The Systems Thinker Blog

Five Ways to Cut Labor Costs with Effective Business Systems!

Posted byRon Carroll

If good business systems and processes don’t reduce your costs and put more money in your pocket then, you’re not tapping into their full potential. One of your best opportunities is to trim labor costs.

For example, I worked with a marginally profitable distribution company having two-million dollars in annual revenue and thirty employees. After looking carefully at their operation, we were able to help streamline the business and decrease the number of people required to process orders. This initiative eventually reduced labor costs for order-fulfillment from approximately12% to 7% of sales. The company saved over $100,000 the following year with the productivity gains. 

Business Productivity

We're talking about the big results you can expect when you put on the hat of a Systems Thinker.

Boost Productivity

In a Microsoft survey of 38,000 workers conducted a few years ago, it was discovered that the average employee is productive about 65% of the time. Using effective business systems to improve on this number is one of your best opportunities to save money.

Do you have twenty employees? I bet you could get the same work done with better business systems and only eighteen employees. Do you have fifty people in your company? Efficient systems and processes could reduce your work force by five or more. I’ve been in many small-business operations through the years, and I could do very well financially if I were only paid by the waste in labor-expense I could recover.

Cut Labor Costs

Here are five methods you can use to slash your labor costs starting today:

  1. Pay the higher price for “A” workers instead of the lower price for “C” workers who cost you more in the long run.  Fit the right people to the job. Train them well. Put workers in a great business system where they can perform above their pay grade.

  2. Get rid of productivity busters such as clutter, poor floor layout, complexity, unnecessary movement, and so forth.

  3. Increase worker and system efficiency by eliminating mistakes and defects, delay and downtime, and show-stopping bottlenecks.

  4. Create competition. Turn the system into a game and keep score. Give financial incentives for excellent performance.

  5. Reduce the cost of supervision by creating smooth-running business processes that provide frequent performance feedback to workers. Give ordinary people the tools for self-management and make them accountable; they will become extraordinary.

In a highly-competitive marketplace, you can keep your labor costs lean with effective business systems and processes! Your organization has opportunities just waiting to be discovered!

And by the way, more than half the participants, 55%, in the Microsoft survey said they relate their productivity directly to software efficiencies. Maybe you should take a look at Box Theory™ business software today.

 

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Tags: Systems Thinker, Business Systems, People, Efficiency/Speed, Cost Cutting

How to Calculate Your Business Break-even Point!

Posted byRon Carroll

Calculating a business break-even point is not difficult. However, there are a few things you need to know in order to make it as accurate as possible.

As a review, your monthly break-even point is reached when your gross sales revenue equals your total fixed and variable costs; it is the point that your business begins to make a profit. (Please read "Do You Know Your Sales Break-even Point?" for more about this principle.)

Get Your Profit and Loss Statement

To begin, you need a copy of your "Profit and Loss Financial Statement." If possible, get a printout that shows year-to-date information and the percent of sales for each line item. Divide the year-to-date total for each item by the number of months to get the average monthly expense (e.g., If your power bill through June is $2742, your average monthly power bill is $457). Averaging multiple months will minimize the effect of any unusual expenses in a single month.

Don't forget to include the monthly portion of line items paid on a quarterly or annual basis such as payroll taxes or insurance. For example, if your annual insurance charge is $9,000, use 1/12 of that amount, or $750, as part of your monthly budget for calculating the break-even point.

Categorize Costs

Looking at individual line items, you will first decide which costs are fixed, which are variable, and which are a mixture of both. Let's discuss each possibility.

  • Fixed Costs - These expenses are dollars paid or accrued each month, even if you don't make a single sale. They include such things as rent, insurance, utilities, equipment leases, contracts, accounting fees, and so forth. Fixed costs are sometimes referred to as overhead or administrative costs.

  • Variable Costs - These expenses are directly related to the products or service you deliver. They include line items such as materials, supplies, labor, and shipping expenses. Variable costs are generally referred to as cost of goods or cost of sales, and are best represented as a percent of sales. For example, the cost of materials and labor might be 50% of the sales price.

  • Mixed or Semi-Variable Costs - These costs are part fixed and part variable. If they are not broken out separately on your Profit and Loss Statement, you will have to estimate them for your break-even analysis.

