In part two of our series on Business Latencies, we will be focusing on Identifying and Responding to “Trouble Spots”.
Definition: The ability to automatically perform periodic checks of business data to identify and respond to existing conditions of data which indicate a problem or potential problem. This is often referred to as Exception Management.
This is one of the more challenging Latencies for a Business to recognize, since most organizations’ approach to trouble (or potential trouble) is to “see it, fix it, and forget about it”. As such, the identification of recurring trouble spots (which is where Latency is most apparent) requires an in-depth analysis of an organization’s business processes and asking such questions as:
“What happens in our business when . . . “.
Although it’s human nature to fix a problem and move on as quickly as possible, the exercise of working backwards from the problem (to explore why it occurred and how to prevent it) allows us to identify the true cause of the Latency.
The identification of (and response to) trouble spots in a business is commonly referred to as Exception Management. This term represents an approach to business whereby the norm is accepted, and only evidence of processes that stray from the norm are identified and acted upon. In that sense, Latencies are easy to identify, as you start out by identifying a specific process or rule and simply ask yourself whether it’s feasible for that process or rule not to be followed. For example:
- Rule: SDS must be delivered once a year unless the formulation has changed. Latency: Formulation is changed and a new SDS is not delivered.
- Rule: Inventory levels on certain items must not be let to drop within 10% of their re-order level without a PO being issued. Latency: An item drops to within 5% of its re-order level and does not trigger any kind of action.
- Rule: Raw materials that are expired can not be left in lots. Latency: Items that have expired are still in stock.
- Rule: If a delivery is delayed beyond the Required Ship Date, the client must be notified. Latency: An order that was due to ship last week still has not shipped and the client has not been informed.
Back in the 1980s, a company that sold System Monitoring software came out with an advertisement that showed an IT Director wearing a Fireman’s helmet and sitting in the seat of a child’s Fire truck. The ad was a huge success, and the response from every IT manager was the same: “I know what it’s like to put out fires.”
Reducing Business Latency isn’t about putting out fires; it’s about preventing them from happening in the first place. Once the fire has occurred, so too has the Latency; time has been lost starting from the very instant that the business rule or process was broken. And the Latency doesn’t stop once the problem is located; correcting the situation always requires additional time and effort – time and effort that could be better spent elsewhere. It’s a simple rule of thumb; the more time that goes by between the initial breakage of a business rule or process and the detection of that breakage, the greater the Latency.
But negatively impacting an organization’s meaningful working hours usually isn’t the worst fallout from an inability to pro-actively identify trouble spots. Worse still is the damage that this Latency has on Customer Relations.
Studies have shown that it takes an average of eight to twelve positive interactions with a customer to earn their loyalty, but only one negative interaction to lose it. With those kinds of odds, it’s imperative that you do whatever you can to minimize the number of negative interactions. Once a negative interaction has occurred, the best that one can hope for is that the customer will not stop doing business with you, and will not spread the word of their negative experience. At worst, a negative interaction can cost your company future sales from this client, and from any other clients who hear about the negative experience.
Surprisingly enough, there is the potential for a silver lining to a negative customer interaction.
In a recent survey of customers who have continued to be loyal to certain organizations – in spite of having experienced one or more negative interactions with them – the survey results showed that clients place an extremely high value on how an organization responds to a problem when it occurs. As one customer put it: “The surest way for a company to gain my loyalty is to show me how well they respond to a problem that I’m having. It’s easy for a company look good when everything is going as planned; but it’s how a company responds to a problem that shows what they’re is really made of.”
And problems will occur. In spite of the best technologies, processes, and training, problems happen and it’s within an organization’s power to turn that negative interaction into an Opportunity to show just how responsive they are to a client’s needs. But the Opportunity is a delicate one. If too much time goes by before the problem is detected and responded to, no amount of good service is going to turn that into a positive experience. Likewise, if the responder to a problem does not have the appropriate information to help the client, the Opportunity is similarly lost.
Speed of detection and access to meaningful data are key components to reducing the Latency from these types of encounters.
Reducing the Latency of Exception Management:
Performing Exception Management (identifying and responding to potential trouble spots in your business) can be an extremely time-consuming process if done manually. But to automate Exception Management is no simple task. And the most difficult part of that task is to identify those business conditions that fall under the heading of “Exceptions”.
One effective way to approach the identification of business exceptions is to choose a process (such as a sales process, a customer support process, or a manufacturing process) and analyze the process to see if you can apply some or all of the following four tests:
- Date / Time Sensitivity. Does the process have dates and/or times associated with it? If so, are there scenarios whereby an item going through this process could have dates or times that are indicative of a problem? (E.g., an open quote that has expired.)
- Numeric Thresholds. Does the process have numeric values associated with it? If so, could an item have one or more values indicating that something is amiss? (E.g. a vendor has been rejected ‘x’ times.)
- Too Many / Too Few. Is it possible that too many (or too few) of an item are in a problematic state? (E.g., excessive number of inventory adjustments made my a user.)
- “Special” Objects. Are there specific items (or types of items) that should be handled differently from the rest? (E.g., formula changes that will increase the cost by X%.)
Once you are able to identify these Exceptions, you can begin to explore Automation that reduces the Latency of identifying and responding to these exceptional conditions. In general, three components are typically required in a solution that automates Exception Management:
- Exception Monitoring. The ability to periodically and automatically monitor business data to see if “exception” conditions exist
- Exception Notifications. The ability to notify select individuals about these conditions
- Exception Workflow. The ability to automate the execution of one or more business processes (“response actions”) that occur when an exception condition is detected
The last of these (the ability to respond to an exception condition) is worthy of extra consideration. This function raises the capability (and commensurate benefits) of an Automation solution insofar as it enables an organization to create a system of automated responses to their exception conditions. And although it is true that the act of notifying an employee is also a type of “response action”, it is still incumbent on that employee to take some action of their own. An Automation solution that both alerts an employee and takes some action (on behalf of that employee) provides a significant advantage.
For some exception conditions a simple Alert is sufficient; but for other conditions, the need to perform an action – whether scheduling a follow-up activity, creating a purchase order, et cetera, is essential to their goal of reducing their business Latencies.
The bottom line is that if you do decide to automate the Exception Management process, make sure that you know:
- What types of conditions you need to monitor (record-level conditions, aggregate or calculated conditions, the ability to detect when key business data has changed, etc.)
- How you wish to notify people (email, IM, SMS, fax, etc.)
- What kind of automated responses you require (the ability to trigger updates into your business applications)
Based on the answers to these three questions, you will be able to easily identify which Automation Technologies are right for your organization.
For a comprehensive whitepaper containing the most common 6 Business Latencies, please download our complimentary guide below.