When deep in the belly of an organization working through locating and resolving black hole creating items other larger problems and opportunities present themselves. This occurs for a few reasons:
So a huge benefit to addressing black hole creating items is it leads to the discovery and potential resolution of larger organizational gains. Below are a few representative samples covering a broad range of importance that had been unearthed while addressing black holes in organizations:
A company’s accounts receivable contained tens of thousands of entries. Thousands of these entries were non-standard and would have jammed the conversion to a new system either electronically or manpower wise or ability wise, or all three.
We ran programs to write off all items + and - $10 remaining balances older that a certain date. We concluded the remaining thousands of non-standard items in various ways, usually after investigating each item or group of items and pulling documents trying to support the receivable items on the company books and by preparing cases for customer staff to negotiate with their customers.
Customer back charges, unpaid balances, mis-applied cash, unsupportable invoices, mis-pricing, unsupportable journal entry items, disputed commission amounts, and other trouble items were cleaned up.
We created a clean accounts receivable that had integrity ready to be rolled into the new computer system.
Problems in the Pricing Department created month end closing delays. Month end rarely closed on time. By re-sequencing the flow of work orders Pricing did not have to search for missing work orders at month end and so month ends closed on time moving forward. A big computer conversion headache was avoided.
Developed and implemented a Monthly Management Report system that contained a special characteristic that refused to allow issues to catch senior management by surprise.
Workflow Data Integrity
Almost ten thousand work orders were not advanced in the company’s existing workflow management system that was being replaced. The existing workflow management system was reviewed and reports were printed, by department, listing the work orders supposedly in those departments. Very few of those work orders actually remained as most of them were completed or cancelled, often long ago. We worked with the departments to close the completed and cancelled work orders and to leave the active work orders in the system. Only the active work orders remained, ready to be rolled into the new computer system.
A re-engineering project had commenced yet the company had not decided if it was a custom manufacturer or a standard product manufacturer, or where in between it wanted to be.
We pushed the issue with management and they finally analysed the situation then determined where on the “custom versus standard” spectrum they wanted to be. Once that was determined re-engineering went much smoother.
Invoice Price Verification
Designed and asked customer staff to program in Microsoft Access a system for verifying the prices on hundreds of invoices received weekly from a major supplier. Once automated this task previously done manually was reduced by about 75%. Additionally, the vendors pricing model was discovered to be incorrect then corrections to it were made by the vendor.
Provided plant personnel with a sledge-hammer to help remove the mandrel from the machine. This saved on average 30 minutes per mandrel change according to the operator.
Negotiations and Settlements
Prepared packages totaling multi-millions of dollars for customer personnel to negotiate and settle with their customers. We attended the negotiations both in Toronto and in Vancouver. Customer management was thrilled with the settlements.
Developed excel spreadsheets for payroll build-up for plant personnel previously prepared manually. Besides saving clerical time to prepare payroll huge savings in follow-up were realized because the excel spreadsheet method almost eliminated entirely the vast amounts of errors being made manually.
Purchasing (1 of 2)
Discovered serious weaknesses in purchasing procedures so drafted a Purchasing Manual for customer management review and approval and for purchasing personnel use. According to the number one man in the customer organization the Purchasing Manual was “good work”.
Purchasing (2 of 2)
Huge efficiencies were available to be gained in the requisitioning, purchasing, accounts payable cycle. We created a series of purchase requisitions on excel that became purchase orders that became packing slips that became receiving documents that were then matched to the original purchase order by Accounts Payable prior to paying invoices. This greatly reduced the time to prepare purchase orders, increased their accuracy, and reduced time to verify complex invoice time to near zero.
Discovered why a large plant was operating twenty-four hours per day seven days per week and losing money. And the answer lay in an event that occurred eight years prior.
Developed a solution to a chronic problem of inter-departmental issues not being handled and prepared a detailed manual on the solution. That solution is the Routing Form system. Routing forms are to be prepared and routed to the correct person in another department who has the authority and responsibility to handle the issue. All routing forms are logged, followed up on, and reported to senior management if they become aged. It was a closed system whereby once an issue was identified it would not be ignored or forgotten about and left to clog the organization. It could only be handled. The Routing Form system has been implemented by Corporate Streamlining twice, both times with stellar results.
