MMS Top Shops Conference 2017 – ProShop ERP Presentation

– If you open a second location of your business tomorrow and you weren’t there to run it, how would it do? Would it be as profitable as it is today? Could it ship jobs on time, would quality be good? And then what if you opened 10 more shops, or 100 more or 1,000 more? If you can’t answer yes to these questions, then it’s likely you don’t have enough clear business processes at your one location and your business isn’t running as smoothly as it could be. So my talk today isn’t actually about opening lots of shops. If you did, that would be awesome. You’re probably happy with the one you have. It’s about creating a system for where your one location can run like a Swiss watch, with very consistent and repeatable business processes and performance. Just like you can expect the same level of quality getting a burger at McDonald’s at any location, and then make no value judgment about the quality of McDonald’s hamburgers, but we want that same kind of performance from our own businesses. So some of you may be aspiring Top Shops. Some of you may be current or past winners, but no matter what your background, I hope you can take something from today’s presentation and take back to your shop to make positive changes. Just to tell you a little bit about myself and my history. So I went to college with my business partners and we design and build race cars, which is about the best thing you could ever do in college, and we did a lot of machining and fell in love with manufacturing and machining, and when we got ready to graduate, we decided to start a company together. So one of my business partners took out a second mortgage on a house he owned, we bought a Haas VF4 and had a few months of rent left over. We opened our doors in 1997 and started our business, fresh out of college, not really knowing what we were doing, but times were good back then, and things went fairly well. By the year 2000, we had grown to the size where we needed some kind of business software to help run our company. We were using Excel and QuickBooks and it just wasn’t gonna scale. So we had different software companies come in, ERP-types companies come in to give us demos. We were totally underwhelmed with what we saw as I’m sure many of you might be, and so we decided to just write our own. We knew a software guy that could help us. So we started doing that, didn’t really think much about it until about eight years later when one of our machine shop customers asked us if we would sell us their software that they had seen a few times visiting us. That went so well, we decided, sure. At first, we said no but we’re just a machine shop, not a software company, but they insisted and customers are always right. So we finally said yes, and it went so well for them that they referred us to some other shops that they worked with and we did it a couple of more times, and then the light bulb really went off. So we made plans to sell our machine shop, which we did in 2014. We had about 75 employees at the time, and been having a great time since then, but one of the things that was really pivotal for us early on in our business was reading this one book called “The “E-Myth Revisited,” which I highly recommend and some of the ideas from that book, I’m gonna be sharing with you today. So our company went through all the same business phases as almost every company does, starting with infancy. Infancy is when you’re probably starting out as a technician, like many of you probably started out. You were a, you know, a machinist or a toolmaker and you thought you could do a better job than your boss. So you opened up a company, but there’s really no difference between the company and yourself. It’s one in the same, and they’re inseparable. Companies then often grow to adolescence where you’re getting busy enough and growing where you need to hire people and bring on some help, but you often, companies often don’t build the structure they need to make sure that that’s effective and it often becomes chaotic, and then companies hopefully get to maturity, and some companies are born mature from day one. They have a vision of what the future looks like in their company. They think about the system for their company rather than just the products that they make. So in our business, we adopted some of those principles and had some of our own, and those were that we were gonna take a very process-based approach. We were gonna have very well-defined roles for every employee. We’d have robust training programs, very standardized work, systems that scale, and a very much focus on continuous improvement. So let’s talk about this idea of a franchise model. A franchise model is basically the concept that if even though you never plan on opening more than one location, your business will run as consistently and repeatably as possible if you design it as if you were gonna franchise it, and there’s a few key points of, of this model. It provides consistent value to all the stakeholders. It uses the lowest possible level of skill which is a bit laughable in our business, but we’ll talk about that. It is a model of impeccable order. All work is well-documented and it provides a uniformly predictable service. So let’s talk about that value, first. This is the value as each of these groups would define it. So for customers, it’s gonna be consistent performance from your company. They can rely on you to perform. For shareholders, it’s increased in