CEO JOURNAL
The Smooth Pool E
very company has its own cul- ture; its own, unique habits, language, and perspective. For
this reason, and despite the fact that the root causes of poor profitability are invariably similar, the path to over- coming them must be understood in words and concepts that are tailored to each unique culture. One such con- cept that I use to describe the desired future state is Te Smooth Pool. Te Smooth Pool, as in a com-
pletely still pond or other body of water, refers to a business that achieves and maintains an internal environ- ment and set of external customer relationships that are without a ripple of discord. Tis is, of course, an unat- tainable ideal, but is a destination CEOs should vigorously pursue as a means of motivating and directing profit improvement. Te journey begins when metal-
casters choose to become particular about who they do business with and which parts they agree to produce. Tis is the essence of the single most important management principle of all—compatibility. Compatible ac- counts are with customers that expect from the precise product and service offering your business is set up to provide. Likewise, compatible cast- ings are those parts that run smoothly through your operation largely with- out scrap, special handling and delays or trouble of any other kind. Once metalcasters decide to do business only with compatible ac- counts and produce only compatible castings, they must rid themselves of the customers and parts which do not fit. I realize that for many this advice amounts to heresy, but the fact of the matter is that the number one cause of waste, inefficiency and cost-driven profit and loss (P&L) trouble in our industry is too much work that doesn’t fit. Likewise, once metalcast- ers decide to do business only with compatible accounts and to produce only compatible castings, they must adjust their sales approach and quot- ing habits accordingly.
48 | MODERN CASTING February 2012
DAN MARCUS, TDC CONSULTING INC., AMHERST, WISCONSIN Compatibility is the genesis of an
internal environment that aspires to operate without a ripple of discord. Without it, metalcasters will con- tinue to be vexed by excessive scrap, needless equipment and maintenance difficulties, unnecessary injuries, poor productivity and high costs. Con- versely, a resolute commitment to compatibility of- fers a cure for all of these plagues and, furthermore, makes possible an aspiration to customer relation- ships that contain nary a ripple of discord. Smooth cus-
Smooth customer relationships are created when
tomer relation- ships are created when metalcasters deliver on time, every time and in less than five weeks. Simple, but not easy, as con- sistently achieving very high levels of on-time performance while main- taining short lead times requires a ripple-free internal environment. Not easy, but a determined commit- ment to moving in this direction can be spectacularly rewarding. Customer relationships charac-
than five weeks.
metalcasters deliver on time, every time and in less
pricing flexibility exists. In fact, getting to and staying at this level of performance provides metalcasters the opportunity to effortlessly (well, al- most effortlessly) adopt profit-orient- ed market pricing and, thereby, cure our industry’s number one revenue- driven cause of P&L trouble—prices that are too low. Moreover, the combination of compatibility, cost minimization, and market pricing builds appropriate- ly healthy margins into every job, which in turn pro- vides a revenue- driven boost to the monthly P&L’s bottom line and brings the business that much closer to profit maximi-
zation. Further, as the business cycle turns, those healthy margins insulate the business from the worst effects of economic downturns and help manag- ers resist the desire to pursue volume growth at almost any price. Another reward of the Smooth
terized by high levels of on-time performance and short lead times are indicative of a metalcasting facil- ity that is operating with minimal scrap and at the lowest possible overall cost. As indicated above, achieving this level of performance means achieving a singular focus on compatible work and, therefore, eliminating all of the waste and in- efficiencies that accompany the parts that don’t fit. In turn, cost minimi- zation means a monthly P&L char- acterized by a smaller cost of goods sold line and a larger bottom line. Similarly, customer relationships
characterized by very high levels of on-time performance and short lead times are those in which maximum
Pool is that the need to sell dimin- ishes as the ripples disappear, so much so that it is possible to reach a point where the sales force can be eliminated altogether. Tis feat is made possible by building a business that literally sells itself by virtue of its devotion to compatibility and its ability to achieve and maintain excellent delivery perfor- mance, engineer conflict-free customer relationships and price wisely. In such cases, a part-time inside sales pres- ence is all that is required to coordi- nate and sustain ripple-free customer relationships and encourage those highly satisfied compatible accounts to consolidate patterns with their most consistent, least problematic and best performing casting supplier.
Keep the conversation going. Reach the author at
tdcmetal@wi-net.com to comment on this or any CEO Journal column or to suggest future topics.
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