Understanding enterprise flow: Changing how you create lasting value
Initiatives that yield the best return to the enterprise go beyond reducing costs or enhancing margins. The most impactful improvements come from the optimization of customer orders through the enterprise, the elimination of waste in the operation and the empowerment of people to supply the product or service into the hands of the customer. Organizational leaders have an opportunity to take value creation a step further by prioritizing flow. Flow carries significant weight beyond simply reducing operating costs or improving on-time delivery to customers – it is the catalyst for change management. Leaders can harness flow as the means to leading their workforce to a shared vision and goal. Effectively optimizing flow can lead to increases in profitability, inventory turns, employee happiness, organizational health and significant improvements in time-to-market.
Think of flow and change management in terms of the human body. Flow represents the blood that moves throughout the body to keep it functioning. A person’s health depends on how the blood is flowing through the body, and trouble arises when there are clogged arteries, too much blood, too little blood, or the blood does not cycle quickly enough. Change management can be equivalent to positive lifestyle change, such as diet, exercise, or medical fixes. The right lifestyle change can improve the blood flow, growth, and health of that person when blood flow problems arise.
These same health concepts can be applied to consumer and industrial products businesses. Flow is the effective movement over time of people, inventory, information, and even new product designs. Organizations with effective flow are able to plan, source, make, deliver and return their products with seamless execution while capitalizing on evolving market conditions and consumer preferences. Flow optimization should always remain relevant and applicable whether the economy is booming or feeling the effects of regulatory pressures, inflation, labor shortages or a myriad of other external forces.
The following opportunities and actions are common ways to optimize flow and generate financial benefits through managing potentially “unhealthy” blockages:
- Implement a pull system reducing work-in-process to reduce on-hand inventory and improve your working capital position
- Consolidate work functions and performing cross training to maximize labor efficiency and to achieve a reduction in overhead and overtime
- Develop strategic partnerships with suppliers of high-spend and low mix to implement a vendor managed inventory (VMI) program that yields a reduction in direct material spend and an increase in shop-floor space for value-added operations
- Leverage your ERP system or bank technology with an automated information flow amongst trading partners to reduce accounts receivable days and collection efforts
Cultivating change in your organization with a goal of improving flow does not require investments in capital equipment or additional headcount. Instead, leadership can approach by identifying key resources and capabilities by following these steps:
- Identify cross-functional change agents in all levels of the organization who exemplify actions that support strategic goals
- Communicate the mission, vision and purpose to link tactical and operational goals to strategic goals
- Sponsor workshops to introduce different tools and methods such as process mapping, analyzing time, and noting cause-and-effects to identify bottlenecks and operational inefficiencies that impede flow
- Empower change agents to launch new or prioritize on-going initiatives that improve flow and streamline operations and eliminate the on-going opportunities that yield little to no value
- Monitor and measure improvements in flow with a project management office (PMO) that reviews and acts on shared metrics regularly
It is crucial to capture and prioritize what the company is doing, which can be done by collecting vital information such as current priorities, process portfolios and driving metrics before creating new goals. It is common for siloed organizations to have separate department goals, objectives and initiatives that have little to no alignment to the corporate strategy and the organization as a whole. Maintaining flow requires a holistic view of the business “body”. The best way to maintain that perspective is through a PMO who is the “general practitioner” calling on “flow specialists”. A PMO can ensure that strategic goals and objectives are prioritized and executed is required if organizations wish to maintain change and reap the financial benefits.
The RSM operations and supply chain group delivers a proven approach on creating the foundation of change within clients’ organizations from leading workshops to training and educating clients on the principles of lean. RSM also has a deep expertise in initiating and launching PMOs with the tools to be self-sustainable. Applying these principles and tools to eliminate operating inefficiencies and improve the ease of doing business both internally and with customers is key to being competitive and achieving profitability. Reach out to RSM today to discuss how enterprise flow and change management can create lasting value at your business immediately.