Increasing your sales revenue dollars is the goal of every business. Some will try to do this by purchasing expensive advertising, sales training or other products. Yet the real goal isn’t exactly about increasing sales revenue, it should be about increasing profit.
Developing the skills necessary to make more, at the same or less cost, with greater product value that in turn increases your profit is called Velocity. Velocity management isn’t about going fast, it is about going better. Some would say this is a full-time job. It isn’t, it is a rewarding job, and it can become just a part of your daily workplace routine.
The goal of Velocity is the process of producing or providing if you are a service or retail company, more production or service at better Value for the Same Cost. Velocity, therefore, is about Cost Containment.
Velocity applies to every single company on the planet. A day care center, a barber shop, a video company, an Accountant or law firm.
Velocity says that 100% of your Monthly Revenue must be able to be achieved consistently with no more added people, or other expense. If it cannot, the company may be operating inefficiently and wastefully.
If a budget for two people is expected to be $20,000 a month only two people should be required to produce. In a manufacturing environment, this might be called Six Sigma. In a service, environment Velocity might be clean the clutter. In a Warehouse, Velocity might be Just In Time inventory instead of Just in Case inventory. Whatever, the work environment, it all gets down to time management and anything and everything that interrupts the expected results within that time… nothing more.
Do not confuse Cost containment – getting more for the same dollar – with Cost Reduction – getting the same result for less money.
Cost Containment is Management of Wasted motion, wasted time, wasted cost-added activities that do not add value to the product such as delivery, transactions, transportation of inventory and products, interruption of flow and so on. Velocity focuses on Problem Solving to find the root cause of the obstacles that impede production and cause internal as well as external Customer dissatisfaction.
There are six basic ELEMENTS that affect Velocity in all sizes and types of work environments. These are the 6 Ms:
and Milieu (Physical space)
Velocity is gained when each of these components of the Value Stream achieves Waste reduction and the Elimination of the costs associated with non-valued added time and space.
Velocity creates Added-Value that must transform the Product in some way. If the product is not transformed, you have a cost-added transaction that must be eliminated. For example, by adding a paragraph to a legal document, you are transforming the document into something different of richer meaning and creating more value. But if you just re-type the document, you are not adding value. That is a cost that should be eliminated.
Any of THESE activities that do not transform the Product or Service in some way, or that a Customer would be unwilling to pay for is a Cost-Added, not a Value added, Activity.
Processing is waste and does not add value. Velocity asks whether any process can be eliminated, reduced, combined, accomplished somewhere else, or the sequence be changed, or different materials used?
Anything that causes Delay and Waiting is non-value-added and wasteful. Perhaps this is due to a poor layout, people specialization, poor quality or disorganization.
Overproduction is wasteful. When a company overproduces in anticipation of selling something is at risk of this never happening for many reasons.
Unnecessary people motion is also a waste. Sometimes simple movement such as delivery of an item to another room or work area can be eliminated.
Transportation of Inventory is a waste. Inventory is money for items that belong on your family’s dining room table.
Scrap and Rework are waste from uncontrollable processes and poor quality.
Transactions are time wasters when they have redundant, untimely or irrelevant information or they are not critical to the fundamental communication of the activity.
Many business owners will state they have no waste. Then, after thinking about it some, they begin to identify all kinds of waste in their business. This is the very first step in improving velocity in your company – awareness.
Remember, the goal of Velocity is to remove all obstacles and Interruption to the Continuous Flow of a job. Then, to make more with the same dollar.
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