Sometimes I am reminded of the mechanic in the old AAMCO commercial who says, “Pay me now or pay me later”. This is especially true when I see executives and managers delay proactive strategic and organizational planning until after current projections start to decline. Unfortunately these also tend to be the same organizations that don’t see the value in continuing education/training for their people or preventive maintenance for their equipment.
Strategic planning is preventive maintenance for the whole organization. By the time things are beginning to slip, it is past the ideal time for new ideas and strategies to be set in motion. We need to prepare yearly, monthly and even weekly to make sure that we are always on track with our plans and our goals. If we wait until we need help, many times it is too late.
Recently I was working with a client to develop a new overall strategic plan for his business since it was growing faster than originally anticipated. A nice problem to have in this economy. While we worked on the traditional macro analysis for a new five year plan, he mentioned that he was getting ready to purchase more trucks, hire more drivers and warehouse workers to handle the current increases in sales and deliveries. Using the existing strategic plan we were able to look back at the projected ratio of trucks to deliveries and to dollars of sales. Something seemed off. We did a quick tour of the distribution center to get a feel for the work levels on the warehouse floor. Everywhere we looked, there was a tremendous hustle and bustle. This seemed like a good sign that capacity was being maximized. Maybe the plan ratios were off. People not only seemed busy, they were swamped. The client’s instinct seemed right. Putting on more staff and buying more equipment seemed like the right answer for handling this upswing in sales and deliveries. At first it appeared that a mistake had been made in the existing plan but after a more detailed examination of the problem, we discovered something else entirely.
When we looked at the number of stops each truck was expected to make daily, the numbers seemed right but the sales numbers were off. What set this client apart from his competitors was their next day delivery guarantee. Any order placed by 3pm was promised the next business day.
This pressure, combined with the sales increases, made the people filling the orders move through their areas in the warehouse quicker than they should. That produced a rising error rate for the products being sent out. These errors caused the number of pickups and redeliveries to rise dramatically, looking like a much bigger bump in sales than was accurate.
Once we identified the real problem we were able to make the right corrections. More staff and equipment would have fixed the problem initially but without a plan, the same errors would have returned again and again.
Instead of hiring more people, we trained the pickers and packers to SLOW DOWN and focus on completing the order correctly. As the mistakes decreased, the system became balanced and the pickup for errors and redeliveries went down by 75%. The need to issue credits and then re-bill clients dropped down to acceptable levels. The need to hire new staff and invest in new equipment vanished, saving hundreds of thousands of dollars.
Our plan was now back in balance. These changes had a profound effect throughout the organization. The warehouse people were proud of doing a quality job. Drivers were happy they had to only make a delivery once. The billing department was relieved to reduce the number of transactions per client, per month. Their clients were satisfied because they got what they wanted, when they wanted it.
This all fell into place because a strategic plan was developed BEFORE it was needed. Many executives and managers think they are too busy to stop long enough to plan effectively. Like most businesses, people feel too busy doing their work to examine how the work should be done. One hour of planning is worth days of effort finding and fixing problems caused by “quick fixes” fueled by instinct alone. Instinct in business is critical to success but it is planning plus instinct that insures success.
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