Business metrics that underpin profitable growth
Putting the challenges of the last two years behind us, the directors of many glass businesses are now renewing their focus on growth and profitability. There are a lot of things you can do to improve an established glass business – and Jotika can help with quite a few of them – but to put everything on a really good footing, you need to measure what's going on across the organisation.
There are seven key areas where we think it is critical to benchmark your performance, target resources and measure ongoing improvement:
1. Customer returns
The ultimate measure of any organisation is your ability to satisfy customers. In the glass business, customers can face costly delays in they have to return product that’s below standard. If you can’t get it right, your competitors will certainly be ready to try.
Your goal here is clear: zero returns.
Achieving this needs to be everybody’s priority, from order taking through production and dispatch. If there is one metric you pin each week on staff noticeboards, this has to be it!
2. Quality – OTIF
The only thing that frustrates customers more than damaged or substandard goods is late or incomplete deliveries.
In the pressured environment of dispatch you don’t avoid mistakes by hard work alone; you need systems and processes to guide and check. For example, barcodes and super-clear labelling make things faster and dependable. The industry leaders are achieving over 99% OTIF, so whether you are a challenger in your market or striving to remain number one, that’s what you need to beat.
You can read more about OTIF (on-time, in-full) here.
3. Lost opportunity cost
Breakages and other mistakes may be hitting your bottom line harder than you think. Every item which goes through your factory but isn’t fit for sale has used up capacity that could have been producing profitable product. That lost profit is the true measure, the opportunity cost.
It’s relatively easy to measure the total profit margin of every damaged or discarded item. The more meaningful exercise is to identify where the mistakes are happening. Some may be down to breakages, but it can be more useful to focus on admin errors, particularly where systems are inflexible or intuitive, or paperwork isn’t clear enough and being mis-read.
4. Glass waste at cutting
With the cost of raw materials going ever upwards, you may need to think again about what you consider to be an acceptable level of glass waste.
Make sure that your optimiser is reporting gross waste: everything left after saleable product has been cut out. Some say that large offcuts shouldn’t count as waste as they get reused later. But in practice, operators are usually too busy to keep track of what they have previously set aside, so after a while it just gets tidied into recycling. Because there is no room for fudging the figures, gross waste is the gold standard for measuring and driving real improvement.
To reliably track improvement over time, you can also consider weighing the clean cullet (the total waste left after cutting) or getting your finance team to report on the weight of glass bought against the weight of glass sold.
5. Furnace utilisation
With soaring energy prices, you don’t want to run your furnace for any longer than necessary. Efficiency improvements are likely to have a huge impact on your overall profitability.
There are many real-world constraints which limit how efficiently you can load the furnace-bed so you will never achieve 100% utilisation. Done by eye, you are doing well to achieve 55%.
However, where glass companies work with the Jotika team to fine-tune their optimisation algorithms, they are averaging 65-75% furnace utilisation.
If you’d like to know more, you can read how optimisation works best within the real-world constraints of glass cutting.
6. Working to capacity
If parts of your operation are working significantly below capacity for much of the time, then you are leaving profit on the table and diminishing your return on investment in plant and equipment.
The important thing is to take a fresh look at where the bottlenecks are and what may be making them worse. A common issue is where operators are working hard to minimise material waste but forgetting that time is also a valuable resource, particularly in a production environment.
Although the answer is sometimes investment in new machinery, there are often substantial improvements to be made through changes to planning and scheduling.
7. Sales conversions
In a competitive market you wouldn’t expect to win every bit of work that you quote for, but there is much you can do to increase your share of the best jobs.
Track the margins your salespeople are building into their quotes. If margins are reasonable but prices uncompetitive, you may need to look hard at your operational efficiency and cost control.
Make sure you are measuring sales activity, including how often you are following up and what reasons customers give for not placing the order. Push your salespeople to obtain more insights than just ‘lost on price’, as this is often the customer’s excuse for not revealing more fundamental gripes.
And finally, how quickly are you providing prices to customers? The first supplier to quote always has an advantage, so make sure you prioritise quotes for your best customers and most profitable jobs.
Next steps
If you are finding that your business systems are getting in the way of measuring and achieving more profitable growth, now would be the perfect time to look at Jotika. We are recognised as one the world’s leading software solutions focused entirely on the glass industry and offer truly outstanding customer service.
