By Jay Arthur
With the economy faltering, customers hesitating and
suppliers balking, every company worries about sustaining profits.
In the face of these market forces, companies can rarely sell
their way to higher profits. Although executives and employees can't
do much about the external forces, they can have a major impact
Faced with shrinking profits, companies invariably try to cut
costs by reducing staff, paying suppliers more slowly or "cheating"
the customer by using inferior quality materials. These quality
shortcuts can cripple and even kill a company in the long run.
Earnings shortfalls make everyone look for a quick fix. They
settle for cheap tricks that damage the company's reputation instead
of focusing on ways to simplify, streamline and optimize the
business to cut costs, boost profits and retain customers. There is
a better way that doesn't take forever or cost a fortune.
Every work area
collects out-of-date equipment and materials. Keeping that junk
around costs money and clutters the workspace. To trim costs and
boost profits, start by going through every nook and cranny and
throwing out everything that isn’t related to the current way work
is done. Once the clutter is gone, it’s easier to streamline the
Then, organize and label the materials and equipment into
consistent locations. It's not unusual for work materials to be
spread all over a workplace, making it difficult to find what is
needed, when it is needed.
step is to streamline the business by removing barriers and
redesigning the work to minimize resistance and delays in the
workflow. All businesses suffer from Lazy Product Syndrome (LPS).
While employees work on the product or service for perhaps three
minutes out of every hour, the product sits idle for the other 57
minutes (the 3-57 Rule). That's why the elapsed time from order to
delivery can take weeks instead of hours; hours instead of minutes;
or minutes instead of seconds.
Take this test: Follow a customer's order from start to
delivery and notice just how little time is actually spent working
the order. Notice how much time it spends in an inbox or an outbox
or a queue somewhere. Notice how much time it spends waiting on the
next step in its journey. The order spends 95percent of its time
waiting for something to happen.
Have employees wear pedometers and record how far they walk
each day. Then rearrange the materials and equipment to reduce their
travel time by half. Using this technique in a 2,400 sq. ft.
hospital lab revealed that technicians traveled three-to-four
miles per day. Redesigning the workspace freed up 400 sq. ft.
for other uses. After redesigning the space to put high volume
equipment closer to arrival area, they were able to reduce travel by
almost 60 percent. In a year, the savings per technician equaled the
distance from Denver to Pittsburgh. It also saved seven hours per
Another option for manufacturing businesses is to stop making
more than can be used. One magazine printer had presses that could
print a million magazines each day, but the bindery could only
handle 200,000 per day. The other 800,000 had to be stored for up to
five days. These unbound magazines took up space and were subject to
forklift damage that resulted in scrap and reprints. Printing only
200,000 per day freed up the press to handle other jobs in a more
timely fashion while still meeting the bindery's needs.
Tip: Make your
product or service faster, not your people:
Simplifying and streamlining the workflow can cut costs by 20
percent or more, and double productivity. Oddly enough, businesses
can be faster without working harder. Simplifying and
streamlining also reduces mistakes and the high cost of rework by up
to 50 percent. It's an easy way to start cutting costs and boosting
workplace and workflow has been simplified and streamlined, it's
time to start optimizing the work process. Every business makes
mistakes, errors, defects, glitches and hitches that result in
rework, scrap and lost profit. To optimize the delivery of products
or services, start counting and categorizing the mistakes, errors or
How many mistakes
are there in the product or service? Include everything from the
initial sales order to customer acceptance.
How many times a day do fast food outlets fail to provide
everything ordered at the drive in window? How many products have a
shortage or oversupply of the nuts and bolts required for assembly?
What are the
most common type of errors, mistakes or defects? Where are they most
often made? At which step in the process? How costly is each type of
mistake? By categorizing defects in a variety of ways, it's easy to
discover that they aren't spread all over; they cluster in a few key
areas. Only four actions out of every 100 cause over 50 percent of
the mistakes, errors, defects, scrap, rework and lost profit (the
One wireless phone company had thousands of order errors
every day. Only six errors out of 200 error types accounted for over
90 percent of all errors. One New England hospital had three wrong
side brain surgeries in one year. Not that many mistakes, but
probably costly ones. While it might seem easy to blame the surgeon
or nursing staff, the root cause lies elsewhere.
People don't make
mistakes; processes do:
Properly designed, a process will not let a person make a mistake. This
is called mistake proofing. Most modern cars will not start
unless the driver's foot is on the brake and the transmission is
parked or neutral. That's mistake proofing. Electrical plugs have a
fat and a thin blade to ensure that they are inserted correctly into
outlets. Mistake proofing! Grocery shoppers use shopping lists to
make sure they get everything they need in one trip. Mistake
Tip: Fix your
process, not your people:
By letting error
categories narrow the improvement focus, it's easy to identify the
root causes and potential solutions. Oddly enough, one rarely needs
more money or more people or more training. Changing the process to
prevent problems often solves the issue.
One business switched from stamps to an online postage
service, which not only provides postage, but verifies addresses
before sending anything. That cut returned mail by 75 percent.
And it provides delivery confirmation for free!
While companies may
not be able to control what happens in the economy, they can control
what happens inside of the company. Even profitable companies spend
$25-$40 out of every $100 on their “Fix-It” factory. By simplifying,
streamlining and optimizing operations, any business can cut those
figures down to $5-$10 out of every $100. Adding 20 percent or more
back to the bottom line could easily double your profits. And it
doesn't have take forever. Aggressive application of these
principles can cut costs to these levels in six to twelve months.
Tip: You don't have
to fix everything, just start with the important ones:
The good news is
that any company can start today by simplifying and streamlining.
These two steps will take profits half the distance to the goal.
So get started today, even if it's just your own workspace. Talk
about these concepts with coworkers. Stop waiting for permission to
make work better, smoother and faster. Start simplifying,
streamlining and optimizing today.
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