May, 2008

Total Operations Thinking

Operations isn't a department; it's a way of doing business

By Tom Fife

Ask yourself if any of these situations sound familiar: “Our accounts receivables are a mess! We take way too long to collect payment from customers, and it seems like we’re using our credit line to fill our customer’s new orders while invoices go unpaid.”

Or this: “Our driver’s safety program is going nowhere and the drivers laugh every time it’s mentioned. It’s a good program, set up to reward the drivers for an outstanding job of safe driving. That’s not operational—it must be administrative, right?”

Or how about this:

“Returns from this job are unbelievable! It often takes two people several hours or even two trucks to get it all! It’s a clear estimating error, or the salesperson is asleep on the job, but this can’t be an operational problem, right?”

The simple truth is, these days the operations blanket covers almost everything we do in our companies.

The challenge we face is to open our team’s eyes as to how each and every step along the operations path is critical to making the next step work. Each team member has the ability to make the next step a building block—or a stumbling block—for the operation.

Take the case of the high number of collection days. That’s often the result of the customer saying, “That bill is not right and I’m not going to pay it until it is!” When we really look at what’s happening, many times it starts with a decision somewhere in back operations rather than accounts receivable.

For example, say one of your employees is filling an order that calls for four 2x4x16s, but you’re out of those. He substitutes eight 2x4x8s, instead. Unfortunately, he also forgets to have the invoice changed to correctly list the new lengths. The customer questions the bill and then doesn’t pay on time. Then you need to trace this problem back through sales, estimating, the dispatcher, the yard foreman and the load builder until you find out what happened.

Or consider the situation where the drivers keep laughing whenever you try to talk about your safety program. Your senior driver finally informs you that no driver has received any award in the past five years because the standard is simply set too high: You demanded that your drivers not dump in the wrong spot on the job site; have no preventable breakdowns such as clutches, transmissions or rear end replacements, and last, you threw in “no late days” as a clincher. (In retrospect, perhaps demanding “no late days” was going too far, but darn it, you needed your drivers there!)

The lesson here is that a program to reward superior operation that isn’t realistic is no incentive at all.

Finally, what about those gigantic returns that come all at once? If you made it your drivers’ responsibility to ask every time they delivered if there was anything that could be returned for credit, it would eliminate a lot of the problem. By educating your drivers about the building process, they would know what material the framers were done with so the return order wouldn’t be placed in the dispatcher’s lap at the end of the month. Proactive sales stops and calls would make that work more smoothly.

Why merely react when we can initiate communications? Operations? Absolutely!

The key is to understand that “operations” isn’t just a word that applies to those duties done in the yard, the shop, and by delivery personnel. “Operations” is a blanket that covers the whole company. Every job is part of the operation and every person’s job is affected by another’s in the complete operation.

Operations isn’t a department; it’s a way of doing business. If done correctly, it assures a smoothly sailing ship. If done incorrectly, it just smothers the company with rework, procedure searching, and inefficiency.

I can help. Just holler.

TOM FIFE is a 20-year veteran of the construction supply business and president of Unionville, Ind.-based Challenges Inc., a speaking, training and consulting firm. Seminar topics include employee motivation and retention, customer service, management skills and yard foreman skills. For additional information, call at 812.330.1640, e-mail tom@tomfife.com, or visit www.tomfife.com.