Better operations through communication

As the poet John Donne wrote in 1624, “Noman is an island,” and nearly 500 years later the sentiment still holds true — especially in business. During a session at last month’s National Conference for Operations and Fulfillment (NCOF) entitled “Breaking Down the Silos: Communicating Information to Achieve Better Results,” consultant George Mollo discussed the importance of cooperation and communication among departments.

Though he’s headed his own operations consultancy, Nanuet, NY-based GJM Associates, for six years, Mollo worked for the Disney Catalog division in the mid-1990s. When he joined the company in 1994, the division was operating at a loss and had had minimal top-line growth and no strategic goals. “They were working book to book to book to book,” he recalled. Management gave Mollo and the rest of the division one year to go from losing $2 million annually to breaking even. Improving interdepartmental communications was a key tool in the proposed turnaround.

Among the changes implemented:

  • Mollo and his colleagues challenged every process and methodology to ensure that they weren’t overlooking a better, more efficient means to the same end.

  • The distribution center implemented what it called DIRTFT: “do it right the first time.” Even visitors to the DC were required to sign a paper pledging to follow the code.

  • Eight cents of every dollar above breakeven was committed to incentive programs.

  • The merchandising and the inventory departments were both responsible for overstocks and fill rates, to ensure that they didn’t work at cross-purposes. In fact, all departments were instructed to make decisions for the greater good. If a certain initiative would save merchandising, for instance, $50,000 but would require marketing to incur an additional $60,000 in expenses, the initiative was not implemented.

  • Representatives from all departments attended a preseason kick-off meeting. Results of previous seasons were reviewed, as were changes in direction for the coming season and potential issues in any one department that could affect other departments. The finance team would discuss changes in cash flow, for example, because such changes could affect merchandising’s conversations with vendors. Along the same lines, if merchandising planned to hold inventory of certain products across seasons, operations would tell them of the carrying costs so that the merchants could decide if they might be better off buying smaller quantities after all.

The results are in…

Mollo gave other examples of how regular communications between departments could benefit a business. When the inventory and merchandising staffs communicate regularly, they can present “one voice” to the vendor, thus eliminating situations where a vendor might tell a buyer that a lead time is six weeks only to tell the inventory department that it’s actually 10 weeks.

Likewise, inventory can supply sell-ratio benchmarks to the creative department to ensure that they don’t allot a product more space in a catalog than is warranted. “If you’re selling a $1,000 car,” Mollo said, “you don’t want to spend $800 on the ad.”

By implementing regular communications among teams and departments that previously acted independently, Disney Catalog was able to double its sales from $50 million to $100 million in 14 months. During that same time frame, it went from operating in the black to posting nearly 16% EBITDA.

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