Eliminate Unproductive Movement
All movement should have a purpose.
Have you ever looked out at your sales counter, warehouse or your yard and seen your equipment moving and your employees moving and wondered:
- What are they doing?
- Why do we still have 40 unfilled work orders?
- Do I have the correct number of people?
- Where is the loader going?
- Why is my delivery truck still here?
All movement should create money.
Any time a piece of equipment moves it should have a vehicle or a part on it. Because when it moves it is costing money and it should be producing income. Anytime the loader moves it should have a vehicle on it. That is your goal.
- When the loader brings a vehicle to dismantling it takes one to set in the yard.
- When the loader sets a vehicle in the yard it moves another to the crusher or crush pile.
Anytime the forklift moves it should be taking something to the warehouse or getting something out of the warehouse. That is your goal.
- When the forklift brings an engine from the warehouse it takes a return part back.
Any movement of your equipment should be traced to a resulting sale or to a necessary movement that will lead to future sales.
Any equipment that cannot function with normal maintenance should be replaced or repaired so that it is in working order. Having your employees work around a poor functioning piece of equipment costs you additional labor, underperforming operations and dissatisfied customers. I believe the changes in the tax laws allow you to write off 100% of equipment purchased. I have been told that the limit is $500,000. So, please verify this before you purchase.
Eliminate unproductive employees
All employees should produce a net profit.
It is safe to say that your employees are 50% of all your costs and maybe more when you consider what company supplies & equipment they use. You need productive employees and you need to think through what it is that you expect of them:
- What do you provide them to make them more productive (equipment, training, software applications, small tools)?
- Does the facility layout hinder or maximize the employees effort (warehouse and yard)?
- How do you measure what they do?
- How you compensate them?
Once you have determined this, then you know based on the employee’s performance whether their cost exceeds their contribution to the profitability of your company.
If your net profit is less than 10% you most likely have too many employees doing too little work. You need to determine what is an acceptable level of performance in each area of your business. You may need some outside help to assist you in making those determinations:
- You will need to know what is possible versus what is currently being done.
- Then you will need to determine if the lack of performance is due to poor use of facilities or equipment and/or poor employee performance.
You may find a win/win situation where you can eliminate poor performing employees, and keep and pay your best employees more.
The overall goal is to be more productive by maximizing your facilities, equipment and employees. To increase your sales and decrease or eliminate unproductive activity and labor. That way when you look out at your yard, warehouse or sales counter you know everything and everyone that is moving has a purpose.
Robert Counts Chad Counts Johnny Logel
Robert Counts, robert@countsbusinessconsulting.com; 512-693-6915
Chad Counts, crcounts@countsbusinessconsulting.com; 512-963-4626