Business Lag Time is Costing You Big Time (Part 1)
Competitiveness is everything to manufacturers. Gains in efficiency and profitability are essential to increasing your business competitively. The old way of doing business just won’t do as margins are being squeezed tighter than ever. One area that many manufacturers must improve upon is anything that hinders the flow of information.
Getting rid of information delays, or what we refer to as latency, is vital to the continued success of manufacturers. Like stepping on the brake pedal of your car will slow it down and even stop it from moving, latency puts the brakes on any movement of information and keeps it from getting to where it is needed. Crazy as it seems, latency is often like putting the car in park…for days on end, which is why efficiency problems happening on a job in the shop are not known until days after the job is done. In those situations, how can you possibly manage your shop floor? Latency puts a “ceiling of complexity” over your business, keeping it from growing in good times and creating excessive overhead in bad times. Latency is a seemingly invisible overhead that inhibits good decisions from being made.
So where does latency exist in the business organization?
Latency exists everywhere in the organization. From the front office to the shop floor, from customer service to purchasing, from accounting to estimating, from executives to material handlers, latency can impact every aspect of the business and can wreak havoc on an organization like a destructive virus.
The major problem with latency is that it increases the cost of doing business. In short, information delays slow down and cripple companies.
Examples of latency and the associated negative costs
- Delays in invoicing cost your company cash flow due to higher receivables.
- Delays in information getting to the shop floor cost your company greater lead times, which increase the levels of work-in-process and result in inefficiency on the shop floor. Those same delays increase the amount of scrap and rework. For example, if the paperwork associated with drawing revisions is delayed getting to the shop floor, even by minutes, the resulting time lag can result in making parts and assemblies to the wrong specifications.
- Latency in getting purchase orders in the hands of your vendors will cut into your production lead times and could keep you from shipping your products on time. Many companies already have a fix for this. They simply send out POs weeks ahead of time, which negatively impacts cash flow, while inflating inventories and worse yet, widen the already excessive gap between when you pay your vendors vs. when you get paid from your customers.
- Latency in getting estimates to your prospects and customers is part of your ability to service your customers and result in lost sales and if done often enough, lost customers.
- Engaging in a multitude of mundane or unnecessary manual tasks—filing, searching, distributing, scheduling, coordinating, storing, billing, printing, reprinting, calling, responding, meeting, documenting, mailing, etc.—slows the flow of information and keeps your costs high. Entering data manually into a spreadsheet, or even copying and pasting the information is latency. Why? Simply put, it slows down the process of getting the information to where it is needed.
The symptoms of latency appear as putting out too many fires as the level of business increases. We have all heard of the $5 part that keeps a $100,000 machine from shipping. Well, latency causes those problems and many more.
5 Pain Points of Communication Barriers and Latency
A study sponsored by Siemens Communications focused on the hidden costs of communication barriers and latency experienced by small and medium sized businesses in their daily activities. They found that five major latency pain points exist that disrupt businesses.
The five most expensive pain points reported by survey respondents were waiting for information, unwanted communications, inefficient coordination, barriers to collaboration, and customer complaints. Unfortunately, 70% of respondents said they continually experience these pain points.
- Waiting for Information: 68% of respondents experienced work delays while waiting for information from others. The average delay is 3.5 hours per week per knowledge worker. This is a considerable amount of time to spend before making progress on a particular task, which could negatively affect critical business processes. We, at The Lake Companies, view everyone as a knowledge worker. For example, is it unheard of that a machine operator could wait 3.5 hours in a week for the right drawings or even for the right parts to show up at their machine? Many would suggest that 3.5 hours is way too conservative.
- Unwanted Communications: Unwanted communications, including low-priority calls and voicemail, is the pain point most frequently experienced by the survey group. 77% of respondents cited spending two or more hours per week dealing with unwanted communications. These interruptions create distractions and disrupt workflow, leading to lower productivity and missed deadlines. A good example for those same machine operators. How about wading through hundreds of released job packets to determine which ones need to be started next? The pure volume of data, or information overload, slows down the process of working on the right job, right now.
- Inefficient Coordination: 68% of respondents stated that they experience difficulty coordinating communications between team members, affecting a team’s ability to respond quickly to time sensitive customer requests. Furthermore, they spend an average of 3.7 hours per week attempting to coordinate such communication, hindering a team’s efficiency in moving toward goals and deadlines.
- Barriers to Collaboration: 61% of respondents find difficulty in establishing collaboration sessions with colleagues. They spend an average of 3.3 hours per week attempting to address issues of inaccessibility, or other communication-tool-based lack of full collaboration with colleagues.
- Customer Complaints: 74% of all respondents stated that they spend, on average, 3.3 hours per week dealing with negative comments or complaints from customers, specifically because the customer was unable to reach them in a timely fashion. While an 8% loss in productivity is itself significant, the true cost of customer dissatisfaction is surely much greater.
Don’t miss the continuation of our Business Latency blog post next week.