share value in returns. For employees, it’s a great place to work that’s stable and they can grow and learn. For vendors and creditors, it’s a, you know, solid customer that they can help grow and grow with you. Using the lowest possible skill. Like I said, this is a difficult one for machining, because the work we do is considerably more difficult than flipping burgers, but there is a major skills gap as all of you know and if the model of your business relies exclusively on high-skilled labor, you will not be able to scale it. So, our task is to build systems that you design that becomes the tools that people use to increase productivity, and the system is really the focus of today’s talk. So, the model must provide impeccable order. If you have chaos in your company, there’s no way you have good systems that are handling that, and order gives employees confidence and they perpetuate that order in your business. It definitely gives customers confidence if they come and visit you and see that order, they will trust you to deliver it for them. It gives suppliers and creditors confidence in you, and it proves that your systems are working. So when it comes to documentation, you’re essentially saying with all of it, this is how we do it here. We need to have clear and concise constructions at all level of the business, high and low, and I’ll be talking quite a bit more about this, how we did this in our company in following this model, and predictability, of course, customers crave this. There’s nothing customers want more than to give you an order and forget about it until it arrives perfectly on time, and employees, of course, crave this as well. They like to show up in a business that they can come to work at and learn and not have things be crazy. So there’s a few key company goals that we would have here. So, number one, to meet or exceed our customer’s expectations. Number two, to create an environment for employees to thrive. Number three, to provide consistent and growing profits for the business, and number four, to provide an an environment where owners or leaders are working on the company, not just in the company. So let’s talk a little bit about this exceeding customer’s expectations. You must design the process to deliver at least, or exactly, or a bit more than what each specific client is wanting every single time, and the way that we did this is we would interview them, survey them, ask them lots of questions, questions about their quoting preferences, customer service status updates, paperwork, first article reports, everything, and we would document it and provide it to the employees in the places where they would do that work. We would push that into the process which would eliminate tribal knowledge and also remembering out of the equation. We had an example of a customer who always wanted us to quote quantities of five, 10, 25, 50, 100, 250, 500 and 1,000 every single time, and they would email us and they’d say, hey, can you me a quote on 15 pieces, and sometimes we’d send them a quote for 15 pieces and then they’d re email right back, what about all my other quantities? So we developed estimating templates for them that always included every single one of those quantities. So we made sure that every time we had a touchpoint with them, we always got it, right. Here’s a few other examples. This is shipping preferences for every client. So we know that this client wants us to ship using their UPS account, only deliver exact quantities, not plus or minus anything. They have an on-time delivery window of seven days early and zero days late. They give us specific instructions about the shipping and the packaging requirements. We know it takes one day to arrive at their dock when we ship it. Here’s an example of some quality requirements. This customer requires certs with every order. They require a certificate of conformance. They want first articles only when there’s a new revision and not otherwise, and they want it in the AS9102 format. So, we push this into the system, here’s an example of an AS9102 format, which will be automatically formatted for them that way, so we know we never get it wrong. Employees want a place where they can thrive. As much as anything, employees wanna be treated with respect, be part of a team that cares about doing good work and have very clear expectations about what good performance looks like from them. So we try to give them an environment that enables them to do that. We set really clear expectations about what every individual employee’s doing, where they reside in the org chart. So here’s an example where we have Mark Machinist there as an entry operator, but he can see the path to advancing in the company. We can see how trained he is and if he chooses to take on other roles, then he can start following those paths and we can see how he’s doing against, and he can see for himself how he’s doing against filling those additional roles. He can see what training he has and what training he needs and what proficiency level he needs to get to to be considered fully trained, and on Mark’s user homepage, we set personal time targets for him for how much time he’s supposed to be spending on jobs and other categories of work. We make sure we have a clear and robust review system. So he’s getting reviewed frequently. You definitely owe that to your employees, and we give him the ability to see his own performance. So how he’s doing against all the metrics we measure him for, he can see that