For example, some of your wages may be administrative (fixed), while other wages are related to the products made or services performed (variable).

Your utilities, such as lights and heating are fixed; however, power to run equipment for manufacturing a product is a variable cost. The amount varies according to production demands.

If you have a marketing budget that is a percent of sales, this would also be a variable cost—the more you sell, the more you can spend on advertising. If you have a minimum monthly advertising expenditure or set media contracts such as radio, television or newspaper, these costs are fixed; you pay them every month, even if they don't generate any sales.

In a final example, let's say you hire a new sales person and want to use a break-even analysis to discover how much more you need to sell in order to cover his or her cost. If the sales person is paid a salary, the cost is fixed, if paid a commission, the cost is variable. Paying a salary plus commission or bonus would be a mixed cost.

I think you get the idea. Keep in mind that costs change and expenses tend to creep up. Recheck the numbers periodically. Caution: the break-even point is dramatically affected by hiring new people without a corresponding increase in sales.

Calculate Your Break-even Point

The formula for computing your business break-even point is described below. Don't worry if it doesn't quite make sense. I have provided a spreadsheet tool so you can just plug in the numbers. Remember to use amounts for the average month.

Break-even Formula

Lower Your Break-even Point

As mentioned in my previous article, there are four ways to reach your break-even point earlier in the month and begin making a profit sooner.

  1. Lower your overhead (fixed costs) - Keep fixed costs to a minimum and resist the temptation to increase them, unless absolutely necessary. It's very hard to go back if sales drop. However, don't cut costs too deeply, especially if there is a negative effect on customers or employees.

  2. Lower the cost of each product or service sold (variable costs) - By lowering direct costs, your gross margin will increase. Be diligent about purchasing material at the most favorable price, controlling inventory, or improving the productivity of your workforce.

  3. Increase your prices (and gross margin) - Most business owners are reluctant to raise prices because they think sales will decline. More often than not, that doesn't happen, unless you are in a very price-sensitive market. Raising prices only a few percent will have a significant effect on your break-even point. There is a delicate balance between sales volume and pricing, so be cautious about changes, and test if you can.

  4. Increase your sales - The toughest job of most small-business owners is to increase sales. A business owner nowadays must be an outstanding marketer, or able to hire one. Never stop trying to improve marketing and sales strategies. Keep the pipeline full. Push every order you possibly can out the door by the end of the month, and then do it again next month. You make all your profit on those last few sales. And remember, a bad month can wipe out the profit of several good months.

As a Systems Thinker, your first thought is, "What business process do I need to improve to reach my financial break-even point sooner in the month? How can I make my administrative systems—hiring, accounting, computer support, custodial—less costly? Can I improve my purchasing system to buy materials or supplies for less? Can I reduce labor costs without affecting customer service? Could I change my pricing system or terms to squeeze out a little more profit? Can I improve my lead-generation or sales-conversion processes to close more sales?

You might be surprised by how many opportunities there are to cut overhead costs or create more margin from the sale your products or services. Those opportunities are just waiting to be discovered as you work on your business in The Zone.

Motivate Your Employees

By the way, if you work within tight profit margin, it is a good idea to let employees know your break-even point. This gives them a clear picture of expenses and what it actually takes to run the business. It also motivates that little extra oomph at the end of the month to get orders done and out the door.

Many companies fail because owners do not know this single number—the sales break-even point. DON'T LET THAT HAPPEN TO YOU!

Related Articles:
Do You Know Your Sales Break-even Point?
Access a Spreadsheet for Doing a Break-Even Analysis

 

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Tags: Business Measurement, Cost Cutting

The Two Critical Purposes of Your Business Systems!

Posted byRon Carroll

Many people believe that creating business systems means getting organized and doing things in a methodical way. If you believe this, well, you're right... sort of. However, you are probably not yet a converted, transformed, and even obsessed Systems Thinker. You're still looking at systems like most of the world. If you want to tap into the real power of effective business systems and processes, then you need to see them through a different lens.

Systmes Thinker Lens

Let's take a look at the TWO critical purposes of your operational systems.

Critical Purpose 1: Create Loyal Customers

First, business systems exist to help you find and keep customers. They do this by making you:

  • Better than the competition (You have fewer mistakes, defects, and disappointments that turn customers away.)

  • Faster than the competition (You have better response time, and consistently meet schedules or deadlines.)

