My goal was to eliminate the billing issues, cut our monthly phone service bill in half, and duplicate the phone system we had been using for years. We are a central fabrication facility — a large warehouse where everyone is constantly moving around from work station to work station. We use several cordless handsets tied into a four-line phone system. The traditional phone lines use a rollover system, where if a caller dials a line that is in use, the call is immediately and seamlessly “rolled over” to the next available line, unbeknownst to the caller. Both the cordless functionality and rollover ability were crucial to the success of our system.
Voice over Internet Protocol (VoIP), or digital phone service looked like it would meet our needs. VoIP uses a high-speed or broadband internet connection to make and receive calls, and there are four equipment options to utilize VoIP service:

1. Software: Uses a computer to connect calls (Skype or Vonage are two examples);
2. Adapter: Allows a conventional phone to use VoIP;
3. IP Phones: Special phones that can connect directly to the internet;
4. IP PBX: Like a traditional PBX system — has an intercom, controls more than one line, and has other advanced features.

I don’t want to get too technically detailed here, as there are many resources to learn more about the nuts and bolts of VoIP, such as VoIP Review, which has many articles, questions and answers and reviews of providers.

Based upon my research and a referral from a trusted associate, I selected a business VoIP provider and ordered a IP PBX system. There are several options to choose from regarding the service for the PBX system, which you can find more detail here.

After the phones arrived, I discovered that setting up a VoIP system does require some technical savvy. It was not as simple as plugging the phone in and getting a dial tone. I had to schedule an appointment to spend an hour on the phone with a service technician, who guided me through the setup process, which did not go smoothly. It took several attempts, in addition to the initial hour-long phone call, to get the system up and running. I recommend that you pay attention to reviews of the installation process and focus on those providers that have favorable reviews regarding the installation and setup process.

You can have your current phone numbers switched or ported over to the VoIP system, and fortunately, you do not have to take this step immediately. You can have your VoIP system installed and test it for as long as you wish. Do make sure you check with the provider before you order your system to ensure that all your numbers are portable. In our case, our fax line was not able to be ported, but we had a workaround.

While the VoIP system did have some promise, in the end, it did not work out for us. After spending various hours in vain to get the VoIP system to duplicate our current system, it was looking like a lost cause. The rollover function was not working properly and the IP cordless handsets didn’t function as well as our current models. While I could have spent more time trying to get these issues worked out, I could not justify spending the time to make it right.

Also, the clock was ticking on our 30-day trial and given the cost of the equipment, I wanted to ensure there was plenty of time to return the equipment and receive our refund (which we did).
Fortunately, our traditional phone service works, and the only negative factor is the cost and the “mistakes” the local phone service provider makes on our bills (but that’s another story). I have several business associates who use VoIP phone systems and are very satisfied with the service. We have a unique environment, and sometimes the best course of action is to leave well enough alone.

8 Things You Need to Know About Setting Up Small Business VoIP.

Tony Wickman, CTPO

Knowing the cost of O&P processes will put the industry on top for the economic rebound.

It feels like the global economic crisis is parked at our front door. The good news is O&P is still a strong industry and when we have been confronted with issues like this before we have emerged stronger, more organized and more efficient than ever.

To ensure that O&P rebounds on top, we have to ask certain questions. How are we going to raise the bar? How are we, as an industry, going to provide our customers with a more accurate, effective and efficient product?

To do this we are going to have to think about what we do every day. We are going to have to be more thoughtful in our approach to process and production. The first step to meet these goals is to develop metrics, or numerical guidelines to ensure that we are always improving upon our processes.

Cost of labor

One of the most important figures you can extrapolate is your labor cost per hour. Simply put, how much do you really pay for each hour of labor that you or your employees work? It is easy to think about how much you pay each employee or how much you take home, as the cost of labor, but in most companies that rate is a fraction of the actual cost of labor. You will need to dig deep into the actual numbers. If you have never done this exercise, or if you have not done it in some time, you may be surprised at best or shocked at worst.

To get to the real number you will have to add up some figures.Take the aforementioned labor rate (the actual hourly wage) then add in the employers portion of Social Security and Medicare, the cost of vacation and sick time actually used, the cost of benefits including insurance, bonuses, continuing education, licensing, workers’ compensation insurance, unemployment insurance and any other perks or benefits derived from the enterprise, for each employee.

I like to annualize these numbers by using the actual cost per year. Once you have the annual total you can divide it by the actual number of hours each person works. This will give you a good approximation of what it actually costs for an hour’s worth of work. This is the number you will use to counterbalance all of the figures we will discuss in the rest of the article.

Labor hours billed

Without understanding all of the numbers, none of them made sense. Then I found a number that could give real power to our technical staff. It is a number I call the labor hours billed. In reality what we are looking for is the actual amount of time each person spends during the day making money.

Now before we get too far into this I should point out that not everyone in your facility is actively involved in making money so this metric is really only effective for technical staff and in some cases clinical staff. It is also important to realize that it is unrealistic to shoot for 100% billable hours from your entire staff. Instead you need to pick a number with which you are comfortable, usually somewhere between 75% and 90%. The actual number is not that critical because what you really want to track is not the number, but the trend.

To develop this number you need to do some homework. In our facility, what we have done is taken the wholesale price for which we sell each of our end products then we back out the material costs. We take what is left over and divide it by our labor cost. What this should leave you with is the labor hours it should take to complete a given task. It is not that important to get to the number to the seventh decimal place, you just want an estimate.

In short, if you have a part that sells for $100 and you have $10 in materials, you have $90 in labor. If your labor cost is $90 per hour then you have to be able to complete this task in 1 hour. If you can do it in 45 minutes – great. If you have already chosen 90% as your target labor hours per day then each of your producers will have to make 7.2 of these units per day. Remember this process starts with an arbitrary assumption so do not become frustrated if you do not meet your goals right away.

Share information

Now here is the really important part and one that most managers overlook. Knowledge is power for everyone. Most people who work for a living, like their job and want to do it as well as they possibly can. If you can give employees an honest metric that they can use to improve the job they do, they will use it to their advantage and step up their game.

Share this number with them every day. It does not have to be a fancy display. A flip chart with the days marked out and the goals indicated will do. Post the number daily so that they know how well or poorly they did the previous day. We go one step further and track it on a second chart that shows the monthly average. If you want to, you can easily put the numbers into a quick spreadsheet and graph it on an ongoing basis.

Now that everyone can see this number, discuss it with your technical staff. Ask questions. What did we do yesterday that caused the number to jump? Why did we work hard all day yesterday only to see terrible numbers today? All of these questions should be presented in the spirit of discovery. This process should be about you helping each other do a better job. If it becomes a method for you to criticize or condemn no one will follow your lead.

This article was originally published in the May 2009 issue of the O&P Business News © 2009 O&P Business News