March 3, 2011

Sometimes I think we focus too much on the big idea--the killer app, the grand, master strategy--that will vanquish competitors and propel our business to the top. We put an unbalanced emphasis on the radical next new thing. In our attempt to get to the next level, we reverse the old cliche and inadvertently miss the trees for the forest.

But a microstrategy can be just as powerful, more cost-effective, easier to implement, and far less risky. Sometimes, if you properly sweat the details, you surprise yourself with the big leaps that are possible simply by taking smart, small steps.

I'll never forget what happened when I was working with Toyota during my early days as a neophyte problem-solver shadowing the experts.

A dealer in North Carolina had a problem. He was outgrowing his facility. The store was selling 1,600 new vehicles a year, and generating $2 million from parts and accessories and $1.5 million in service. The symptoms of the problem were becoming serious; expansion was a looming threat, as was the nearly $500,000 in parts inventory, 10 percent of which was obsolete. He needed space. And money...lots of it. Or so he thought.

Seeking help for the expansion effort, the general manager made a call to the Toyota U.S. headquarters. The national parts operation business unit decided to investigate before making a determination on how best to help the dealer.
 

The kaizen (continuous improvement) team, to which I was attached, was dispatched, and soon after arrived on the scene to begin the process of grasping the situation through direct observation of people and process (an activity termed genchi genbutsu, which means "go look, go see"). Almost immediately something grabbed their attention in the service and parts operation: service technicians were spending a good amount of time at the parts counter waiting for parts. The team decided to collect data.
 

Over the course of a week, they determined that each trip to the parts counter averaged five minutes. With five teams of five technicians each making an average of nine visits per day lasting five minutes per visit, the wasted time and motion added up quickly. The team figured that waiting time at the parts window accounted for nearly 19 man hours per day! Part of it was due to the visit itself; the rest was due to an inefficient parts system. The inventory was stacked according to convention, based on size and space. That led to wasted time searching.

The team decided to attack this "slack point" directly, and conducted a study over three months to identify the fastest-moving parts. Data confirmed that slow-moving parts were the prime cause of the problem.

The microstrategy that resulted from the analysis amounted to a two-fold, time-and-motion tactic. First, relocate the fastest moving parts to enable quicker access by putting those parts most often requested nearest the counter to reduce the steps required to retrieve them. Second, implement a just-in-time, sell-one/buy-one method of resupplying parts. The microstrategy was nick-named "Source by Movement."

Turnaround was immediate. Saving time behind the counter saved time for the service technician. That in turn shortened the time needed to service each vehicle, thereby increasing customer satisfaction and output. That meant more revenue to grow the dealership.

The new supply system allowed the parts and accessories department to reduce parts inventory by 35 percent and order parts on demand. That in turn freed up 30 percent of the storage space for other uses.

Dramatic improvement in time, efficiency, and productivity led to impressive bottom line gains within 18 months:

• Obsolete parts inventory was reduced from $50,000 to $8000.

• Parts sales grew 50 percent.

• Service department appointment scheduling went from seven days out to three.

• An additional service team was added.

• Monthly service sales grew 25 percent, with a 45-percent increase in gross profit contribution.

The simple elimination of the slack in the process eventually enabled new service bays and expanded service hours. All because of slow-moving parts.

Neither the real problem nor the solution were obvious. No one could have told the general manager at the outset that he would be able to realize such gains simply by shifting parts around behind the counter and eliminating time spent by service technicians waiting at the parts counter. He thought he needed million-dollar facilities expansion strategy.

Do you have a slack point--an undetected and counterintuitive inefficiency found only through focused observation and analysis of data--in your business? My bet is you do, and it's grounds for implementing your own business-growing microstrategy.

In your hunt for the next great spitfire idea, make sure you don't miss the trees for the forest. 

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Matthew E. May, Article