Shift to Efficiency

“You were more organized, but you almost went broke?” I pressed.

“Yes, we managed to get all the orders out the door, but it cost more to produce, than the revenue could cover,” Arianne replied.

“So, you needed to raise your prices?”

“Not that simple,” she explained. “We had competition. Our competitors price-to-the-customer was 15 percent below our cost to produce the same product. We waited for two years for them to go out of business. There was no way they could sustain that loss. But after two years, we figured out they weren’t losing money after all. They had found ways to be more efficient and productive.”

“What did you do?”

“It wasn’t enough to be organized. We had to examine every step. Turns out there were more efficient ways to work. We changed the sequence of some of the steps. Some steps could be done at the same time by different teams, increasing throughput. It was amazing. We cut our lead time from six weeks to four weeks. Higher throughput with the same number of people, with the same equipment, in the same facility, we lowered our cost. We shifted from just getting the orders out the door, to a consistent, predictable system.”

“Problem solved?” I asked.

“Not really. That’s when our troubles really began.”

Leave a Reply

Your email address will not be published. Required fields are marked *