Optimization—Maximizing Additional Value Within Your Business
- Published: Tuesday, 20 September 2011 16:36
- Written by CP Staff
The potential for optimization in the ready mixed business touches many levels and areas. The most recognized are the areas of logistics/dispatch, materials and plant performance. They all have quick gains and add value, but there are other areas to optimize as well.
In this issue, we will take a brief look at the benefits and tools available in those business areas, as well as discuss some additional areas to identify value through optimization. Often the term optimization is used loosely, and only independent performance goals are set within a company that may lack the full mapping of the process—thereby missing additional opportunities for improvement.
This potentially presents a level of variability, and what is satisfactory for one group can be unacceptable for others, making it difficult to implement standardized optimal solutions. An increasing passion of producers is their interest in finding additional value, and some have begun to look throughout their business to identify it. Sometimes, that value comes from areas other than the “usual suspects” of logistics, materials and plant flow, but the “pain point” is that it involves looking at the business as a whole and how each process operates independently and in concert.
One of the big challenges of this concept is accepting that there is more value to find, because it is believed optimal performance is being achieved. Looking throughout your business in this process is like having a physical—not something you really want to do, but you feel a lot better about knowing what you know afterwards. It’s important to think about optimization, not as an event, but more a way of doing business with continuous improvement. The key is creating an environment of continual improvement through optimization, which opens the door to perpetually examining the entire business.
In the ready mixed concrete business, value can be found in a number of areas and “best in class” is continually being redefined with improvements made in all areas, adding still more value.
One of the most recognized areas of Optimization is logistics (both incoming and outgoing). The evolution of dispatch in the past 25 years has moved from the use of a #2 pencil, radio and worksheet, to computer automated manual process, followed by electronic manual statusing then auto status (utilizing GPS and truck-mounted sensors), all the while automating the software versions for tracking and logistics logic. Maximizing efficiency (optimizing) of the utilization of equipment and personnel has been the foundation of this continued development in our industry, which many believe with the current automated technology to have reached its pinnacle.
I admit, we have come a long way and while this evolution continues to provide the framework for good decision making and constantly hones our ability in logistics, there is more to come and additional value will be extracted from the area. The next step in optimization is the advent of interpretive logic. As you know, the dispatch process has a tremendous amount of variables to consider at any one moment that can cost time and work against ultimate efficiency.
These variables can be difficult to see due to the sheer number of options. Adjusting to those variables in real time, while continuing to keep an eye out for the future effects of those decisions and their impact, can be a daunting task. Add additional plants or sourcing potential into the equation, and it ups the challenge of ultimate efficiency and profitability. Interpretive logic can sort through hundreds of thousands of variable paths with rules you set, and provides optimum solutions instantly, allowing you to continuously optimize your logistics and strip out costs.
This is not a replacement for dispatch but an enhancement for it. During every second, these tools have the ability to adjust for countless variables and provide instantaneous solutions while still anticipating future effects for dispatch, both on the incoming and outgoing side of delivery. This next generation of tool further pushes dispatch and raw material sourcing optimization, thereby streamlining time and equipment utilization and adding value to the business.
Another targeted area of optimization is concrete performance; along with materials and operational efficiency, it ultimately drives design. The components of concrete performance optimization are linked, falling into general categories of raw materials, operational performance (plant & truck variability), design, and information flow. They are all building blocks for performance optimization with the potential to affect value. The challenge is that design optimization is driven heavily by raw materials, operational performance and data.
The foundation of concrete performance is built on raw materials. Understanding and controlling your raw materials is critical and sets the stage for design and ultimately performance. Optimization of raw materials is part of a decision tree (process) that, as mentioned in a previous issue, can be influenced by more than technical or financial rationale, so it is important to clearly outline the “give and takes” internally (defining the impact of decisions), while at the same time externally develop technical partnerships with your suppliers. You not only need to look at each raw material’s individual performance, but also its consistency and the overall influence it has on your concrete performance.
For example, if your cementitious or aggregate components have or create unpredictable variability (i.e. the influence of mica in sand on water demand), you will most likely concede value in design to meet performance—but at what cost? Inversely, you can have well-controlled raw materials, yet variability in operational performance (i.e. poor mixing, weight tolerance variability, load sequencing, returned unknown quantity of water in the drum, etc.) or other effects all causing a loss of design value, but again, at what cost? Lastly, control of performance information can influence design based on posted results and potential inherent variability (due to outside influences, such as testing method, handling, etc.).
Taking into account using tools to control along each of these three lines, the actual design can be optimized based on performance targets. Remember, it’s important to embrace the concept that optimization is not an event but an ongoing process and in the case of concrete performance, it needs to be managed at mutable levels. There are a number of technical optimization tools to assist in this process, as well as to control variability through constant monitoring of performance. Transparency at each step of concrete production is available, along with the proper flags to notify you of errors/problems.
Tools also exist to monitor and modify performance in transit, thus optimizing consistency as well as monitoring/adjusting water consumption and ultimate performance, while narrowing variability. The concrete performance is influenced by a number of factors all operating at the same time, which once again can be a daunting task to control, but well worth it if you do. These available informational systems provide transparency into the factors influencing performance and are very useful with targeting finished-concrete optimization. But it starts with defining each within your business.
Operations is a big bucket for process, and depending on the individual producer, there is often a difference on what that bucket contains. Generically, the operations side of our business efficiency is all about breaking down the operating component processes and identifying ways to improve. Often, optimization comes from finding better ways for material handling, transport (within and through the plant), procurement and maintenance processing. Finding efficiency and managing time, as well as work flow within the business, plus allowing for proper preventative work to be done are key.
To do all this while looking for areas of continuous improvement can be challenging. Some of these processes influence other areas, such as quality, logistics and design performance to name a few. This is why a holistic view of optimization is worthwhile and tends to flush out any cause and effect issues. I have seen the best of intentions in operational optimization cause havoc in technical performance, sales and even back office, as well as vice versa. There are a number of operational tools available to insure your optimization works with the organization as a whole.
As mentioned in a previous issue, ready mixed sales is truly a difficult job in its entirety, but as a unique process can be optimized as well. Obviously sales is a series of critical processes essential to the business, so time should be taken to understand all the components. The challenge is defining what is truly needed versus “nice to have” and how much actually adds value to the customer and bottom line, versus what can be automated/streamlined.
I have reviewed a number of sales organizations that once we mapped the full process it was clear there was not enough time in the day to properly/effectively meet their objectives as defined. Often, it is the best of intentions to further enable the sales efforts that begins to foster non-value activities. There are countless tools available, but until you have defined your expectations of the sales process, it is hard to select the most applicable tool that continuously sharpens their efforts.
Even back office can present optimization opportunities. There are ways of looking at each process for improvement, finding efficiency and reduced costs. Often, IT will play a key role in solutions, but it is important to understand each process and its interdependence first, and allow IT to enable optimization, not be the solution. I urge you to look at your business and find those areas where you can optimize as I am confident you will find additional value and as always, Money Matters.
Next month: Procurement — Leveraging value in your business
Industry veteran Chris Crouch heads Jacksonville, Fla.-based CCI Consulting. He continues this month with the fifth of a 12-part series identifying increased profit opportunities in the Ready Mixed Business. He can be reached at 404/275-3865 and email@example.com