This posting is the first in a series of postings on
a story written by Bruce Nelson about a company that designs, builds and
delivers cabinets for different types of organizations.
In this story Bruce discusses some well-known problems facing many
manufacturers and service providers. I
hope you like it as much as I do.
The
Cabinet Maker
The
consequences and chaos of uncontrolled efficiency
The ultimate story of the Cabinet Maker could
actually be any company, in any industry, in any location, and at any point in
time. However, for this story we will
focus on a particular cabinet maker and their improvement journey.
This cabinet maker, by industry standard,
could have been classified as a small company.
It had grown from a father and son operation conducted in a backyard
woodshop (shed) into a company that had annual revenues of about $1.5M, and
employed about 30 - 40 people at any given time. In time, they moved from the backyard
woodshop into a sizable building complete with its own shipping and receiving
docks, plenty of floor space for required equipment and a large area to hold
raw material inventory - complete with storage racks that went all the way to
the ceiling – probably about 30 to 35 ft. high.
The new building also contained adequate area to layout and build
special cabinets, such as reception areas.
There was also an adequate area, where counter tops could be
manufactured.
This cabinet maker was considered specialized
because the highest percentage of their work was commercial cabinetry and not
residential cabinetry. The primary
business model focused on office buildings, schools, and other larger public structures
(libraries) that required cabinets and sometimes the very special (very ornate)
reception desks located in office lobbies and waiting areas. This cabinet maker could also provide a wide
range of custom counter tops, if required.
In essence, they were very much a “one-stop-shop” to provide the
cabinets, custom cabinets, custom counter tops, and special design cabinets for
larger projects.
For the most part, the cabinet maker had
limited their work efforts within a single state, but had recently made a
management decision to expand the sales effort into three adjoining
states. Management was of the mindset
that they needed to grow the business. By
expanding the sales into additional states they were able to increase the sales
and had done quite well getting new business. Actually, the “sales” statement is a bit of a
misnomer. What they actually did was expand
their effort to provide “bids” to local contractors that were bidding, and
working, projects for local, county and state Governments, and on several
occasions they bid, and won, contracts for the Federal Government such as,
court houses. This expanded bidding
process seemed to be working well and the orders were rolling in. They were winning some major subcontracts to
provide cabinetry in several new schools that were being built – life was
good! Except, for one small thing – the new
projects were coming in fast but, they weren’t going out fast!
The new projects seemed to be stalled in the production process. It was not uncommon that new projects could
take as long as two (2) months to complete, and this was not a good
situation. The cabinet maker couldn’t
get paid for projects that were not complete and because of some contract
limitations (which seemed to be typical for this industry), they could not
receive progress payments – cash flow was a major concern, and rightly so. In fact, in some cases the cabinet maker was
being charged a severe penalty by the prime contractors for late deliveries.
For a majority of the new business, the
cabinet maker was a subcontractor to several different major construction
companies who were the primary builders for the projects. As such, the primary contractor (the
construction companies) used MS Project to schedule their project(s). MS Project is a Critical Path Method (CPM)
scheduling system, and that, by itself, presented a multitude of recurring
issues. The cabinet installation was
typically one of the last scheduled task segments to be completed, and as such,
they were always near the end of the project schedule. This problem usually manifested itself when
any task slack time in the previous tasks had already been consumed by previous
tradesmen. The cabinet maker was often
exposed to a reduced time-setting to complete their tasks and was often asked
to complete tasks in less time than they had originally bid.
To compound the problem even further, if the
cabinet maker did not perform the tasks in the reduced time offering they could
(most of the time) be subjected to very severe financial penalty for not
completing the work on time. The
construction companies certainly held the high ground and contractual advantage
to make this a very painful process. It
was a vicious cycle of reduced cash flow, poor on-time-delivery, and the inability
to accept any new work, that finally pushed the cabinet maker management team
to ask for some help. To be continued.........
Bob Sproull
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