The Data Heads

Yesterday my colleague Chris called me. “I just had a really interesting call from Bob,” he said. (Bob isn’t his real name. “Bob” is a customer who doesn’t want me to divulge his or his company’s name.) Bob’s company makes  packages filled with something that you can find in most grocery stores. They make a lot of these packages.

In one of my last conversations with Bob he told me “I’m almost embarrassed to tell you how much money GainSeeker is saving us by helping us reduce over pack (give away). The ROI on our deployment is shocking.”

We love it when we hear these stories – even if Bob won’t let me do a full-blown write up with all the gory details.

But Bob’s call to Chris raised an interesting question. Chris told me that Bob said he now believes they’ve been under-reporting the payback on his GainSeeker deployment. After six months or eight months of reducing over pack, Bob is discovering that his plant has made significant increases in yield.

He had been counting the savings realized by not giving away the product, but he wasn’t thinking about where the product he had been giving away was going.

It seems to me that the answer to this question hinges on whether the major constraint to his system is plant capacity, or demand for the product. If demand for the product is unlimited (we could sell every package we make) then any reduction in over pack goes into new packages and brand new sales. That is like picking up free money off the floor.

On the other hand, if the constraint on the system is capacity for production, then any reduction in over pack reduces the total cost of filling the package. If you have an order for 1000 packages and you can produce them in 7 hours instead of 8 hours, then you save one hour’s cost (energy, labor, etc.) and use less materials.

This reminds me of a chapter out of Goldratt’s The Goal. Do you remember when Jonah walks through the plant with the hero Alex and his team and discusses bottlenecks? They get to the heat treat area and the consensus among the team is that the parts waiting in the queue (WIP) are worth only a few thousand dollars. Jonah helps them realize that in reality those parts represent over a million dollars of revenue stuck in WIP. (p155-156)

I think Bob’s controller will have to weigh in on the final answer. What is clear to me is that Bob was delighted with GainSeeker Suite’s power to collect and analyze data so he could reduce material  costs and increase yields.

After I wrote most of this I had a chance to talk directly with Bob, and I learned a little more. He produces to order, not to stock, so improving yield does not lead directly to new sales. Improving yield means that he can produce the same output at lower costs. If the cost of over pack already includes all his overhead costs (energy, labor, materials) then I think it would be double-dipping to count increased sales. However, at some point it does seem that increased capacity would result in increased sales. He told me that last year he had the place open half the Saturdays of the year to meet demand. Now they’ve eliminated overtime and increased volume. Can he get his accounting people to recognize this? We’ll see.

What do you think? How are you tracking the ROI on your data efforts? How might GainSeeker help you? Use the ShareThis button below to mark this page, leave a comment, tweet me, schedule a conversation, or call 800-958-2709.

At today’s web seminar How Best-in-Class Food Processing Companies Drive Profits, Increase Efficiency and Reduce Risk, my colleague Tom Albrecht offered a number of free resources for individuals who would like more information. (If you missed the live presentation, you can still view the recorded version.) We decided to put links to all of these resources on one page so that you can use this as a starting point.

Here are the resources:

• The Aberdeen Group’s Event Driven Manufacturing Intelligence Benchmark Report.
• A supporting white paper that examines the role of real-time data in improving profitability and customer satisfaction.
• The Aberdeen Group’s Cost of Quality Benchmark Report.
• Free gap analysis software that helps you rate your ‘Gap to Entitlement‘ to a data driven organization
• Case Studies and video presentations from McCormick Flavor Division, Hormel Foods, Consolidated Biscuit, and Del Monte Foods. Additional case studies and white papers are available from the Portfolio pages on our website.

Of course, if you’d like to link to this, share it with a friend or make a comments, please do so. Use the ShareThis button below to mark this page, leave a comment, tweet me, schedule a conversation, or call 800-958-2709.

If you’re connected to the foods industry, mark your calendar for October 6 at 1pm EDT.

That’s the date we’ve set for our brand new web seminar “How Best-in-Class Food Processing Companies Drive Profits, Increase Efficiency and Reduce Risk”

Over the years, my colleague Tom Albrecht (our VP Bus Dev) has worked with a lot of people in the foods industry, and he has had an amazing range of experiences. I don’t think there’s much he hasn’t seen in one form or another.

I’ve asked him to try to boil it all down to the essence and present it to you on Oct 6 in 45 minutes or less.

This isn’t going to be a sales pitch. Tom is going to share his experience with best-in-class customers and back it up with research provided by the Aberdeen Group. It will be solid content that your team can sink their teeth into.

The seminar is free, and will be delivered to your desk top. But you need to register by following this link. You can also read our press release here.

Hope to see you there. Use the ShareThis button below to mark this page, leave a comment, tweet me, schedule a conversation, or call 800-958-2709.