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The main benefit of doing this analysis is to post the numbers. This lets peo-
ple know someone is paying attention to what they are doing. There is also
the natural tendency of people to want to outdo themselves. Posting these
numbers allows people to see their progress in increasing productivity.


Making It Happen

List each product you manufacture and, at the end of each month, enter the
number of units produced. Keep a running tally of total year-to-date output
in the first shaded column. Enter the average for the year in the last column.

Do this three times: once for last year, once to make projections for the
current year, and once over the course of the year with actual numbers
month-to-month. Last, enter the output numbers for the prior year at the
bottom of the page.


Reality Check

Consider these questions about your completed worksheet:

• Is output on the rise for all products?
• Does output approximately match sales numbers?
• Is output up over last year?
• Are any of the trends indicative of factors that might affect pro-
duction cycles in the coming year?
• How do unit-output figures compare with unit-revenue figures?
In other words, which are your most cost-effective products?
Actuals Last Year
Worksheet 5.1
Projections for This Year
Unit Output by Product Actuals for This Year
Month Unit Output Average Unit
Product 1 2 3 4 5 6 7 8 9 10 11 12 Year-to-Date Output by Month*




*Divide total year-to-date unit sales by current month number.

Total Unit Output Last Year
Month
1 2 3 4 5 6 7 8 9 10 11 12 Total




157
158 Build Long-Term Growth



UNITS SHIPPED

Worksheet 5.2 tracks the number of products shipped each week and
each month.

Another way to get a feel for sales each month is to know how many units
were shipped. Even taking into consideration the variety of prices charged
for different products, if units shipped are up, sales probably are, too.

Units shipped is also a good gauge for determining whether to hire new
production and fulfillment personnel. After using this form for a period
of time, it is possible to determine how many units an average person can
ship. If your totals get over this number, you may need to hire temporary
help or even hire regular help for an ongoing need.



Making It Happen

List your products in the left-hand column. Track the number of units
shipped each day for each of your products and enter the number once a
week. At the end of the month, total the columns for each week in the
total shipped column. Divide this total by four or five to determine the
average number of units shipped per week. Enter this number in the last
column. At the bottom of the worksheet, list units shipped in total for
each month of the current year and the prior year.



Reality Check

Consider these questions about your completed worksheet:

• Are total units shipped up from last year?

• Is there a seasonality to your sales that means you have more
units to be shipped at certain times of the year?

• How much of your weekly and/or monthly shipments were back
orders? What™s your current backlog?

• How do spikes in the units shipped figures alter your inventory
control systems? Can you absorb some fluctuation? How much?

• Do these numbers seem to track with expectations based on sales
figures for the same period of time?
Worksheet 5.2
Units Shipped
for (Month/ Year)
Total Units Average
Shipped for Units Shipped
Product Week 1 Week 2 Week 3 Week 4 Week 5 the Month per Week




Totals

Items Shipped This Year
Month
1 2 3 4 5 6 7 8 9 10 11 12 Total


Items Shipped Last Year
Month
1 2 3 4 5 6 7 8 9 10 11 12 Total




159
160 Build Long-Term Growth



AVERAGE DAYS TO SHIP

Worksheet 5.3 helps you determine how long your customers have to
wait between the time they place an order and the time the product is
sent to them. This worksheet will be most useful if you set a standard to
meet. Use the average number of days to ship as a tracking for a service
standard that you want to meet or beat.

Many companies try to ship off-the-shelf products within 24 or 48 hours
of the order.




Worksheet 5.3
Average Days to Ship
for (Month/ Year)

Days from
Order Number Order Date Order Shipped Date Order to Ship




Total days from order to ship/Total number of orders = Average days to ship
161
Achieving Quality and Quantity



Making It Happen

Identify your orders (usually by order number) in the first column of
Worksheet 5.3. For each order, enter the date the order was placed by the
customer. In the third column, enter the date the order was actually
shipped. Enter the number of days difference between the order date and
the date shipped in the last column.

At the bottom of the worksheet, take the total number of days from the
shaded box at the bottom right and divide by the number of orders you
have listed in the first column. This number is the number of days on av-
erage between the time the customer placed the order and the time it was
shipped.



Reality Check

Consider these questions about your completed worksheet:

• Is your current average number of days to ship an acceptable
number to you? What is standard in your industry?

• What can your company do to decrease that number?

• Does seasonality or any other external factor influence turn-
around time? If so, what can you do to anticipate this?

• Can you make a short turnaround time a stated goal for your
company? Can you do this effectively?

• Again, how do these figures affect your inventory control?

• At what point does the time it takes you to ship an order start to
interfere with sales?

• To what extent do different products require different turn-
around times? Can you segregate shipping functions to handle
these variations more efficiently?
162 Build Long-Term Growth



RETURNS ANALYSIS

Worksheet 5.4 helps you determine how many of the units you send to
customers are returned to you and why they are returned. It™s a diagnos-
tic tool.

As with many other worksheets in this section, it is important to track
measures of productivity. If employees know you are paying attention to
this measure, they will seek to improve the statistics themselves over
time.