for himself all day, every day. Consistent and growing profits. There’s probably no greater place in the company to have well-documented processes when it comes to profitability of your company. So here’s an example of a profit summary page that automatically gets generated when if any job is finished, and what’s important is that we have the information to make smart decisions with, you know, hopefully, you have a good number like that, and when you have good numbers, you know, share it with your employees, you know, at a company meeting. Whether you share profits or not, or actual dollars, we always had an open book policy, but we always shared the good and the bad, and when you had bad news, we would look into the root cause and engage employees in the solutions. For us, and we would even ask them to present to the group why jobs went bad. For us, there was no shame in a job going bad. It meant the system was failing, not a personal failing for them, and then when you do have jobs that aren’t going well, dig into the details, look for anomalies. We tried to present the data to people in a way that they could easily click through and find every piece of labor or dollars spent on a job, so they could easily come up with solutions, and sometimes even when you take your best efforts, you’re gonna have some hard decisions to make, and sometimes you need to fire customers. Those aren’t easy to do, but they must be done, and so providing a system that people can make those decisions with is something that is worth having for sure. We want the ability for our owners and leaders to work on the company, not just in it. It is definitely the case that as a business leader, you are most valuable working on the company, and if you feel there’s a job that’s too complex for others to do, and you must be doing it, then you haven’t simplified and distilled that task down to its most basic level so others can do it. So this is from the book, “The E-Myth” very much. The things that the owners should be working on are innovation, quantification and orchestration. Innovation is self-explanatory. It’s the continuous improvement process of making your systems. Quantification is critical. The innovations need to be quantified. What are the better ways that you’re gonna design your system, so it performs better for you every day? And those have to be driven by data, and orchestration is the elimination of choice. It reduces chaos, and it makes sure that things are done the same way every time, and it’s also a great foundation for lean improvements. If when you do things the same way, it provides that opportunity to see the differences. If you’re doing it a different way every time, you have no basis for making those changes. All right, let’s actually dig into some of the details of how you might start this system. So I would start first by defining every role in the company with an org chart and define what that is gonna look like in 10 or 20 years, even if you don’t have that today, to find the duties, the responsibilities and performance for every single role, define all your company procedures at a high level, and then also the very much low-level tasks and work instructions. Here’s an example of the org chart. Even if your org chart doesn’t look like this today and you don’t officially have people in these roles, it is definitely the case that all those things are happening, and you may just be kinda switching hats all day and without even realizing it, but the goal is to build out that sort of ideal structure for your company and put your name in every spot that you actually work, whether you’re the janitor and the CFO, put your names in all those spots and then define those roles and responsibilities and job descriptions and performance metrics so well that by the time you have done that, you can then replace yourself in that role, move into the next one, formally, and replace yourself there and move on and so forth until you’ve worked yourself out of a job. and all you have left to do is work on your company. So here’s an example of a procedure. In ProShop, we built several levels of documentation starting with standards, you know, for example, if you’re an ISO-certified company, you might include that, quality manual procedures, tasks, training, and documents, and you can absolutely use Word or Excel, Google Docs, Google Sites, anything where you can put in text and link things to each other is a great way to organize this type of information. So here in our procedure, you know, we have an area for who approves these documents to what standard it meets with the flow of the work, and it’s very clear in any, for everyone can see this. Here’s an example of a company position where we very, you know, definitely define what the roles and responsibilities for that person are, what the performance metrics look like and all the training that they need to be fully trained in that role. This is down at a task level. This is more daily sort of detailed level. It shows who does that work, to what proficiency level, and you may notice if you can read it, there’s a lot of revisions on this task. You wanna make this level of documentation very easy to revise and accessible to the people doing the work and empower them to make improvements to the process. Let’s talk a little bit more deeply still yet about work instructions for specific jobs. These work instructions should have the goal of eliminating tribal knowledge, being very precise and specific, simplifying