BUSINESS DEVELOPMENT
The supplier of this product has wasted his design talent in offering functionality or design features that he believes are worth a price of 105. The customer is not interested. The supplier has wasted his time.
Furthermore, this offer is made at a cost which leaves the supplier with no inclination to sell at a price less than 80. We can see that the Zone of Probable Agreement (ZoPA) is restricted to the small range between 82 and 86.
I guess you have seen as many examples as I have of products designed by the company’s technical team who, in essence, have been locked in internal competition to build something with more bells and whistles than each other with little credence given to the customers’ specification of value. The supplier who matches his offer to the customers’ specification of value will not be wasting all this time and money.
The other wasteful design is the one that has given no consideration to production cost. Being sensitive to the customer specification of value and mindful of the cost of production are not contradictory influences. More often than not the use of standard components or standard production processes will not negate an aspect of design which has value to the customer.
Now we can look at the supplier who has a better chance of success.
This supplier has achieved two important targets
1 He has restricted his design to fit the customers’ specification of value. The best price for him would be 100, the very limit of the buyer’s tolerance
2 He has achieved a cost saving efficiency that far exceeds that of the other supplier.
This elimination of waste has put him into the position that he is still able to sell at a price of 65 without losing money. As a consequence, the Zone of Probable Agreement (ZoPA) for this buyer and seller is huge by comparison.
The elimination of waste under point 2 above is the vital ingredient to success. Let’s remind ourselves of the definition we started with.
Everything that adds cost, but does not add value is WASTE.
WASTEFUL OPERATIONS
Think of your own operation and quickly list down the 5 changes you would make, no matter how big or small, that would save cost without making any difference to the customers’ perception of value.
…….3 MINUTES LATER. Done it?
Good, now you can make those 5 changes without delay.
To help you find another 5 it is always useful to run through the 7 classic (Japanese) categories of waste.
TIM WOOD T = Transport. Any unnecessary transportation of men or materials I = Inventory. Despite what accountants tell you inventory is a potential liability M = Movement. An individual’s unnecessary movement in the execution of their job W = Waiting. The unavailability of men or material that causes work to stop O = Overproduction. Committing resources to activity that is not required yet O = Overprocessing. Applying processes that have no value to the customer D = Defects. Committing resources to products that are not fit for purpose
Do you feel that it is not quite the done thing to pay homage to the Japanese pioneers of continuous improvement? “After all, theirs is a very different culture, they are more regimented than we are, and more used to obeying orders” I hear some people say.
Let us not forget that the Quality Management systems, perfected in Japanese companies such as Toyota, were begun by the American managers who were appointed to rejuvenate Japanese industry after World War II. It was Deming and Duran who were the catalysts of these principles.
In realising the potential benefit to your own team I would urge you to explore further the insight that a focus on TIM WOOD will bring. As an example of the changes that are possible, that save cost without decreasing the customers’ perception of value I refer you to the square water melon.
In the cost
conscious food market the cost of transport is a significant element of the price to the consumer. In order to reduce this element,
without decreasing the customers’ perception of value, watermelons have been grown in moulds so that more melons can be fitted into a given cubic space for transport. As a consequence the transport cost per melon has been reduced, to the benefit of the customer.
The management of waste is not a job for the boffins, or for the ‘deadwood’ in your team. It is the way to sustain your business, the way to offer competitive prices without sacrificing your profit margin and the way to build stronger relationships with customers who have a very clear specification of value. It is a job for every member of your team, and especially for you.
If you want to know more about the Renewables Development Programme, or about Renewables Network Ltd don’t waste any more time...
Ring John Britton or Sam Pick on 01482 638464.
In any event, the only way to improve your own operation is to identify the principles that have been proven to work by others, and to make these principles your own by incorporating them into the culture of your own organisation.
If you, as the catalyst of change for your team, do not work out how a new principle can be incorporated into the workplace culture of your organisation then there is virtually no chance that your team will take ownership of the change, improve their level of performance and deliver the available benefit.
www.windenergynetwork.co.uk
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