Boost your bottom line by 20% by getting rid of waste!
As organisations grow, habits form, people get set in their ways and cost to produce inevitably rises. The result is inefficient practices. Waste in the business is an opportunity to make more profit.
The good news is that anyone in business can learn how to remove the waste. Working in teams, using common sense and practical tools, you can continuously identify and remove waste.
Toyota identified seven areas in a business where waste commonly occurs.
Overproduction
Ask where are you overproducing? Look for build up of stocks, work in progress, and resources. Do we over service our customers? Do we produce unnecessary reports?
Waiting
Where do goods and services wait? Are we waiting to collect outstanding debtor accounts? Do we wait excessive periods to obtain approval before completing tasks?
Transport
Map out where things move from one point to another. Look at moving goods, paper, people and machines. Can we save time by locating the storage area or photocopier closer to the office. Can we combine the number of trips it takes to service the customer to save time and money?
Inappropriate Processing
Are you using the right machine for the job? Are you using a highly paid senior to complete a task that should be delegated to a lower cost employee?
Inventory
Is it costing you money by holding excessive stores of inventory, debtors, money in bank accounts? How can we reduce the level of stock we operate to currently?
Motion
Where do we waste time through our daily activity personally? Do we waste time looking for things on an cluttered and untidy desk? Do we look for things that could be filed better? Do we consider using more efficient means of delivering a letter like email?
Defects
Do we incur costs in fixing mistakes and redoing the job? How important is for us to do the job right the first time?
Step One - Brainstorm the waste issues
Now that you have the seven wastes, simply develop a check-list of potential wastes that could fit under the seven headings.
For example, under the waste of over production you could use sub elements such as the following:
Over Production
1. Over use of subcontractors
2. Warehousing some items that don't require it
3. Over servicing of customers
4. Working unnecessary overtime
5. Production of reports that are not used
Step Two - Rate each waste issue
By putting a rating scale against each you have developed a simple waste survey.
Rate each of the issues on current performance and then rate each issue on the targeted performance you desire.
Examine the gap on each issue to identify the highest priority issues.
Rating Scale:
LOW - This represents poor performance in this area
HIGH - This indicates that performance on this issue is excellent
Step Three - Estimate the cost of the waste
For each issue estimate the cost (opportunity cost) involved with performing at this level.
The cost represents potential savings once you improve the performance of issue.
Step Four - Prioritise each issue
Determine the priority to address issues by using the gap analysis and magnitude of the potential savings as a guide.
A large gap indicates that this issue needs to be addressed and is a candidate for improvement.
Step Five - Develop Actions
Develop actions for each issue by forming Project Teams and using problems solving tools.
Don’t be too concerned about whether you are entering an issue under the correct heading.
All that matters is that the issue appears somewhere in your audit.
We have specialist consultants who can take you and your organisation through this profit improvement exercise. Call me and we will catch up on an obligation free basis to review if/how this program could be applied to your organisation.
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