the process, being very visual, and we’re a firm believer of using checklists. So this, we think it’s critical to document not just the higher-up business processes, but down to this level. So we built set-up sheets into our software, and many companies’ set-up sheets are incomplete, and they’re managed separately from the main system, and because they’re incomplete, only certain employees have enough knowledge and skill to set up those jobs, whereas you want to have almost anyone be able to set up jobs if possible, and in order for a less-skilled employee to successfully set up a complex job, you have to have better documentation. So by adding, you know, media-rich set-up instructions with videos and photos, you can work towards eliminating that tribal knowledge and allow employees with lower skill levels to successfully set up more complex jobs Being specific. We believe it’s incredibly important to be very detailed and specific with your instructions. We were talking about this last night. Don’t just specify a half-inch end mill in your program and expect that you’re gonna to find something, that your buyer’s gonna find something that’s gonna work. There’s a thousand different types of half-inch end mills and most of ’em are not gonna work in your application. So we recommend using specific part numbers and specifying what performance characteristics need to have in order for that to be successful. This allows set-ups to go faster. It allows inspections to go smoother. It just simplifies the whole process. Here’s an example of a tool page. It includes vendors, prices lead times, jobs that it’s used on, future demand, and this simplifies the process of purchasing. It makes it consistent. You know you’re gonna get the right tools at the right time that you need them. We also suggest tracking tools throughout the whole company in the facility. So here’s a page where we have loaded tools into a caddy. We’ve done offline tool presetting, and again, this is all with the goal of making those set-ups more consistent as they can possibly can be, and it may look more complicated to do this, but I’ll assure you that in the long run, this is much simpler than just telling a guy to go set up a machine and, you know, good luck with it, because that requires a high level of skill, which will not always be available to you. We definitely recommend liberal use of checklists. There’s an incredible book called “The Checklist Manifesto,” which I highly recommend you read. It was written by a medical researcher who identified two different types of mistakes or errors in companies we make or in organizations. So we make mistakes. There are errors of ignorance because we don’t know enough and there are errors of ineptitude where we don’t use the knowledge that we already know and both of these types of mistakes are rampant in manufacturing, and when his research team introduced checklists into surgery rooms in eight hospitals, deaths related to surgeries plunged 47%. So just imagine surgeons who are the, probably the most highly trained people in the world, by working off a checklist can reduce deaths by 47%. So checklists can dramatically reduce the level of skill that’s needed for your set-ups, and just helps jobs to go that much more smoothly ’cause even the most highly skilled people forget to do things right every time. All right. Now I’d like to, for those that are Spinal Tap fans, we’re gonna turn it to 11 and show you some even more detailed things for what we did to document our processes. Our job travelers would include time and date stamps for every checkbox and quantity, and it would also validate the data behind that checkbox. So you see that we have one red box that jumps out to everybody. That’s indicating that the first article behind that checkbox is not actually complete or has invalid results in it. So our employees were trained to zone in on that color and then drill down into the details and figure out why there wasn’t a good first article. We firmly believe in doing an inspection immediately during the manufacturing process, and so we provide, you know, in-process inspection and trend graphs, so employees can look for trends and fix things before they actually become a problem. There inevitably will be some problems. So we standardize the method of creating and publishing NCRs. So we believe that if you can get managers and leads to immediately know about quality issues at the equipment, they can provide support immediately and help nip those problems in the bud, and by developing this process in a very standardized way, it allowed people to always just follow the system and make sure that what they were doing was doing it properly every single way. I talked earlier about continuous improvement being so important, and we tried our best to build continuous improvement into the systems and into the culture. So this, this page we see here, it’s called process development. It used to be called part development, but we renamed it years ago because we realized that the importance of using it was not to improve our parts but it was improve the process of building our parts, and that was more universal across the company. So it is essentially a workflow for identifying and resolving improvement activities related to the process of creating parts. We recommend automating your documentation wherever possible. If you can create standardized templates and forms, that ideally would auto-propagate, that would be the best. It will definitely