Tuesday, September 21, 2010

Volume 74 - Four Key Components for Success

While preparing for my recent business trip to Memphis, I put together notes from a decade ago concerning changes at a major Hollow Metal Manufacturer as well as a 'distribution center' concept, since one of my meetings this coming week is 'distribution center' oriented. In reviewing my notes, letters, and outlines for the restructuring of a large Los Angeles Distribution Center it became very clear to me that the Four Major ingredients that I proposed many years ago are truer than ever today and not only apply to a restructure deal but apply to business in general; therefore, worth my 'blog' submittal.

Although these Four Major ingredients or Key Components were first established to clarify and to effectively 'change' the 'front-end' of a major hollow metal manufacturer and subsequently were used to 'change' a large distribution center, a revenue stream of the same hollow metal manufacturer, they are as applicable today as they were successful a decade ago. So whether they are used for a 'total restructure mandate' or simply used to tighten up a companies controls, procedures and quality of personnel or (as in the case of the distribution center) to elevate it to a much more effective facility, with quick ship manufacturing, wood doors, packaged hardware, and joint ventures concepts, the Four Key Components remain the same.

A few months before I took over the Presidency of Amweld (mid-1995), I realized that there were some major changes that had to take place if we were going to be able to handle the internal growth that I had projected through the Sales Department. Having control over Sales and Customer Service and LADC, it was logical that these changes had to be made with or without the input of other divisions within the company, as we all know 'manufacturing people' and 'financial people' live in their own small tightly woven world. Even though under my control, Sales, Customer Service and LADC did not embrace the idea of change, common within most manufacturing based facilities; nevertheless, this was not an option nor was it up for debate.

There had to be a 'reorganization' of the front-end of Amweld Building Products. There had to be a specific plan to reduce 'past dues' (which is the complete opposite of 100% complete and on-time) and at the same time work within the guidelines of a new detailed 'lead-time' document which would tie into the 'front-end' reorganization; at the same time, identifying the 'capability' and 'capacity' in our factories working under present manpower and shifts.

During initial discussions we accomplished two vital objectives: 1. To re-examine and restate the company's business purpose and focus; and 2. to use this purpose to localize people for change. We then proceeded to implement this same 'change' at LADC for we had reached a 'cross-road' (at that facility) and had to decide where we wanted to go.

Did we want to keep it at a four million dollar facility (after growing it from 1) and simply tighten up its controls, procedures and quality of personnel, or do we want to elevate it again to double the sales output with quick ship manufacturing, wood doors, packaged hardware, etc. or something in-between? We made our decision and proceeded with the four key ingredients that I believe are applicable to any business facing a 'cross-road'. These ingredients are not compatible with a 'structured' organization where all decisions run 'down-hill' and decisions are made by 'consensus' (automatic losing situation):

1. The belief that there is a single right way to do everything. Rather, we must keep up with changes in the market place and continuously go after better solutions. There is no single right way to do anything. This is even more prevalent in a distribution center twenty-five hundred miles away where they are dealing with a quicker lead-time/response schedule, stock shipping in hours and fabricated special orders shipped in small weekly schedules, and changes in over-the-counter sales.

2. The sense that authority is tied to an organizational chart. Rather, authority should be distributed among those who can do a better job for the customer. One of the reasons that LADC did not function previous to 1988 is the simple fact that they (LADC) was totally controlled from Ohio by more than one individual. In a service orientated facility 2500 hundred miles away from the corporate office this type of control cannot take place. Autonomy becomes an important key to its success regardless of who has final authority.

3. The view that the value of everything you do must be measured in dollars. Rather, the true value of an activity only counts in what it is worth to the customer. Again, this becomes more important for LADC/GVDC type operations because they are dealing with the customer, a back log that fluctuates hourly, short lead times, stock and non-stock and over the counter sales that make up 50% of the business within four counties (LA).

4. The idea that people have one skill, departments have a single function, and an enterprise has one goal. Rather, we must think in terms of multiskilled people, mutitasked teams, and the all goal enterprise. This speaks for itself. Anytime you have a satellite operation you have individuals doing multitasked functions. They must be able to respond both to vendors and to customers on an immediate basis without going through a long chain of command, especially when there is a three hour time difference and they only have so many hours to 0perate. We never totally understood that simple idea at Amweld; the fact that LADC is our single largest customer (and revenue stream) of the home office. We have had an antagonistic point of view toward that facility, whether it comes from the general sales area, the accounting department or the manufacturing facility.

There are many more layers of the 'onion' to 'peel back' to accomplish the above stated task. Many months were put into 'planners', structured 'payables', staff upgrades, duties and responsibilities, training, flexible stocking programs, reduced fabricating lead-times, sales volume and forecasts, operational daily-weekly-monthly reports, change of 'mind-set', etc. etc. It has been and is now my belief that Market Share and Profitability can be obtained in a satellite operation with Service being the main pillar of stability backed up by a variety of product flexibility integrated with speed, cost effectiveness and total integration with an overall corporate purpose.

One doesn't have to agree with any of the above, as most manufacturing guru's will attest; but the fact that very few successful companies grasp this concept is proven out by the constant closing of satellite operations as well as the loss of manufacturing capabilities within this country. Don't blame foreign countries for taking manufacturing jobs, don't even blame stupid Congress or the Local politicians; rather, look within ones own (manufacturing or distribution) make-up to find the correct blame.

