Sunday, July 13, 2008

A Small Business Case Study in Six Sigma

score_tjpg_Revelle This article was written by Jack Revelle, SCORE Orange County Chairman

Six Sigma is a problem-solving methodology and management philosophy that was born at Motorola in the early 1980s. In recent years it has “caught fire” and is currently in use at a broad variety of both product- and service-oriented businesses. However, some ill-advised people falsely believe that Six Sigma is just for large companies. Frankly, this is just not true! The following example of applying Six Sigma supports the truth that it has universal application.

A small company assembled orders within its warehouse for delivery to its customers. Orders were written and phoned in by its customers one to two days in advance of requested delivery dates. More often than the company was willing to admit (actually about 15% of the time), the delivered orders did not match up with the orders that had been placed. 

Enter the tools of Six Sigma. Using process flow charts and process maps to graphically define the assembly and delivery processes, tally sheets for data collection, Pareto diagrams for data analysis, cause and effect analysis plus multi-voting to determine root causes, brainstorming to identify potential corrective actions, and force field analysis to analyze the various corrective actions and determine which action was the best choice, the company, led by an external Six Sigma facilitator, was able to significantly reduce its "go-backs." 

As a direct result of the foregoing, the company saved the cost of three full-time employees who previously worked exclusively on refilling and redelivery of orders.  This is commonly referred to as the “hidden factory.” This reduction in labor costs amounted to an annual savings of nearly $100,000.

I can personally attest to the authenticity of this example since I was the Six Sigma facilitator. I worked with this small business (now much larger) in Phoenix, Arizona for about two years and all this actually happened.

Those readers who think Six Sigma might be the problem-solving methodology that could help them to eliminate, or at the very least, reduce some of their business-related problems should view the website, http://en.wikipedia.org/wiki/Six_Sigma. You’ll learn about Define, Measure, Analyze, Improve, and Control, or DMAIC, the step-by-step approach to problem-solving known throughout the world as Six Sigma. Other sites that focus on Six Sigma as it relates to small business are http://ezinearticles.com/?Six-Sigma-for-Small-Business&id=59532 and http://www.isixsigma.com/library/content/c051024a.asp.

For free assistance from Orange County SCORE-114 in learning more about and implementing Six Sigma in your business, call (714) 550-7369 and let our Client Services Manager (CSM) know what you need. The first step in problem identification and solution is to make the call.

Third Party Enhancements for QuickBooks – Definitely Check Them Out!

score_tjpg_Ginnaty This article was written by Dick Ginnaty, CPA

QuickBooks cannot be everything for all businesses. Even they recognize this. For over ten years they have provided information on their web site (www.quickbooks.intuit.com) about independent providers of add-on programs that do things QuickBooks doesn’t do. Usually, these programs fit niche markets (not necessarily small niches however) that QuickBooks doesn’t serve or doesn’t serve with the features needed by the businesses in that niche. Both new and seasoned QuickBooks users should check out the third party providers serving their business. Dealer Management, Property Maintenance, Real Estate Brokerage, Commission Calculations/Tracking, Retail Management, Child Care, Law Practice and Church Management are just examples of the types of software offered.

To find the third party software on the QuickBooks web site, click the Community tab (Home page, left column), then click Compatible Software (left column) and then click All Solutions By Industry (scroll to bottom of page).

Don’t forget to periodically re-visit this site, as new software is being added periodically. Just recently, software that facilitates paperless (less paper but not “no paper”) operations has been added as new category.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles)

Mentor Cal State Fullerton Business Students This Fall Semester

Consider being a mentor to senior business students on real time consulting projects for small businesses. The fall semester starts late August.

Mentors are assigned to a team of 5 students on projects that CSUF selects from the many applications they receive for consulting assistance. Mentors meet with students about 8 times a semester to discuss the ideas and recommendations that the students develop. Mentors review proposals and final written reports and critique the final PowerPoint presentation.

