IndustryWeek Forums - Manufacturing Talk

Value Pricing Research

Jerry Bernstein — Fri, 20 Nov 2009 16:07:43 GMT

What do customers value in your product and services? What is their willingness to buy? Will they pay a premium for your product. You can get answers to these questions, and you can get started on your own. Qualitative research is much less expensive than quantitative work, and often will provide answers that reduce the need for quantitative research.

The first step is to design an Interview guide. Questions should fall into categories designed to satisfy your overall objectives, which might include some of the following:
1. Test or validate the assumed and any potential value propositions. This can be a list that you ask the respondent to score for the importance or value of each item. If interview is in person this could be conducted as a "game".
2. Gain greater understanding into the barriers to switching to your product and/or new technology that your product offers. See if you can determine if the respondent is dissatisfied with their current solution, dormant because they have no perceived problems with their existing solution, looking to improve their process or position, or if their company is growing and in need to make a purchase in the near future.
3. Gain qualitative or directional input to defining the trade off position the product could offer. You might simulate a likely purchase scenario and ask questions aimed at judging their response and likely outcome.
4. Develop questions that aim to define from the customer perspective the ultimate and acceptable whole product solution.
5. Consider questions that would qualify a respondent to participate in an early adopter phase of the product.
6. Develop a list of questions that will collect demographic information that may be of use either now or later.
7. Write questions that increase your understanding of the purchase process for your product.

For practical articles on pricing: http://valuepg.com/Articles.html

Pricing: Reverse Auctions

Jerry Bernstein — Mon, 16 Nov 2009 15:18:31 GMT

A common supplier pricing mistake is thinking Reverse Auction award decisions are based only on price. In most Reverse Auction events price is not the only factor that customers consider. If the customer doesn�t publish in the Event that the �Lowest Bidder Wins� than in most cases factors other than price are used in the award decision. Suppliers are often intimidated by the process, not thinking of the risks that customers face when changing suppliers. Suppliers that only sell on price are bound to lose.

For practical pricing guides and articles http://valuepg.com/Articles.html

Run for Cover, The Auditor is here!!

examplecg — Sun, 15 Nov 2009 15:37:24 GMT

Run for Cover, The Auditor is here

Product, Process and System auditing has been used extensively in organizations for many years to track extent of implementation to established standards. It is also utilized to verify whether standards established are in line with global standard frameworks for eg., ISO, CMM etc.,.

In specific, compliance audits are often perceived by the workforce to be "policing" activity and most organization members find it a "plague to avoid" as much as possible. There are many reasons for this such as:

* The way audit is positioned in the organization by top/senior management and the auditing functions (say Process/Quality/Operational excellence (or) Accounts (in case of financial audits)
* The repetitive experience of employees over series of audits which primarily focus on finding "deviations and non-conformances" vs. established standards and makes employees feel like culprits.
* Often "dictatorial" way in which audits are conducted. Hey, I am here for an audit, you should leave all your job and listen to me (or) Send an audit schedule weeks ahead of time and land on the D-Day to make the doers life miserable

Often in audit, the focus is on finding "objective evidence" of non-conformance to established standards or requirements. While this in itself is the intended purpose of any audit, the attributing causes / reasons for such non-conformance is generally left to the persons / team which operates the process to investigate and fix via a corrective action report or plan.

Quite often I notice auditors are inadequately trained (if someone has extra time, make him an auditor), unclear themselves on the width and depth of processes to be audited, become "one size fits all" auditors (if I get trained/certified once as an auditor I am now capable of auditing anything and everything in the organization) besides many other shortcomings.

While auditor training is extremely important and ongoing competency upgradation is a must (given that periodic changes in technology, tools and ways of doing business (for eg., outsourcing work to partners etc brings about major changes in the way organizations run businesses), I have frequently noticed the audit can much more effective if one takes into consideration the following elements.

I believe the audit process besides checking for compliance should seriously consider and help address:

How adequately is the standard defined and documented?

(If you look at most standards definitions and documents in the company (whether product/process/service/inspection/testing etc.,), they read like the "Constitution of India" - Boring/uninspiring and unappetizing to even pick up and read (Employees keep talking that "if you want to go to sleep, read our company's Quality / process manual). Making the organization standards and documentation easy and presentable to read can never be under-emphasized. Use of as many pictures, visuals, samples/illustrations, diagrams, photographs etc will induce better interest for employees to read through the standards and also quickly refer to it in times of need and this automatically improves the situation. Besides, doing a "failure mode" assessment of standards when they get defined to identify gaps in standard definitions and in its potential deployment will really help)

How well is the standard communicated?

In implementing standards, usually a few training sessions are held where batch of employees of the company are herded into conference room and are "downloaded" with "knowledge" about the standards. After that they are expected to "strictly" implement and comply with it. In this age and time when public memory is so short and there are hundred of priorities for employees to take care, it is unrealistic to expect employees to well remember the standards and follow it to the "t". The team which is responsible for such communications (for eg. CMM/SEPG/ISO team etc.) should make a detailed communication plan that well and truly ensures knowledge about the standards reach the employees not just in the beginning but everytime when there are changes, or new employees join or people get transferred across teams/groups/locations (or) join back after long leave/sabbatical etc., One should consider organization "standards" like a product being sold to prospects and plan to "market" it well within the company so that customers (employees in this case) will have high "standard (brand) recall". Communication strategies could include use of posters, technology tools (intranet alerts, standard of the day campaigns, e-mail/newsletter campaigns of changes to standards on periodic basis, quiz/contests etc.). Think like a marketing person and get innovative in communicating standards and I am sure compliance levels will be much better.

How well is the standard understood?

