"Improvement" impacts



An "improvement" in one department caused costs to rise and customer service  problems to increase

Consider the sales team who were paid bonuses for achieving their targets. They were set quarterly targets and they neared the end of the quarter they were free to start increasing the discounts to get customer orders in;

Ø They raised a large number of orders towards the end of each quarter, increasing pressure on operations to deliver products in the normal time-scale. Operations needed to employ overtime to see them through this raised demand.

Ø Operations decided to try and second guess what would be sold at the end of each quarter and so raised their inventory levels using forecasting. .

Ø The Sales team sold products at a discount even if though the costs of this product were the same or higher through increased stock holding and overtime.

Ø  The warehousing and distribution team had to obtain more storage space to store the forecast stock that was being held "just in case" .

Ø  The flip side was that some of the sales staff were so far from their targets that  they held orders back to the start of the next quarter and then deluged the operational teams with orders with shortened delivery times.

So the improvements and targets in one department increased costs in others.


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An "improvement" that ignored customers and caused sales to fall

A company, losing market share, decided to gather feedback from its' sales staff and
their customers. This led to a new product range (with greater technical specs), some lower prices and new shorter target delivery times to woo customers,

Ø The customers that sales focussed on were "purchasers", the "users" of the product in the field still feedback the same complaints to their purchasers.

Ø The customers in the field was that the parts were sometime difficult to fit, they weren't sure about the maintenance regimes or how to test the parts in place, things the company had missed and they fedback to their purchasers that they didn't like them.

Ø The customers continued to go elsewhere at a faster rate as they felt they'd been duped by the company.

Ø So the company offered more discounts to woo customers!

An "improvement" in one team led to wasted effort, reduced margins (through discounting) and led customers to believe that they had been given lip-service, there were still complaints. 


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A successful "improvement" programme which failed to be recognised elsewhere

A "lean" programme was introduced to the operations area and was initially successful, however the implementation programme was confined to operations. The programme reduced the labour time for products and the wip and stock holdings

Ø  The allocation of labour costs showed that the despite the improvement the fiannce reports showed that labour costs weren't running at a loss.

Ø  The reduction of the wip and the increased stock turns weren't reflected in the reporting and the larger business failed to grasp the changes.

Ø  No reports highlighted that the operation area now had spare capacity so the marketing and sales teams failed to capitalise on this and introduce new customers or products.

Despite the success of the programme, the business failed to reconise the opportunities it presented and it fell into dis-use. 


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