Monday, September 13, 2010

Volume 73 - Health Care Bill -Enough!

As I stated in Volume 72, I've run out of the patience to dig through this piece of Bureaucratic Bullshit legislation, even if it's simply delivering the translation by way of our International Law Firm.

But it just 'pisses me off' that we Americans told our lawmakers in Washington that we wanted 'reforms' that would LOWER costs; that we wanted to insure those social programs that made sense, such as protecting Medicare; that we wanted to keep the health plans that we had but wanted reform to the prescription side of the equation as well as some 'common sense' applied to the coverages offered protecting us from the giant Health Care Companies and Pharmaceutical Companies taking advantage of us both from a extreme profit standpoint and exclusionary standpoint.

BUT WHAT DID WE GET: We got legislation from an Administration pitching this health spending bill that can't be paid for without stealing billions of dollars from Medicare; does nothing to LOWER present costs but will actually encourage the Health Care Companies to raise premiums. It does nothing to reduce prescription costs, simply encourages more prescriptions to be imported into this country. It encourages the Health Care Giants to be more exclusionary and to 'legal-ease' their programs so that denial can occur at their choosing.

We, as Americans, argued strenuously against its passage at every opportunity. We offered detailed reasons for our opposition, along with common-sense alternative reforms aimed at lowering the cost of health care while yet providing access without undermining the system that we had and for all of our efforts these same lawmakers in Washington persisted to pass this 'garbage' bill. A bill that will ultimately cost jobs as employers reduce benefits and cut jobs simply to 'make ends meet'.

I believe it is time for our lawmakers in Washington to understand that the working public, the entrepreneur, the small business person, the second and third generation of LEGAL immigrants are sick and tired of carrying those that take advantage of a system that has become so Socialized, so addicting, so anti-business, so non-accountable that it actually encourages people to do nothing because the government will take care of you. Bullshit!

Sunday, September 12, 2010

Volume 72 - Health Care Bill - 3nd in Series

Health Care Reform: Grandfathering Rules and Plan Design Changes as prepared by i.2 Independence2, LLC's International Law Firm Calfee, Halter & Griswold, LLP.

This third in a series "highlights potential pitfalls under health care reform for employers considering changes to their group health plans. Any employer considering plan changes, including design changes as a way to decrease the cost of coverage before open enrollment, should evaluate the changes against requirements to maintain 'grandfathered' status under recently released regulations. Failure to maintain grandfaathered status can have signficant ramifications for employers.

Grandfathered status and its significance

Any group health plan in which an idividual was enrolled on March 23, 2010, (the law's enactment date) and which has continuaously covered an individual since this date is 'grandfathered' under the new law. This means that the plan may avoid or delay the application of some potentially burdensome requirements under the new law. These requirements include:

> nondiscrimination rules for insured plans;

> external claims review requiarements;

> additional coverage requirements such as immunization or preventive care without cost sharing;

> the extension of coverage to a child under age 26 prior to 2014 even if the child is covered under his or her employer's plan; and

> the elimination of preexisting conditions exclusions for individuals age 19 or older.

Loss of grandfathered status

Prior to the issuance of the regulations, we knew that a plan's grandfathered status would not be lost for any of the following reasons:

> participants' family members enroll in the plan upon reneewal pursuant to the plan's terms as of March 23, 2010;

> new employees and their family members enroll in the plan; or

> the plan extends dependent coverage to age 26, as required by the law.

It was not clear, however, whether certain changes would be significant enough to cause the loss of grandfathered status. The regulations prove much needed guidance about changes that trigger a loss of grandfathered status.

Under the regulations, a plan will lose its grandfathered status if:

> Employer contribution - The employer contribution rate for any tier of coverage (e.g. single, family) is reduced by more than five percentage points below the contribution rate in effect on March 23, 2010. For self-insured plans, contributions by an employer are equal to the total cost of coverage minus the employee contributions for the coverage.

> Percentage cost-sharing - A percentage cost-sharing requirement (e.g. coinsurance percentage) is increased from the plan's requirement as of March 23, 2010.

> Fixed amount cost-sharing - A fixed-amount cost-sharing requirement other than a copayment (e.g. deductible, out-of-pocket maximum) is increased by more than 15% from the plan's requirement in effect on March 23, 2010, as adjusted for medical inflation.

> Copay - A copay is increased from the paln's March 23, 2010, copay by more than the greater of: (1) $5 or (2) 15% as adjusted for medical inflation.

> Annual Dollar Limit
An annual dollar limit in place on March 23, 2010, is reduced

> New policy
A new insurance policy replaces an existing policy after March 23, 2010, (e.g. prior insurance policy is not renewed).

> Particular condition

Benefits for a particular condition are eliminated. This includes the elimination of a necessary element to diagnose or treat a condition.

The regulations provide that grandfathered status is available to each benefit package provided under a group health plan. Thus, if a single plan provides two or more medical plan options and a new policy of Insurance is obtained for only one option, then only the option covered by the new policy will lose grandfathered status.

As you can easily tell from this and the past two postings that the Health Care Reform Act is anything but 'reform'!

It should be noted that Calfee goes on with three more articles relating to this Health Care Reform, one actually starting with an effective date of March 23, 2010 and extending to January 1, 2014 giving not only the effective dates but also the 'Description' and 'Employer Considerations'. I simply don't have the patience to continue with this piece of Bureaucratic Bullshit legislation!