take time to set up these systems and templates, but I can assure you that the returns on that time will be enormous and it’s well worth the upfront effort. Standardizing communication between employees is critical. This is a page where we would standardize our shift tie-ins. We ran three shifts and some of the shifts wouldn’t overlap with each other. So, we would put it, we’d made this page where they were one, you know, one employee can leave notes and information for the next employee that they’re not gonna see, and we embedded that improvement process, at the bottom, you can see there, because when they’re thinking about communicating to the next shift, it’s the best time for them to identify issues that they’re currently having now that they might need and want to initiate some improvement activities on. Where at ever possible, of course, dumb down the process. This is an estimating page and estimating is super critical to any shop, and it’s one of the last things that owners will often give up. I did all the estimating in our shop for many years and I thought that I couldn’t let anyone else do it ’cause no one else could be trusted to do it, but we eventually developed a system that allowed less-skilled employees to successfully do estimating most of the time, not all the time. Of course, I wasn’t successful all the time myself. So wherever possible, dumb down that process. Having your facility run well is important, just the physics of it all. So designing preventative maintenance into your process is critical. Making sure that happens on a routine schedule. Here’s an example of an equipment page with many different schedules of different things that have to happen, and then proactively letting people know when they need to happen. We firmly believe that standardizing your calibration procedures are also really critical. If you make it simple and easy, people will actually do it, and then you will actually have good equipment that is calibrated and readily accessible to measure your parts. Here’s an example of a caliber and its calibration instructions, a page where I can see the history of all the time that it’s been calibrated and what other equipment we used for that calibration, which would include this gauge block set, and if I wanted to then find the actual cert that came, you know, that came with that when it was new, or when it got recalibrated, I could easily click right into that, and the point of this is to make it all very simple, so that employees in proactive, so employees actually are doing this on the routine schedule. Definitely standardize your fixture methods and storage systems. Every one of our machines had the exact same type of sub-plate on it. So we could take any job, any fixture and bolt it to any machine with no dialing in or zeros finding needed, and it offered a very standardized way to perform set-ups, and again, made it more accessible to less-skilled employees to set those jobs up. Our other fixtures were organized into shelves for easy retrieval and storage. We even built an archiving system, which would remind people every six months to touch base with customers for fixtures that hadn’t been used. It provided a nice touchpoint and let them know that we were organized and kept clutter down in the fixture area. Definitely recommend building a lean improvements into your system. Here’s a page where we kinda were using our equipment module for standardizing the 5S process, especially the sustaining part of that, which is always the hardest. We would schedule Kaizen-type work orders and actually schedule the time to do that you know, in between other jobs, which again, was a critical part of continuous improvement. Here’s that same set-up sheet that I mentioned earlier. We call this a pre-processing checklist, and this is basically a checklist that ensures that all the steps required before a job hits the machine are actually been performed in advance, and this walks a less-experienced employee through all those steps and even links to other things in the system, so they can successfully execute those jobs. It also happened to provide visibility to those in scheduling if a job was ready to go or not, before it hit the machine, and then lastly, we would provide tools to allow people to monitor the process to make sure it was going well. So this is a page for a shift lead to look at to see every single job in the shop and how they’re doing, and if simple, it was fairly simple, if the red bar was longer than the green bar, then that job is not going well and they need to come offer support to the people at those machines. All right, so just last part here. So what is next? Now what? You sat through this, you’ve heard some ideas, you’d maybe like to try some things out. I would suggest you define the org chart for your company, systematically document all the systems, start replacing yourself in the roles that you don’t actually wanna be doing and start working on the company, and then once you’re able to, you can focus on innovation, quantification, and orchestration of those systems that you’ve built, or you can ask us to provide those things for you as well, and the last point is the sort of key thing to take away, it’s the system that produces the results, and it’s up to your people just to manage that system, and information is the glue that holds that whole thing together. So thank you very much for your time. Again, my name is Paul and we have a booth upstairs if anyone has any further questions.