Create Low Cost Business Systems and Processes!
If you believe that systems are the essential building blocks or your business, then you must believe that your primary task as a business owner is overseeing their development. Michael Gerber, in his book E-Myth Revisited, said you have to work on your business, not just in your business. Creating high-performance systems and processes is working on the business; it is the primary function of owners and managers.
You begin by improving the systems that will provide the biggest payoff—the systems that make you money and directly benefit customers.
Keep in mind that your customers all want the same thing. They want your products and services better, faster and cheaper than your competition. They want:
Quality Plus Efficiency=Low Cost
A quality product or service means that it has few or no defects; it does what it is supposed to do; it is as good as or better than the competition; it meets customer specifications and often exceeds their expectations. You take cost out of your business when you eliminate the waste and rework that come from low-quality systems—whether in the factory or in the office.
Speed means delivering your product or service fast or on time, according to a schedule or by a deadline. There is little delay or downtime. System cycle speed is more important than employee speed; employees can only work so fast, and if pushed, create more quality problems.
To increase speed without losing quality, focus your efforts on reducing idle time—the time things are waiting to be worked on. Bad things happen when work sits around. Merchandise becomes outdated and damaged. Information becomes old, obsolete, and hard to remember. Momentum is lost. Products and services can’t be billed.
Reduce your operational costs by getting things done right the first time and out the door as quickly as possible.
Remember: A process that makes errors cannot keep up its speed. High quality makes it possible to attain fast speed. Low quality and slow speed are what make business processes—and the resulting products and services—more expensive.
Therefore, if you want to be competitively priced—if you want to offer customers the best value—you must improve the quality and speed of your business systems and processes. Quality, speed and low cost are interdependent and you have to work on them simultaneously!
A recent phenomenon in our area is a restaurant called Café Rio. They serve fast-casual Mexican food and are rarely without a long line. The selection is limited but every food option is a proven winner at a cost of about seven dollars. Quality is outstanding because the food is fresh and moves quickly through the system—no heat lamps. Your order is prepared right in front of you to your exact specifications. The assembly-line approach moves hundreds of people through per hour—customers never wait very long. The system produces a high quality product, with lower than average labor costs, and delights customers.
The result of Café Rio's high quality, fast speed and low cost formula is a large base of repeat customers, a good profit on each meal, and an exceptional number of meals delivered each day. It has now become a fast-growing franchise operation.
The only way to consistently offer the lowest possible price—and still make a profit—is to improve your quality and efficiency, and to eliminate waste—the defects and delay buried in the systems and processes of your organization.
Effective Systems Boost Cash Flow and Profit
Effective systems create an efficient and smooth-running business that maximizes cash flow and profit. Learn how to cut costs and thrill your customers by applying the principles taught in my eCourse, Box Theory™: Double Your Profit with High Performance Systems and Processes. Check it out at www.boxtheorygold.com/business-course.
Tomorrow we talk about the importance of innovation from a Systems Thinker's point of view. It may not be what you think!
Wishing You Prosperous Times,
Ron
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