Making It Happen

List your products in the far left column of Worksheet 5.4. Then list the
total quantity returned for each product in the second column. The third
column has 10 separate sections. Each section has a reason for return
code number that is explained to the right.

Enter the total quantity returned for each reason in this section. At the
bottom of the columns, enter the total numbers for reasons 1 through 6
and reasons 7 through 10.

Reasons for return numbers 1 through 6 are errors on the part of the
company. Use this worksheet to track these numbers, set goals, and de-
crease them over time.

On the bottom of the worksheet, enter the total units shipped. Calculate
the percentage of shipments returned by dividing the total returns in
the first shaded box by the total number of units shipped. Calculate the
percentage of shipments returned for reasons 1 through 6 by dividing
the second shaded box by the total number of units shipped.

Enter the number of shipments returned for reasons 1 through 6 for each
month this year and last year.
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Achieving Quality and Quantity



Worksheet 5.4
Returns Analysis
for (Month/ Year)
Returns by Product
Quantity Returned by Reason*
Total Quantity
Product Returned 1 2 3 4 5 6 7 8 9 10




Totals:
Total Returns for Codes 1“6 and Total Returns for Codes 7“10

Total Units Shipped Shipments Returned
(from Units Shipped Worksheet) Shipments Returned (%) for Reasons 1“6 (%)



*Return Codes
1 = Product 2 = Shipment 3 = Wrong Product 4 = Wrong Product 5 = Product Defective
Not Ordered Received Damaged Received Received
(order entry error) (shipping error)
6 = Quality Not 7 = Ordered Too 8 = Customer 9 = Exchange 10 = Other/Don™t
as Expected Much Changed Mind Know
about Product

Percentage of Shipments Returned for Reasons 1“6 This Year:
Month
1 2 3 4 5 6 7 8 9 10 11 12 Total


Percentage of Shipments Returned for Reasons 1“6 Last Year:
Month
1 2 3 4 5 6 7 8 9 10 11 12 Total
164 Build Long-Term Growth



Reality Check

Consider these questions about your completed worksheet:

• Overall, are your returns increasing or decreasing?

• Is there any meaningful link between types of product and num-
bers of returns? Does this suggest anything for marketing or
product development projects?

• Are many of the returns caused by problems on your end (reasons
1 through 6), or are they mostly due to customer needs changes?

• Do you think the number of returns could be lowered? If so, how?

Would returns be lower if customers better understood your product at
the time they ordered?
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Achieving Quality and Quantity



BACKLOG OF ORDERS

Worksheet 5.5 helps you determine whether any orders have not been
shipped by the end of the week (or other period of time that you choose).
This is very important as a diagnostic monitor of production bottlenecks.
A backlog occurs when an order is not shipped, which could be for a va-
riety of reasons: The product may not be available, packaging may not be
available, or shipping may be too busy to get it out.

Any items on this list should be investigated. The dollar volume column
totaled on the bottom of the sheet will really focus your attention. Like
excess inventory, backlog orders sap a company™s productivity. Knowing
this report will have to be made each week will usually prompt the ship-
ping department to get all the orders out that it can.



Making It Happen

Worksheet 5.5 should be completed by shipping or customer service per-
sonnel every Friday. Any order not shipped by the end of the week
should be documented by order number and customer name. Also en-
tered should be the dollar volume of the order and the date the order was
placed. The expected ship date and comments should indicate why the
order was not shipped and when it will be. The total dollar volume of all
the orders not shipped should be entered at the bottom of the worksheet.



Reality Check

Consider these questions about your completed worksheet:

• Are there orders backlogged every week or only occasionally?

• Are the reasons for backlogs usually the same?

• Are these problems that can be corrected? If so, how?

• How many of these orders will be canceled because of product
unavailability?

• Has this problem gotten worse over time? With the same products?
166 Build Long-Term Growth



Worksheet 5.5
Backlog of Orders
Week of .
Order Volume of Expected
Number Comments Order ($) Order Date Ship Date Comments




Total:
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Achieving Quality and Quantity



INVENTORY CONTROL REPORT

Worksheet 5.6 helps you determine total inventory over a set time period
and where inventory is inadequate to meet sales needs. This is another
very important indicator of production bottlenecks.

Any items listed at the bottom of the page should be questioned. Asking
the right questions at this stage could prevent these products from show-
ing up on the backlog list later.



Making It Happen

In the first section of Worksheet 5.6, enter the total inventory numbers
from the Year-at-a-Glance Financial Analysis Worksheet (3.3) for each
month this year and last year. In the next section, list all products with
less than two months™ inventory at current sales levels, quantity cur-
rently on hand, and date that restocking is expected. This worksheet is
an essential step in any move toward a just-in-time inventory manage-
ment system.



Reality Check

Consider these questions about your completed worksheet:

• Is total inventory going up or down?

• Does inventory fluctuate in a cyclical or seasonal pattern? If so,
can you use these patterns to manage inventory in the future?

• Does this increase or decrease fit with your cash management
strategies?

• Will your restocking dates allow you to replenish your inventory
supply before you run out of product?

What do inventory fluctuations suggest about your market sector? Your
customers? Your internal operations?
168 Build Long-Term Growth


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