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Archive for the ‘Improvement of Variable Costs’ Category

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When CIOs and IT managers start wondering about how to effect Lean Improvement and cut wastes in their departments, the big possibility is lying right under their very own noses – Software Licenses!

Many large companies, and even medium sized companies these days, have volume licensing with companies like Microsoft. When a new employee joins, quite often there is a new PC and all desktop software like Office and sometimes diagramming tools, graphic design tools and project management software may be installed on this machine, each one taking a license off the approved list of licenses that company has with the vendor.

Unfortunately, the ugly, unspoken truth of many companies is that when the employee leaves, the disk is formatted and the PC may be recycled for another employee with installation taking one more license all over again!

With hardware it is even worse. Of course, 5 year or even a 3 year old computer hardware is hardly useful but the amounts of money spent on buying new hardware while another department is cutting back on employees and freeing hardware is often is not considered carefully.

Many large companies are implementing Asset Management software that can reclaim and reuse hardware and software wherever they can and that’s a very useful Lean Improvement project that one can undertake.

In fact there are many vendors like Redbeam that can serve even smaller companies cut waste in IT departments, especially on Hardware and Software that need not be spent money on!

Make less, buy less, use less, throw away less. – Akiko Busch

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Producing Business Intelligence has always been thought of as a linear process where, you have at the beginning of a the BI process, all the data, then it gets cleaned; then you populate your data warehouse and then you do your reports. The reports are then of immense use to you!

Hardly works in real life! In fact, truly useful Business Intelligence lies in Excel Spreadsheets and skunkworks projects within companies in many departments. Yes. There may be a central Business Intelligence effort, but frustration with getting precisely the information they needed at any time in the forms they need, has always been the achilles’ heel of many BI efforts within companies, especially larger ones.

I ran across a novel way of thinking about this whole process. What if you just had all the data sources available to you somewhere and you assemble in the form of a flowchart, your own unique Business Intelligence mashup including Geographic, Demographic data as needed? What if you could just drag and drop these components on the screen and you get the new kind of mashups you need?

SRC is a company that makes a product called Alteryx that enables this kind of Business Intelligence.

What is interesting about this product is that it first of all, it serves customers better! Consumers of Business Intelligence for the most part do not know ahead of time all the different kinds of Business Intelligence they need and what data needs to be collected and stored in the first place.

Add to it, the waste of human effort, and time spent on monolithic Business Datawarehousing, and Business Intelligence efforts. This is not to talking about waiting for IT resources to free up to work on  the precise kind of reports you need for your work!

By making it easy for consumers of Business Intelligence to do a lot of the assembling and analysis themselves, it makes for a Lean form of Business Intelligence effort within the company.

With the amount of Geocoding, Demographic and other location-related data available for many countries in the world in great detail, tools like these enable a Lean form of Business Intelligence, cutting a lot  of wasted efforts within large companies. For small and medium sized companies that do not have large IT departments, of course, something like this is a natural!

You can observe a lot by just watching – Yogi Berra

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The only thing sure about usernames and passwords are that they are not only totally unsafe and do not work well in practice, they are anything but Lean in practice! They can be solid in theory but in practice they are anything but!

An unwritten secret of any company or any individual is that a lot of usernames and passwords are written on post- it notes or stored digitally somewhere on a computer.

Unfortunately for users, every software product and company thinks that they are coming up with the most foolproof system of user authentication. They all make it so convoluted and painful for the end user. With usernames and passwords for everything like your office computer, PC at home, office related websites, personal websites, banks, retirement account financial websites, etc, everybody has tens of usernames and passwords. Many of them use different security restrictions and requirements for safety resulting in a lot of confusion in the minds of users. They cannot but write them all somewhere or store them digitally on a computer system. Who can remember all these usernames and passwords when you have so many?

As if these were not enough, different organizations waste everybody’s time and energy requiring these passwords to be changed periodically. Of course, users will forget their new passwords, they need to waste time either talking to someone on the phone or email or go figure it out with a “Forgot password” link on a website somewhere.

What a waste of human effort, time and effort when the safety can be achieved in other ways that are simpler for everyone to remember and use?

This is where single-sign ons have lean benefits for the user as well as the organization. Single signon regimes like the ones from Microsoft and OpenID can be very beneficial. You can enforce even changing the password periodically as long as it is a couple of passwords, not the tens of usernames and passwords as before.

Social networking sites like facebook allow their username and password to be used by many, many businesses and content websites now.

Finally, the online world of User Authentication has caught up with the pain of people and organizations!

Too much sanity may be madness – Miguel de Cervantes Saavedra

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My credit union doesn’t want me to come in and bother them if I have a check to be deposited in my account. If I have a scanner at home and access to the Internet, I can just deposit my checks from home!

It saves me a trip to the bank, time, gas and the opportunity to do something else useful. For the bank, I am doing all the work. They don’t need me showing up at the branch needing time on their part to do the work I can do from home.

Chase Begins Converting Its ATM Fleet to No-Envelope Machines reports Bank and Technology. You can now deposit up to 30 checks in one go along with cash also in a Chase ATM.

They are trying to do away with Deposit Slips and that’s a great Value-added improvement for consumers as well as a lean improvement for banks.  For the consumer, they get a scanned image of the check in the receipt as well as money that is available sooner because the intermediate step of somebody at the bank manually opening these envelopes and processing them is totally eliminated.

