Sunday, October 24, 2004

Phenomenal Productive Capacity...

Remarkable, the miracles of modern industry - from the Baby Ruth candy bar to the Boeing 777, any number of wonders unimaginable as little as two hundred years before are produced in great quantity. And yet, even the best businesses often do very poorly, considering what they're capable of.

The problem I'm getting at is one of actualization - that is to say, actually getting the company to perform up to its potential. Take the business I work for, for example (a new job - the reason I've been posting less frequently as of late):

We stock a variety of housewares, bedding, and bathroom supplies; that which we can't fit on the sales floor goes into a stock room, or into "topstock", accessable only via ladder. So let's say that we have only 5 units of product A on the floor, and the rest (15) in the stock room. When we run out, we need to discover the shortage, input the UPC into the computer system to find out if we have any more, then actually locate the products (a daunting task, since the ladders don't really fit in the stockroom, and climbing becomes the most expedient, if not the safest means of locomotion).

There's plenty of room for process improvement here; all the products are in the computer system, so products running on-shelf or in stock should be automatically brought to the attention of management for restocking. Further, having the information of where in the building (topstock, backstock, etc.) the reserve units are would save hours of time every day spent wandering around, climbing shelves, etc.

And this is no small mom & pop shop; this year, more than 50 new locations are being opened in the midwest alone. The point of all this is just to demonstrate in one small area of business the opportunities for competition to erode the market position of existing businesses. The margin could be much tighter. Yes, they have lots of advantages, key amongst them being economies of scale and inherited structure and organization, but that shouldn't dishearten an entrepreneur too greatly. Just remember that the opportunities are there if you look hard enough, and if they're not, there's a good reason for it (like getting the cheapest possible products, all else unchanged).

No comments: