 Mo

Extrait

Proving Continuous Improvement with Profit Ability

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To request a complimentary catalog of ASQ Quality Press publications, call 800-248-1946, or visit our Web site at http://www.asq.org/quality-press.

Proving Continuous Improvement with Profit Ability

Russ Jones

ASQ Quality Press Milwaukee, Wisconsin

AmericanSocietyforQuality,QualityPress,Milwaukee53203 © 2008 by ASQ All rights reserved. Published 2008 Printed in the United States of America 14 13 12 11 10 09 08 5 4 3 2 1

Library of Congress Cataloging-in-Publication Data

Jones, Russ, 1932–  Proving continuous improvement with profit ability / Russ Jones.  p. cm.  Includes bibliographical references and index.  ISBN: 978-0-87389-742-6 (hbk. : alk. paper)  1. Corporate profits. 2. Rate of return. 3. Capital investments. 4. Management.  I. Title.

HG4028.P7.J66 2008 658.15'5—dc22

ISBN: 978-0-87389-742-6

2008021018

No part of this book may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.

Publisher: William A. Tony Acquisitions Editor: Matt T. Meinholz Project Editor: Paul O’Mara Production Administrator: Randall Benson

ASQ Mission: The American Society for Quality advances individual, organizational, and community excellence worldwide through learning, quality improvement, and knowledge exchange.

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To place orders or to request a free copy of the ASQ Quality Press Publications Catalog, including ASQ membership information, call 800-248-1946. Visit our Web site at www.asq.org or http://www.asq.org/quality-press.

Printed in the United States of America

 Printed on acid-free paper

Table of Contents

Note to the Reader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acronym List. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 1 Double Your Return on Assets Percent . . . . . . . . . . Sources of Knowledge for this Book. . . . . . . . . . . . . . . . . . . . . To Business Owners and Managers. . . . . . . . . . . . . . . . . . . . . . Chapter 2 The Seven Critical Business Elements. . . . . . . . . . . The Seven Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 3 Seven Project Groups for Project Teams. . . . . . . . . Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 Seven Project Groups You Can Start Today. . . . . . Project Group: Maximize Employee Asset Utilization. . . . . . . Project Group: Increase Sales and Market Share . . . . . . . . . . . . Project Group: Reduce Expenses per Sales Dollar . . . . . . . . . . Project Group: Reduce Lead Times . . . . . . . . . . . . . . . . . . . . . . Project Group: Reduce Setup Costs . . . . . . . . . . . . . . . . . . . . . . Project Group: Maximize Capital Asset Utilization . . . . . . . . . Project Group: Control the Customer Invoice Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . What Comes Next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 Project Evaluation and Project Goal Setting . . . . . . Worksheets for Gathering Financial Data . . . . . . . . . . . . . . . . . Project Evaluation Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ROA Improvement Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 6 Empowering Employee Teams. . . . . . . . . . . . . . . . . . Seven Realities to Internalize . . . . . . . . . . . . . . . . . . . . . . . . . . . Get the Most Out of Employee Assets. . . . . . . . . . . . . . . . . . . .

v

ix xi 1 3 4 5 5 17 18

31 32 33 34 35 36 37

39 39 41 42 45 45 61 61 64

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Table of Contents

Team Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Gain Sharing Incentives . . . . . . . . . . . . . . . . . . . . . .

Chapter 7 More About Project Evaluation and Ranking . . . . . Using Profitability to Prioritize Projects. . . . . . . . . . . . . . . . . . Use of Actual Confidential Financial Numbers . . . . . . . . . . . . . Using Your Company’s Business Cycle to Time Project Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Make Use of the 80/20 Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 8 Projects to Reduce Total Expense per Sales Dollar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Few Accounting Truths. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segregating Budget Line Items. . . . . . . . . . . . . . . . . . . . . . . . . . Lean Waste Discovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lean Improvement Building Blocks. . . . . . . . . . . . . . . . . . . . . .

