A presentation for APICS – Chicago January 21, 2003

1. A presentation for APICS – ChicagoJanuary 21, 2003 Why companies compromise results and what to do about it Speed Unrealized Ideas to Action

2. The Potential of Speed • What's obvious • Higher customer satisfaction • Increased profit margins • Higher employee job satisfaction • What’s compromised • Whole company alignment • A pool of available cash • What's missing • A framework for managing change

3. What’s Obvious - The Definition

4. What’s Obvious - The Process • Establish an overall cycle time measure • Order to bill • Establish sub-cycle time measures • Establish value added time of each as a goal • Define the pool of savings available • Use change management as framework

5. The Burning Platform – The Pool of Savings Pool definition assumptions: • Cost of inventory 30% of total • Cost of accounts receivable (AR) 30% of total • Cost of quality is 30% of sales • Labor reduction proportional to cycle time reductions • Value added time 2 hours • Cost changes with improvements • Revenue does not change

6. Cost Pyramids Cost of Carrying Inventory Cost of Carrying AR

7. Projected Pool of Savings Material saving of $73K (COQ – reduced waste) Labor saving of $273K (increased throughput) Inventory savings of $20K (30% cost of inventory) AR savings of $10K (30% cost of AR)

8. Actual Product Line Results

9. What’s Compromised • Alignment of the tough areas • Sales • Customer service • The savings pool

10. Inventory Makes Life Simple … • Takes the burden off customers to plan • Provides manufacturing with cushions to cover quality problems and lack of planning • Provides illusion to customers that company is fast and demands can easily be met • Takes the burden off customer communication • Keeps everyone busy

11. Common Excuses • I don’t want to get hammered for running out of product. • It’s those sales guys in the front office. • I’m OK, you’re not, and who cares. • I need to keep Joe busy. • It’s less work for me if I have long production runs. • What do you mean – apathy? We’ll sell it eventually. • We know we can’t make budgeted sales, but we haven’t reduced the forecast. • But the EOQ tells me to buy a ton of this stuff. • I’m supposed to be accountable but I can’t control it. • Our past sins are hidden in that old stuff. I’m not going near it! From Culture Shock, John Cranvenho APICS – The Performance Advantage July/August 2002, pp 49 - 51

12. Why a Framework for Change is Needed

13. The LaMarsh Approach • The LaMarsh Managed Change™ model and methodology increases the quality and impact of the change. LaMarsh & Associates, Inc.

14. Closing Thoughts • We have the knowledge to force speed in our companies • We understand the full potential possible • Our efforts are sometimes compromised because sweeping changes are required within our company • If you approach the changes knowing and planning for resistance you will have a higher likelihood of success

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