I first learned this lesson on the manufacturing floor. There is a concept called “stack-up”. Every part that makes up an assembly can be within spec but the variation of each part is just enough that when you assemble the product, it doesn’t quite work or fit. The accumulating/building effect of variation upon variation of all the parts creates a multiplicative and negative effect on what’s being built. The second time I had an “ah-hah” about the magnifying effect of variation was watching some children jumping rope. With one tiny flick of the wrist, the rope’s swing would change wildly until when it reached the other person holding the rope, the range of “swinging” was huge. The third time I had an “ah-hah” was in managing customer demand. The argument was, “the more you can manage demand, the easier life will be in the business and on the factory floor. The cliché or rule that comes out of this is “Make the uncertain more certain”. If I do this, I will have more control over my operations rather than always reacting.
My sense is there are two major things we can do to make the uncertain more certain.
Manage customers proactively
Determine the cost of change
What I’m talking about in managing customers proactively is this. There are some types of business that is always there come hell or high water. They’re always there. So go out there and book it. And book it proactively. Call the customer. Don’t wait for them to call. The other part of managing the customer proactively is managing the relationship with them actively. I know for my teaching clients when to call in advance of their semesters so I can make it into their catalog. I also proactively work at building a relationship with them so when new businesses arise, or new ideas arise, I’m the first one they call. If I come across a new idea also, they are very open to listening because they know I’m looking out for their interests.
I made the comment above, “Determine the cost of change”, and you’re probably wondering what that has to do with making the uncertain more certain. It’s this. If you determine what it costs to change and react to a customer change, and it turns out to be $80, give the customer $30 of it and you’re $50 ahead. We make tons of changes and have no clue what it’s costing us. I’ve done enough planning over the years to know that your customers for the most part have some flexibility in their schedules and needs and are willing to accommodate a “no change” policy given an incentive. You’ll also have some customers that just do not or cannot manage their own business and you can’t manage this change without having extra inventory or extra resources available to support the change. All I can tell you is you better charge for this “extra resource” because dollars in have to be greater than dollars out. There’s no freebies here and we’ll pay for it financially or organizationally.