Chapter Synopses

Chapter One: Gathering the Facts, Setting the Goals

This first chapter lays out the fundamental strategies that form the building blocks of such modern management programs as Six Sigma, Total Quality Management (TQM), lean manufacturing, and the like. Through a simple ratio analysis, which can be accomplished in a weekend, we can determine realistic profit goals for any company. We also see that growth without an underlying program to maximize profits is not a viable long-term strategy.

Chapter Two: Use Your Head During the First Weekend and For the Rest of Your Life

After setting goals and gaining an understanding of your company’s strengths and weaknesses in chapter one, chapter two will include several common sense techniques to get started. A more micro ratio analysis of specific departments, for example, will now reveal how the goals set in the previous chapter can be met. Also during this first week, an organizational analysis will make certain your reporting structure is operating at maximum efficiency.

Chapter Three: Go Where the Money Is

In virtually all manufacturing companies, the cost of materials will represent the largest single expenditure. This chapter will emphasize the importance of the purchasing function, and discuss a number of common sense techniques for making it run smoothly, including how to negotiate for the best price; how to make certain all purchasing efforts are coordinated with engineering, manufacturing, and sales; and how simple improvements in packaging and shipping can substantially reduce costs.

Chapter Four: Keep Focused on Where You Are Spending Your Dollars

Modern management theory has many names for methods aimed at optimizing inventory, most notably Just In Time and Kanban. But at their heart is our simple system of dividing all parts into three categories in order to concentrate your greatest efforts on the 20% of parts that represent about 80% of your material costs. We call it ABC Inventory Control. Other methods for controlling materials, including a sawtooth chart and economic order quantity, will also be explained.

Chapter Five: Redesigning Products for Profit

Product redesign (what modern management theory tends to call Direct Material Optimization), effective make or buy decisions, and brand extensions of existing successful products are all ways to significantly increase profits. This chapter will also explore value analysis and how to avoid the deadly NIH (not invented here) syndrome.

Chapter Six: Smart Sales Forecasting

In today’s economy, when sales may be just as likely to fall from one year to the next as they are to rise, accurate forecasting has never been more critical. It seems self evident that every company should have a fairly accurate idea of how many units of its product can be sold. Yet in the vast majority of manufacturing operations, sales forecasting is little more than guesswork, often due to an overreliance on salespeople as forecasters and an under-reliance on historic trend lines. Modern management theory has various names for accurate sales forecasting, like pull production and customer demand rate. Our methods provide the foundation of these techniques.

Chapter Seven: Don’t Price Yourself Out of Profits

This chapter will discuss proper pricing methods, including how to set prices so that the savings realized by the hard work of a comprehensive profit improvement program are not forfeited by a faulty pricing mechanism.

Chapter Eight: Managing Labor Costs

Modern management theory has various names for worker productivity, everything from Continuous Flow Processing, to 5S, to Fishbone, to Visual Management. To us, these are just different ways to establish labor standards. Likewise, Discounted Cash Flow is just another name for recouping equipment costs, and Work Group Organizational Structure is another name for work sampling. This chapter will explain all these techniques in simple terms, parsing them to their basics, and explaining how they can be used to boost productivity and get the most from your direct labor investment.

Chapter Nine: Keep Away From Debt

It’s always tempting to spend – on new plants and equipment, on new products, on brainpower, on acquisitions. This chapter will reveal the true costs of such actions, taking into account increases in working capital requirements and the ramifications of each expense to a company’s total operations. It will expose such modern techniques as discounted cash flow for what they are – common sense calculations that have been used for many years to determine the payback on every kind of investment.

Chapter Ten: Grow and Profit

Early in Maximizing Profits Immediately, we will emphasize how reducing costs is a significantly more effective way to increase profits than sales growth. But once a comprehensive profit improvement program is in place, every company wants to grow. Both organic growth (product extensions and expanding geographically and on the web) and acquired growth (a different kind of make or buy decision and how to evaluate an acquisition) will be explored. The authors have many decades of experience with both kinds of growth.

Chapter Eleven: Maximizing Profits at Service Companies

This chapter will explain how the strategies described in Maximizing Profits Immediately can be applied to non-manufacturing companies.

Conclusion: Profit Improvement as a Way of Life

Successful profit improvement is more than a regimented program of rules and procedures. It is a mindset; the always-on conviction by every salaried employee that maximizing profits is a team effort. Consultants have taken to calling it KAIZEN Continuous Improvement, or just continuous improvement. These are just brand names for making the comprehensive profit improvement program described in these pages a way of life in your organization.

Glossary of Terms

As part of our effort to reduce modern management theory to its essence, a glossary will include the latest terms and relate each of them to the fundamental methods described in Maximizing Profits Immediately.