It was discovered that the Daily Environmental Checklist had not been used in five months putting the company and its officers and directors at serious financial and legal risk. The Daily Environmental Checklist was immediately returned to use and its use documented and made available for government inspectors.
Identified the absence of a formal framework and rules between a company and its over one hundred distributors, then drafted a distribution agreement for legal vetting and management review.
Resolved the issue of continuous requests for more manpower by the Pricing Manager by: 1) analysing the productivity level of all Pricing staff and discovering underutilized personnel; 2) formulating better company procedures; 3) standardizing documents flowing into Pricing; and 4) pushing incomplete work flowing into Pricing from other departments back to the departments the incomplete work originated from.
Convinced company management that the company was no where near ready for a large-scale computer conversion, then set out to increase the company’s readiness. Although we did not see the completion of the re-engineering project as that was not our mandate the delay in moving forward and the gains made to ready the organization were making the re-engineering personnel’s job much easier. And increasing the company’s readiness improved the end product of re-engineering because positive shifts in the desired end product were made. And we reduced the volume of dirty data that would be forced or jammed into the new system (as was done on the previous conversion) to be handled by someone else later therefore we decreased future write-offs. And increasing the company’s readiness no doubt increased the likelihood of the overall re-engineering and computer conversion success.
A Warning Unheeded
After observing that a company’s products were deteriorating in quality and that quality control mechanisms were not being diligently followed Corporate Streamlining presented a sketch of a probability distribution curve to the company stressing how the chances of an undesirable event occurring are dramatically increasing because of this. The company took no significant quality control action and within two months an Asian customer refused nine shipping container loads of custom product and the largest Canadian customer refused its largest shipment of the year of custom product.
Credit and Collections Policies and Procedures
Similar to Purchasing above, discovered serious weaknesses in credit and collections policies and procedures so drafted a Credit and Collections Policies and Procedures Manual for customer management review and approval and for Credit department personnel use.
Identified the fact that millions of dollars worth of invoices were being issued prior to the work being completed. Subsequently designed a procedure that would not permit invoicing prior to the work being completed and signed off by the customer.
Cash Application was often being improperly applied to customer Accounts Receivable accounts because of certain complexities. A customer payment breakdown template was subsequently developed on excel to properly process these complexities. This greatly facilitated Cash Application and reduced future write-offs significantly.
Claims for Credits
A large ticket item company issued invoices in multiple parts, usually three parts (three separate invoices and credit notes) for each order, as a standard operating procedure. The three parts were basic price, credits and re-bills for modifications to create the final price. The company was experiencing customers deducting all the credits for all purchases immediately from their next payment without making any payment on the debit portion of the invoices until many months later. We worked with the IT department to issue one invoice for each order/shipment so that the credit could not be used without also paying the invoice to which the credit related.
Customer management had been operating off an assumption that gross margins were positive and healthy when in fact the gross margins were shown to be negative. This discovery dramatically altered management’s strategic plans.
Customer management had been operating off an assumption that $40 million in accounts receivable, inventory and accounts payable credits (total balances were much higher) could be turned into cash when in fact this $40 million had to be written off. This was significant data for management to know.
Corporate Streamlining attempts to identify and resolve root causes to an organization’s less than ideal scene. On one project Corporate Streamlining identified fifty-four root causes in one department alone, many of which were procedural. Root causes that once handled turned the department around from being a weight on the organization to a department that continually received praise from the President and from Senior Executives of the parent company. Praise received in writing.
As a clearing the burden step, took over the function of compiled the annual budget for two companies (a Canadian public company and a subsidiary of a U.S. public company) and in both cases showed that no one in these organizations were being held responsible for perhaps the most important yet most ignored financial number, namely, contribution margin (selling price less direct and semi-direct costs which is the money left over to pay for overhead and leave a profit). And that is why in one company Sales were able to use the selling tactic of undercutting the competition to boom sales and get away with it . . . until the company shut its doors.