Businesses seem to be benefit even more because they don’t need to write a big deposit slip with thirty or forty checks each time. The ATM can just easily scan it all and print out a receipt with all the images.

In addition, it appears that the bank has eliminated fraudulent transactions where someone deposits their own checks into their own accounts and if that bank allowed withdrawals immediately, got the money out!

Great example of a Lean Improvement in check processing that is a win-win for everyone, except perhaps for the people not needed anymore to process these transactions at the bank!

Any general statement is like a check drawn on a bank. Its value depends on what is there to meet it.  –  Ezra Pound

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Finace and Accounting processes in a company belong to a whole class of non-value adding activities, if you really think about it. They are needed by the regulatory authorities, shareholders and other stakeholders that have business with the company but for the life of me could not think of one way in which it adds value to me, the end customer.

How Ford Motor Company does its Finance and Accounting function has very little to do with the value it is adding to the Ford car I am thinking of buying!

It is interesting that even large companies like Dell and Cisco spent time thinking about how to make the Finance and Accounting function leaner.  

What they found was interesting. They unearthed lots of unnecessary processes and wasted human effort in all of their financial forecasting and regular accounting functions.

The surprising result of all of this is the elimination of a lot of unncessary reports.

As anyone who has watched the movie OfficeSpace and/or worked in a middle management or lower position in any company, we all know the reports we need to fill out periodically that we were convinced wasn’t going to be useful to anybody within the company.  

Time wasted in useless reports so satirized in OfficeSpace that people have designed coversheets for Initech T.P.S Report as a joke! IniTech is the fictitious company that features in the movie.

But seems like wasted human efforts and unnecessary reports are a reality in the world of Finance and Accounting and companies have found a lean approach to eliminating them!

But if you have not seen OfficeSpace yet, do not miss it! It’s widely available on DVD!

There’s no business like show business, but there are several businesses like accounting. – David Letterman

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My daughter was biding her time to buy a new laptop after she ground the last one to death for four years, We pounced on a great deal last week at one of the local Office Supply chains.

Of course, these kinds of deals always comes up with some mail-in rebates where you pay the store and get the money back from the store headquarters or the manufacturer.

The mail-in rebate we got this time was different like night and day from my previous experiences with mail-in rebates.

To me, they always appeared to be epitomes of waste;  involving me doing all kinds of cutting bar codes, filling out forms, sending them in with all the right attachments, and then waiting 6 to 8 weeks for the check to come in.

Usually these things are not worth the time or attention of any one, for anything less than $50 or so.

But this experience was an eye opener on how you can lean some of these processes, cutting a whole of waste of my time, their time and everything in between. They had leveraged the Internet very effectively for this one.

After we bought the system, all we had to do was go to a web site, type in the 20 digit number on the receipt, type in the serial number of the system, name and address and done!  From the 20 digit number, they figured out the offer, the store number, type of system, whether the serial number was a valid one, etc and all I had to do was just fill out the address details additionally.

To understand how much waste in people’s time, resources, etc that were cut out of this process, you need to follow how it was done otherwise. I had to fill out the form, cut the bar code out ofthe box, make sure that all necessary pieces of documents were all attached together, made sure that the envelope had enough postage and then mailed it.

Usually you mailed it to some rebate processing third party business in Minnesota. There someone opened up the envelope and checked if all the documents are in place, whether the rebates were all sent in on time, then someone manually entered all the information into a computer application for cutting the checks.

This entire manual cycle has been now cut out, cutting I imagine lots of my time, their time, and people’s time.

Of course, some one made a living doing this thing but I bet they were bored out of their mind doing this day in and day out.

The Internet has the potential of simplifying and cutting waste out of mindless ways of doing things like this one. If only, some one thought about the Internet as the first tool to explore before fancy Business process automation software!

Simplicity is the ultimate sophistication – Leonardo Da Vinci

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When considering Lean Improvements, it is a very good exercise to think about whether your improvements will improve your Fixed Costs picture or the Variable Costs Picture. It can also provide some insights into what the net effects of these improvements will be on the company. This kind of analysis also provides insights into ALL the aspects you can improve!

To begin with, let’s start with Lean improvements to things that can be attributed to Fixed Costs. Let’s say you are trying to improve the Manufacturing process in the automobile industry. Say you are trying to see if a Car Seat’s manufacturing can be improved and you are working with a supplier on this. This points not only the manufacturing process but may also to the design of the seat with better, less expensive, and greener materials! The payoffs need not be in just dollars and cents but also some eco-friendly improvement like usage of greener materials. These days greener materials may not only be ecologically friendly but give the company potent marketing weapons against competitors!

Once the design of the car seat is improved then you can get into the improvement of the manufacturing process itself! Improvements in Fixed Costs lead to interesting expansion of existing capacity, something you did not realize you had before!  Less manufacturing time, less physical movements of people all lead to the same people and the assembly capacity being available for more production! This is what we mean by capacity that you did not realize you had before!

Lean improvements to Variable Costs can easily be done by Value Stream Mapping. If a variable cost component adds value to the end customer then it is a candidate for improvement. If it is really a non-value adding component, then it is a good candidate for elimination, rather than improvement!

Lean improvements of both Fixed and Variable costs is an interesting way to analyze the range of improvements you may be looking at. It provides you insights into their net effects on the company and where and how they affect the company’s capacity, utilization of people and even value added analysis!

 Efficiency is doing things right; effectiveness is doing the right things – Peter F.Drucker

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