Businesses are regularly challenged with an increasing array of product and service requirements that are often the result of industry best practices, customer requirements, or management innovation initiative, to name a few. The way that the business (private, not for profit, or governmental) is able to respond to these challenges helps to determine the business’s ability to provide these products and services effectively and efficiently.
This article discusses the dynamics of these challenges, and presents an opportunity for business owners to effectively manage the business changes resulting from these product and service requirements utilizing process improvement planning and implementation tools.
The ability of a business owner or executive to effectively determine the cost and time necessary to deliver existing products and services relies, to a great extent, on costing allocation methodologies as well as the increasingly adaptive performance measurement process.
The key components to measurement (KPI or Key Performance Indicators) can include a description of the inputs (personal services, expenses, operating capital, and time to deliver), the outputs (units of service delivered during a cycle or period); and the outcome measures (indicators of results such as the quality, timeliness, or effectiveness of services provided: e.g. customer satisfaction, problem alleviated by x %).
The ability of an owner or executive to effectively determine the cost for a newly proposed product or service is similar, but a little more daunting, since the benefit of experience and hindsight to benchmark the cost is usually absent.
Inherent in the discussion of existing and proposed additional products and services lies the premise of effective and efficient service delivery. Businesses continue to experience increased financial constrictions on their ability to operate as a result of economic forces such as wage pressure, competition, information technology advances, raw material and transportation pressure; and must often choose which, of the multitude of products or services it can provide, that it will provide effectively and efficiently; thereby leaving all the other desired products and service decisions to “when there is time and resources to do so.”
If owners and executives could measure accurately the cost and time necessary to deliver these services, and could then determine how to reduce the cost and time necessary to deliver, would the financial and time resources now made available enable the more effective delivery of those “essentially non-delivered services?”
These questions begin to cause the owner or executive to examine the true cost/benefit of the delivered or produced products and services. Before describing an effective method for doing so, it is helpful to determine why a manager would critically evaluate any procedure by looking at the objectives for a review. These include but are not limited to the following:
Perhaps as important are the following reasons why processes may not be reviewed:
In subsequent articles I’ll provide further illustration of how cracking the process improvement code can improve your business’ productivity and profit. In the meantime, perhaps you can start thinking about your answers to several of the questions presented above.