By: Rick Phelps, Principal, Synchronous Solutions
Businesses live or die on their ability to generate Cash Flow. When a business is generating a solid stream of cash, cash is often taken for granted and not given the attention it deserves. It is only when cash is tight that owners get serious about it. Cash has been tight for a lot of businesses lately.
Synchronous Flow is the science of managing and improving the flow of information, material, and money, through your business. It is a simple science, but one that often runs counter to common perceptions and practices in business.
Synchronous Flow is a wholistic system for doing business: from marketing and sales through production, installation, and invoicing. It cannot be the way part of the business runs but not the rest for all parts of that system must be in synch. Businesses that attempt to apply the science to just part of their system, the part currently causing them pain, will alleviate their pain, then tyically lack the discipline to do the remainder of the work. As a result, in the long run they do not see the full benefit or get the results they intend.
When it comes to making money, what you sell and the price you sell it for, cannot be divorced from production and how they need to produce it. This linkage between sales and production exposes the first common misconception in business – that a product with higher gross margin is more profitable than one with a lower gross margin. This is simply not true. Product profitability is determined by the flow rate of money through the business, not its percent margin.
Synchronous Flow gives a business clarity on true profitability so that marketing and sales can make informed decisions on what products to promote and how to price them.
The second common misconception in business is efficiency and the desire to keep everyone busy. A business where everyone is always busy is an extremely inefficient operation. Take answering the phone as an example. If you have just enough people to answer the phone based on your average call volume, then during the higher-than-average time periods, new prospects who are interested in buying from you are not getting their call answered. In today’s world that likely results in a lost sale as they moved on to call your competition.
In the shop, pushing work into the system to keep every process busy is hugely wasteful. Work can only flow through the shop at the rate of the slowest, most limited process. Any work beyond that rate creates the worst kind of waste: that of over-production. With Synchronous Flow, workflow is synchronized to the pace of the Constraint process, allowing the whole process to flow at its maximum rate.
Constraining flow this way frees up the operators at the non-constraint processes to do other value add work, either supporting the Constraint or doing maintenance or improvement work on their process.
Synchronous Flow gives a business the clarity it needs optimize the flow of information through the business, enabling product to flow at its maximum rate, which ensures cash flows at its maximum rate. No other business system can achieve that. This is not marketing bluster – it’s a scientific fact.
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