This is a very important step in order to achieve high level of standards compliance. Often employees are communicated but do not fully understand the purpose and import of the relevant standards. Activities such as "short and quick refreshers" (instead of long boring full day sessions), group studies (joint study and interpretation of standards - like we used to do in school/college of group studies!!), "Standards hour" where team members spend time addressing gaps in understanding of standards and identifying exceptions which requiring modification of standards, illustrative examples of "what is correct undertanding" and list of what is wrong understanding (based on past audit outcomes / instances and failure mode assessment data), multi-lingual training (if employees / lower level staff are not comfortable understanding things in English, nice quick e-learning capsules, quiz/test/contests, conducting events and entertaining workshops (where standards are demystified and making it easy for people to understand) are initiatives that can go a long way to help employees well understand and comply.

Remember it is essential that time and resources be budgeted along with a well developed strategy to make such things happen. Creating excitement in employees that standards are primarily help them to do a better and productive job (so that they can go home at 5.00 pm and enjoy both professional and personal life!!) is vital to get buy-in and high level of voluntary involvement in implementing standards.

How well is it complied?

This is the last but not the least element of good standard implementation. If the above explained aspects are well undertaken (I call them the "process" of deploying standards in the company), the result i.e, extent of compliance (or) #of non-conformances per standard audited will be much better. Such a transformation will take some months to achieve and will really start improving in the medium to long term for the betterment of the organization.

I am sure a structured approach to developing and deploying standards in the organization will largely take away the fear and anxiety that most employees have on the "AuD-Day" or the running around that companies do 2-3 days before an external audit as well as bring a sense of calmness and confidence to boldly get subjected to audits whether planned or surprise ones, whether internal or external and come out with flying colors.

These are based on my personal experiences both as an Auditor and Auditee to many organizations as internal / external consultant resource and I hope it is beneficial in a small way to our forum members.

Post your experience and comments!!

Sethu V
eXample Consulting Group
www.examplecg.com
(Enabling Excellence!!)
Forum: http://leansigma.groupsite.com

Why Lean Doesn't Work

GStocker — Thu, 05 Nov 2009 21:47:51 GMT

Just to be clear, I am a huge fan of lean. I am a huge fan of Toyota and have seen some great results from projects over the years. Lately it seems, though, that lean in the United States and Europe is turning into just another overused, misunderstood concept that everybody does but few actually do well.

Read more at http://corporatedeathspiral.blogspot.com

Video: New Zealand's Lean Manufacturing Initiative

Frank Chloupek — Mon, 19 Oct 2009 23:15:50 GMT

Posted on youtube by Tigadee00.

A description of New Zealand's efforts -- through their Heavy Engineering Research Association (HERA) -- to increase productivity in their heavy metals engineering industry. The speaker is HERA Director Dr Wolfgang Scholz.

Manufacturers Need To Manage Inventories in a Changing Economy

DHowardell — Mon, 12 Oct 2009 00:33:39 GMT

During the current economic downturn many manufacturing and distribution companies are discovering that a small drop in sales can result in a much larger drop in inventory turns. As planners, buyers and managers whose performance is often measured by inventory turns, we need to understand why this happens and what we can do to avoid it.

First, most companies will admit that they had too much inventory to begin with and that they din’t react to changes quickly enough. But even when we do react well to a drop in demand, our systems are typically using the same replenishment parameters that they were programmed with months or even years before.

Using one popular measure of inventory performance, IQR, confirms this fact. The IQR for most of the over 400 companies we have surveyed is in the 30% to 45% range. The Inventory Quality Ratio is the ratio of the active inventory dollars to total inventory dollars. In a theoretically perfect situation (i.e., with no excess, slow moving or no moving inventories), the IQR would be 100%. So an IQR in the range revealed in the survey means that approximately 60% of inventory dollars are tied up in excess, slow or no moving items.

The major reasons that inventories go up in a down economy are:
• Our inventory systems and metrics, like turns and Days Inventory Outstanding, are backward looking.
• Our ABC classifications are out of date.
• Our order quantities and safety stock levels are based on past usage.
• We are still planning part quantities rather than managing inventory dollars.

To manage inventories effectively – in any economy, but particularly with changing demand – we need systems that are dynamically demand driven and that provide a dollar focus. Forward-looking demand-driven ABC classifications are needed to revise our order quantities and safety stock levels. Most importantly, we need to focus on the value of the inventory so that planners and buyers can be more effective in choosing the most important issues to work on first. Since we have limited time to work the issues, we need to make it easy to identify the ones with the biggest dollar returns.

Here again, many companies have found IQR helpful. The Inventory Quality Ratio methodology provides an effective way to manage inventory dollars and improve inventory performance. The IQR technique and tools help; to prioritize improvement opportunities, to set meaningful inventory targets, and to revise safety stocks and order quantities consistent with current demand, all of which make the planners’ and buyers’ jobs easier.

Whatever tools we use, in any economy we can do a better job of managing inventory levels and working capital by using demand-driven inventory logic and having a dollar focus. This will allow us to respond more quickly and effectively in dealing with the inevitable changes in demand for raw materials, purchased parts and our finished goods.

Furniture Manufacturer Uses 'Made in the U.S.A.' to Lift Sales

Frank Chloupek — Thu, 08 Oct 2009 00:26:49 GMT

Interesting case study from MarketingSherpa on how Indiana furniture manufacturer Foamiture used promotion of it's American-made products to boost their sales 10%.

The study is available at http://www.marketingsherpa.com/article.php?ident=31383 (free for 10 days, costs thereafter).

The details are in the study, but in short after first verifying their claims (not necessarily a simple task) they launched the messaging on their Web home page, on individual product descriptions, packaging, and phone contacts.

The results after 6 months were impressive.

19.1% increase in orders per day
4.6% increase in order value
10.1% increase in total sales

(taken from the case study cited above)

Anyone know of any made in the USA case studies? either positive or not?