Think you're a smooth operator?

BY BRUCE CROZIER
Special to The Wholesaler

Wringing cash out of your operation starts by knowing how it works.

We all know that during economic downturns there's only so many dollars to go around. We all know that as gross profit dollars shrink, net profits can turn into net losses and catastrophe. We know that the operating expense section of the income statement becomes even more important to business survival. Tighten up the ship's operations and you will stay afloat.

We know all of this. But in order to control something, you have to know how it works. What do you know about your operation? Are there orders languishing on someone's desk, costing you sales? Are clerks drinking coffee, waiting for invoices, costing you cash flow? Are cash receipts zagging when they should zig, costing you interest? If your accounts payable clerk walks out the door in a huff, what exactly did they do every day? If you have 25 people in the office, would 24 do the job just as well? Would 26 do it better?

Maybe you're asking yourself the biggest operations question of all. You're thinking of replacing your abacus-like computer system. You've decided that you need more information and more control to compete profitably and now, not later, is the time to make that change so that you can start reaping the benefits ASAP.

What do you do now that the new system would have to handle? What would a prospective new system's operation look like? How would it affect your employees' work load and job descriptions?

I'm sure many managers think they could answer those -- or any other -- operations question without referring to any documentation. "I can tell you what every employee does and where every piece of paper goes." Yes, and I can remember when managers used to tell me they didn't need a computer to tell them exactly what was in their warehouse. I've never done an operations survey where management and staff agreed on the flow of transactions through the company or what was done when or who did it and how. Managers may think operations zig but staff know that they zag.

Why don't more managers document their operations? Simple. It takes too much time and no one will ever look at it, right?

It's true. It does and they won't, not if it's done the traditional way. The traditional way to document operations (sometimes referred to as standard operating procedures or sop) is to start with a flowchart. Ick. Nothing turns people off like a page full of funny looking symbols connected by lines and arrows. Only an engineer's mother could love a flowchart. And they're as hard to create as they are to interpret. Charting an operation so that it doesn't look like the meanderings of a drunken ant is high art. For most managers it's a none-starter. You can try writing a text version but you'll drive people who try to follow it nuts. If this, go here. If that, go someplace else. Then someplace else. Et cetera ad nauseam. Where was I?

There is a way to produce easy to follow, easy to understand, and easy to maintain, operations documentation that people will look at and understand. And you can do it using software you use every day, your word processing software. You don't need fancy flowcharting software. It will just make the job harder. You can refer to the sidebar article and example for some of the how-to details, but it's primarily done using the ability to hyperlink from one section to another and a simplified charting method that utilizes a reduced set of symbols and flow paths. Hyperlinks are those places on a web page where you can click to another area or page. Any decent word processing software, including the omnipresent ms Word™, includes a hyperlinking feature.

Instead of trying to draw flowcharts of processes that are bound to branch and loop and go off never to return, hyperlinks allow you to keep the main flow of operations documented on one page but instantly jump to offshoots or more detailed information on another page, and then instantly back to where you were.

For example, you're flowcharting the sales order process and you get to the point where a picking ticket goes to the warehouse. In a traditional chart you would either add an off-page connector symbol indicating the rest of that process could be picked up somewhere on another piece of paper, or you got a bigger piece of paper and used shorter connector lines. Instead of that off-page connector, you can use a hyperlink that allows you to jump to the picking process with one mouse click and back to the sales process with another without shuffling through a binder full of paper or scrolling around a diagram then trying to find you way back.

Another problem solved is how much explanation to give each step in the process. By hyperlinking to detailed task descriptions you can quickly give the reader all of the information they could want without cluttering up the operations diagram itself. Then create your job description documents by simply listing hyperlinked task descriptions. Need to reassign a task from one job type to another? Just cut and paste from one job description to another.

Once you've done the initial documentation of your operation you have three general types of interlinked documents: operations flows, task descriptions and job descriptions. Make a change anywhere and everything else is updated. Depending on your ingenuity and the nature of your business applications software you may be able to link other information like form and report examples, employee records, file layouts and applications documentation. But the operations flow diagram, the one with the symbols and arrows, is what ties it all together and gives you the big picture. The operations flow diagram, by itself, can tell you things that will pay off at the bottom line.

Revisit those earlier questions. Sales orders or invoices stalled? Cash receipts zagging? AP clerk out the door? Too many or too few employees? Now you have a place to look for the answers.

Looking to change your enterprise software? Traditionally, wholesalers have spent hundreds of management hours compiling long lists of features requirements for the RFP. Did we miss anything?! Then the vendor would respond yes, no, or "no problem" to each item. Did they really understand your operation? Provide them with the documentation outlined here and a lot of work is saved and doubts erased. Ask them to adjust it to reflect life with their software and you have a reasonable picture of your potential future employee requirements. You have real answers instead of reassurances.

Convincing managers of the value in doing the work to create operations documentation has always been a tough sell. I'll leave it at this: If your job is to manage operations in your company, shouldn't you be able to provide others with a detailed description of exactly how that operation works? Maybe that should be in your job description.

Bruce Crozier is a business software consultant specializing the hardgoods wholesale distribution industry. Crozier has 36 years of experience in all facets of the distribution software industry. He can be reached by e-mailing bcrozier@bcrozier.com or by calling 970/874-3257. His website is www.bcrozier.com.