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Hi. Alan Stratton here from Cost Matters dot Com
According to Peter Drucker “There is nothing so useless as doing efficiently that which
should not be done at all.” With developments in technology, we now have the ability to
automate more processes than ever before. While I am an advocate of applied technology,
another rule applies, “Don’t automate what you don’t need to do.” Indeed, computers
can process more transactions and faster than ever before. But this very efficient processing
may be quite useless. I once consulted with a heavy equipment manufacturer.
For this project we needed participation from production control personnel for an important
improvement project. However, these people were scrambling to maintain all the transactions
flowing through their system. As the inevitable glitches hit, they went into expedite mode.
To make matters worse, the more they expedited, the more glitches appeared and the more they
needed to expedite. They seemed to be caught in a vicious cycle.
While waiting for them, we analyzed a typical bill of material. On a whim, we counted the
number of items on the bill of material and tabulated the value. We chose an arbitrary
break point of $1 in total cost. The results were amazing. At least 85% of the items on
the bill of material contributed less than $1 each to the total cost. The total cost
of these items was less than $500 or less than 1% of the total cost. When we applied
these findings to the production control system, we realized that they were expediting all
lot of transactions that had very little value. Was this a situation where they were doing
something very efficiently that should not be done at all? We thought so. We recommended
gradually implementing a Kanban system and discontinuing production control tracking
of small value components. Actually, a Kanban system was only one possible
alternative. Some companies have specialized vendors manage selected commodities on their
own shop floor. These specialists know the components well. They can relieve the company’s
own personnel to what they do best and add more value to the process. What was the cost
of a little bit of theoretically excess inventory? What was the cost in technology and personnel
to process all these low value transactions? No company and no discipline are exempt from
taking Peter Drucker’s advice. Technology makes much more possible. But we still need
to take a step back and analyze what we’re doing and why we do it. Nothing can be more
productive than stopping a very efficient but useless practice. These situations abound.
Every company needs to re-consider what they do and why.
So what are you doing very efficently that should not be
done at all? Please share below this post at Cost Matters dot com.
When Cost Matters, Profits Soar. I'm Alan Stratton from Cost Matters dot Com THANK YOU