The students are enthusiastic and welcome your business knowledge and suggestions. Several SCORE counselors are mentors and speak highly of the experience. You can contact Dr. Michael Ames, at 949-644- 4541 or sbiames@fullerton.edu

Beat the Competition Before They Beat You

score_tjpg_pitlick This article was written by Hillel Pitlik, SCORE Orange County Management Counselor

Being in a small business today is a constant battle.  You are always looking over your shoulder to see what your competition is doing. This reactive method suggests keeping the status quo until things get tough.  Without doubt reacting is not the most efficient way to operate.

Let’s consider a slightly different approach. If you could conceive of the idea that would put you out of business, then you could beat your competition by getting there first, and thus continue to grow and flourish.
It almost sounds too simple, because it is.

Such a process demands that you begin by thinking out of the box. Spend some time studying your business and thus grasping every facet effecting its growth or decline. Record your observations carefully. Ask yourself the critical questions that reveal what you are doing right and what you are not doing right or not doing at all.

Look around the business world for similar businesses and how they are behaving in the current business climate. What must change for you that could lead you to start such thinking process?  Start now before change is forced upon you.  So put on your thinking cap today.

What product or service don’t you deliver today that your customers could use? Do these fit within your present business model? If not, how can your model be modified? Do you have the skills and the resources to add these new elements to your business? If this new segment is a good idea should you consider evolving your business in a new direction, so when the competition wakes up, you are already successfully operating in that area and they have to play catch up to you.

Just as you should review your cash flow on a monthly basis to properly manage your business, so should you go through this out of the box evaluation on an annual basis. It allows you to keep your business fresh and on the path of success. This process should be conducted with the key people in your enterprise for greater effectiveness. More heads are better than one.

Remember that you have lived with your business since inception. Don’t get bogged down in the past, look into the future.

Marketing, What is Your Plan?

score_tjpg_noah This article was written by Robin Noah, SCORE Orange County Management Counselor

Marketing! The myth and the realities intersect.  Too often I hear “…takes too long, I can’t afford it, I am too busy, and I need a hit now…"  These are somewhat mythical statements.   The reality is that the essence of marketing has to do with understanding 2 things: 1) knowing what the end result you are looking for is and 2) focusing on your customer’s needs and wants.  For example fix into your thinking process that growth comes about by what I call the GET:

  • Get more customers
  • Get customers to repeat buying
  • Get customers to buy more products
  • Get customers to buy your upper level products

Most business persons know the GET.  Yet what I hear more of is “I can’t get ….  “Can’t get” is focusing on the loss, how about putting your energy into getting what you want?  Open your circle of attraction.  Look for what you want not what you have not gotten.

The simple answer is really a question...”How can I get more business (cash flowing in)?”  The answer is that the bigger the customer base the larger the revenue stream.  The more people know about you the more opportunity for increasing your customer base.

So what can you do?  First set aside some time to map out a plan; set a direction for increasing your business cash flow...  Consider this time an investment in managing your business.

Here are some ideas: Start by:

  • Listing what your needs are:  For example is it increasing sales - getting more leads, or to get your customers to buy more and more often because they are  greatly satisfied or is it to have a steady cash flow or is the focus on profit.
  • Making sure that your promotional message is presented as a customer solution.  Drive your customer towards success.  Your message needs to quickly answer the silent question, “What is in it for me?” 
  • Studying your pricing – can you increase the pricing on all or some of your products?
  • Venturing out to other market segments that are potential clients. No one can afford to be everywhere so be selective.
  • Introduce an incentive plan for your existing customers for referrals.  Incentives can be some special pricing for your product line.
  • Find someone to take a critical eye to your web site.  Does your web site draw visitors/customers? There needs to be a reason for the visitor/customer to return to your site.
  • Get a blog started
  • Get to know other business people in your area.  Work out a combined promotion.
  • Talk to The Business Development Manager at your city hall.  They often have programs that impact the business community. 
  • Attend local business community events and promote your business.

You may have done some of these things and found that they did not work for you.  If that is the case then get some help to analyze why your activity did not work and go forward with another activity.  Make sure you follow up your efforts to determine how they work for you.  Track the activity and responses. Ask yourself “Did the action get the result I was looking for?”    The greater challenge is knowing what you are looking for and how to get it.