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A Middle-Market Business Leader’s Guide to Continuous Improvement

By Gerry Mendelbaum and Vincent Piccione

Amazon lists over 18,000 titles in the category of Continuous Improvement and 4,400 more in Lean Management.  There is no shortage of people that will come into your business and tell you what to do.  With all of these resources available, wouldn’t you think there would be more operational excellence inside the middle-market?

Too many middle-market companies focus on the mechanics of continuous improvement, when they should be changing their culture.  Vincent Piccione (CEO and co-owner) and Gerry Mendelbaum (consultant) worked together to change the culture of Alfred Angelo (AA) into an operationally excellent middle-market company.  AA is relatively complicated.  They manufacture and source bridal apparel in China, which are sold through a network of AA Signature stores and private bridal retailers around the world.  While AA’s processes and systems were not perfect, their transformation required changing the culture to make continuous improvement an integral part of managing the business and doing the work.  Five major steps drove the transformation:

  1. Understand where you are.  Vincent realized that AA had outgrown its operating model.  Key metrics like inventory and order-to-delivery time were out-of-whack given AA’s make to order model.  Costs were increasing and profits shrinking.  Something was wrong but what and where to start?  To get those answers Vincent engaged Gerry and his team to conduct a through review of the business from the product offering to the suppliers.  The answers weren’t pretty, but they were just what Vincent wanted.  There were plenty of things to fix and now there was a roadmap and rallying point for AA.
  2. Clarify roles and expectations.  Among the study’s findings was confusion as to what people throughout AA were supposed to do.  Too many people thought they should be involved in too many things, diluting their time and effectiveness, and creating confusion about how decisions were made.  One way to begin a culture change is to change roles and responsibilities. Using a RACI (Responsible, Accountable, Consulted, Informed) model Gerry and Vincent redefined roles throughout AA streamlining the decision making process and freeing people to do other work.
  3. Create a team.  To a large extent AA was operating as a classic siloed organization.  For instance, to maximize supply chain efficiency, production over-built dresses.  Retail and wholesale could only sell what customers wanted to buy, which often were not what the supply chain wanted to produce.  That resulted in large investments in non-performing inventory and lengthy order fulfillment lead-times.  To get everyone on the same page and create an environment where people were focusing on AA instead of their department, Vincent initiated S&OP (Sales & Operations Planning).  Realizing that S&OP was hard and that it would take time to get it right, he decided to begin immediately rather than lose time preparing.  As expected the initial bi-weekly meeting did not go smoothly.  The old culture of blaming others hadn’t changed; there wasn’t enough data so people resorted opinion and denial; and many attendees didn’t really understand why they were there.  But the second meeting was better than the first and the third was better than the second.  After a few months, they fixed the data problems, attendees understood what was expected and communication, understanding and coordination began improving across AA.
  4. Formalize processes.  When we began, there were no rules describing how people should do their jobs.  Metrics were either non-existent or created the wrong incentives.  For instance, there was no policy around order cancellations and returns, which is a big problem in a make-to-order business, and leads to unsellable inventory.  To date, Vincent has written over 250 policies and procedures that define everything from the penalties for order cancellation, when returns are accepted, how new styles become part of the product line and the scheduling of factory orders.  We created and publicized a handful of easy to understand metrics like inventory record accuracy, order-to-delivery lead-time, first pass quality and unsold inventory investment.   In less than a year inventory record accuracy improved by 30%, on-time-delivery improved to 100%, and raw material and unsold inventories have both decreased by about 80%.
  5. 5.     Communicate.  AA has a complicated mix of people and cultures.  Their factory and suppliers are in China.  They sell through private bridal stores on 3 different continents.  To get everyone rowing in the same direction we created a handful of easy to remember slogans like:
  • First quality, on time, every time.
  • Don’t make product without a customer order, the only good inventory is sold inventory.
  • Share as much information as we can with everyone, that includes performance metrics, policies, procedures and plans.
  • Balancing the factory isn’t our goal if it means making product ahead customer orders.

Today, when Vincent visits his factory and suppliers, they all know these simple rules and have meaningful discussions about performance improvement.

Every company is different and there is no simple cookbook for a successful transformation.  Finding the right coach that understands the culture and provides perspectives and guidance continues to be the catalyst for the ongoing transformation.   What worked at AA is instructive and provides a good starting point.  The big lesson learned is that companies need to focus on changing the culture then providing the necessary tools, infrastructure, and leadership.

476353639Gerry Mendelbaum is a Camber Advisors managing partner. Camber Advisors offers operational and technological expertise primarily to private equity firms and their portfolio companies. 

 

 

picconeVincent Piccione is the CEO (and co-owner) of Alfred Angelo Bridal, an 80 year-old family-owned designer, manufacturer, wholesaler and retailer of bridal gowns, bridesmaid dresses, flower girls and special occasion dresses. 

 

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