Chapter 9 Projects to Reduce Lead Time and Inventory . . . . . Document Customer and Manufacturing Lead Time Mismatches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reduce Manufacturing Lead Time. . . . . . . . . . . . . . . . . . . . . . . Reducing Distribution and Service Business Lead Time . . . . . . Apply Lean Value Stream Mapping . . . . . . . . . . . . . . . . . . . . . .

Chapter 10 Projects to Reduce Setup Cost and Inventory. . . . Setup Cost and Commonsense Lot Sizing . . . . . . . . . . . . . . . . . Financially Sound Lot Sizing . . . . . . . . . . . . . . . . . . . . . . . . . . . Product and Process Design to Reduce Lot Sizes . . . . . . . . . . . Lean Quick Changeover Concepts . . . . . . . . . . . . . . . . . . . . . . . Lean Cell Design and Implementation . . . . . . . . . . . . . . . . . . . . Supplier Setup Cost Control and Reacting to Price Breaks . . . . Dispose of Surplus Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 11 Rationalizing a Material Control System. . . . . . . . Rationalizing a Material Control System . . . . . . . . . . . . . . . . . . Improving Inventory Control. . . . . . . . . . . . . . . . . . . . . . . . . . . Production Control Improvement . . . . . . . . . . . . . . . . . . . . . . . . Charting Material Control System Performance Evaluation. . . Chapter 12 Linking Continuous Improvement With ISO 9000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 13 Projects to Increase Market Share . . . . . . . . . . . . . Companywide Marketing Planning. . . . . . . . . . . . . . . . . . . . . . Market Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66 70 73 73 74

74 75

77 77 82 86 95 99

99 104 115 119 129 129 131 140 144 149 155 159

161 161 165 181 193

199 213 213 214

Table of Contents

Marketing Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increasing Market Share Through Acquisitions. . . . . . . . . . . . . Placing a Value on a Business . . . . . . . . . . . . . . . . . . . . . . . . . . The Acquisition Team and Process . . . . . . . . . . . . . . . . . . . . . . Improving Customer Service. . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 14 Plotting Your Economic Business Cycle . . . . . . . . . A Business Cycle Pictured As the Percent Rate of Change . . . . Reasons to Plot Your Business Cycle Each Month. . . . . . . . . . . Calculate and Plot Your Company’s Business Cycle. . . . . . . . . Interpretation of a Business Cycle Picture . . . . . . . . . . . . . . . . . Company Decisions During Each Business Cycle Phase. . . . . . The Calculation and Plotting Process. . . . . . . . . . . . . . . . . . . . . Leading and Following Economic Indicators . . . . . . . . . . . . . . Chapter 15 Continuous Improvement versus Creativity . . . . . Chapter 16 Seven Sources of Entrepreneurial Innovation . . . . The Three Groups of Knowledge Resources. . . . . . . . . . . . . . . Managing Entrepreneurial Innovation . . . . . . . . . . . . . . . . . . . . The Business X-Ray . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Seven Sources of Innovation . . . . . . . . . . . . . . . . . . . . . . . .

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

vii

222 226 234 238 245 251

257 257 258 259 260 260 263 266 269 271 272 273 275 275 281 283

Note to the Reader

t may appear at first glance that this book is primarily oriented toward I manufacturing businesses. You may have gotten the same impression if you’ve implemented lean manufacturing, Six Sigma, or ISO 9000 qualitystandards.BeassuredthatIalsofocusonservicebusinessesand distributors as well as those companies that include some elements from all three categories. For example, in Chapter 5 I provide two different forms for gather- ing the financial data required to understand and apply concepts in the other chapters. One form is for a manufacturing business while the other is more suitable to a distribution or service business. Chapter 1 speaks more directly to this issue and the third section of Chapter 9 is specifically dedi- cated to distribution and service businesses. All forms and charts in the book are intended to be used by you as a starting point to design your own forms that more closely resemble your current financial statements. Throughout the text I have also tried to point out which chapters or sectionsofchaptershavelittlevalueforadistributionorservicebusiness.

ix