  • Cheaper than the competition (You're able to provide lower prices and more value, precisely because you are better and faster—the primary means of lowering cost).

Your well-run operation—with effective business systems and processes—will give you a competitive edge by attracting more customers and enabling you to consistently meet and exceed customer expectations. Your company will “stand out like a purple cow in a field of brown cows” (Seth Godin, Purple Cow). People would be crazy to buy from anyone else!

You become the best in Your target market because you have the BEST BUSINESS SYSTEMS!

Critical Purpose 2: Eliminate Defects and Delay

Second, business systems exist to squeeze waste out of your operations. They do this by helping you become:

  • Better than before (You have fewer mistakes, errors, and defects to throw away or rework—money down the drain.)

  • Faster than before (You have a less delay, downtime and inefficiencies that waste time—a costly and unrecoverable resource.)

  • Cheaper than before (Quality and speed reduce cost, making you more competitive and more profitable.)

Your well-run operationwith effective business systems and processeswill create a culture of discipline and excellence, where Results Rule! (Randy Pennington). Employees are happier, productivity increases, costs go down, and profit and cash flow are greatly improved.

You become exceedingly prosperous because you have REMARKABLE BUSINESS SYSTEMS!

Better, Faster, Cheaper

Did you notice that the two critical purposes of your business systems and processes are fulfilled in the same way? When you are better, faster and cheaper, everyone benefits—customers, employees and stakeholders.

Good business systems help you rise above the ordinary; they make you extraordinary! There is no other way!

 

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Tags: Systems Thinker, Business Systems, Customer Retention, Quality, Efficiency/Speed, Cost Cutting

Eliminate 8 "System Busters" from Your Business Systems!

Posted byRon Carroll

Sir Walter Scott said, "It is more than probable that the average man could, with no injury to his health, increase his efficiency fifty percent."

While that may be true, your people don't intend to be inefficient; they just do what comes natural in the work environment YOU provide. If they have to jump over hurdles, most won't complain, but you'll pay extra for each jump. Let me explain.

Business Obstacle

In every business system or process, there is the potential for "system busters," "speed bumps," or "time traps" that drag down system performance, add to human error, reduce quality, and increase labor costs. You need to put on your System Thinker's hat, identify these termites that are eating away profit, and exterminate them.

Below are eight such system busters to look for:

  1. Physical impediments create waste of time and effort (e.g., an obstructed aisle; clutter; things hard to find; piles; messes; unsafe or uncomfortable work conditions; general disorganization).

  2. Extra movement from a poor layout of work areas and walking distance adds time to complete a task. When this is multiplied by many people over the course of a year, it can be very costly (e.g., printer at the far end of an office; poorly laid-out production area or warehouse; unnecessary steps in a process).

  3. Distractions are small interruptions that cause people to lose focus on the task at hand. Continuity and momentum are disrupted. These can be big time-wasters and the source of mistakes (e.g., worker's look up to see people coming and going; personal telephone calls; excessive talking with co-workers; surfing the Internet).

  4. Mistakes and rework require a duplication of effort and lost time that could be spent more productively (e.g., handling rejects on an assembly line; processing returned merchandise; researching data entry errors; returning to a job site to fix a problem).

  5. Downtime is a major interruption to system flow. A system or process stops because another system it is dependent upon breaks down (e.g., needed supplies don't arrive on time; power outage; corrupted or lost computer file; work stalled at a bottleneck). Every in-basket or pallet of materials waiting to be worked on is in a state of downtime!

  6. Start-stop work flow occurs when the people work more than one system or process (job function) and switch between them. This decreases concentration and momentum, increases the risk of operator error, and makes it difficult to measure performance (e.g., shifting production schedules; "multitasking," "wearing multiple hats," or being "spread too thin").

  7. Complexity, incompetence, or confusion can make it difficult for people to follow through on instruction or direction given (e.g., poor documentation; inadequate training; multiple bosses; conflicting priorities; too many choices/options). Keep it Simple!

  8. Unfinished items are a mental and emotional drain, and decrease efficiency (e.g., back-orders, accumulation of tasks, half-finished projects; long to-do lists). The more incomplete items there, the longer the completion time stretches out for each of them. Stay focused on a few things and be a finisher!

Wasted Time is Never Recovered

You can't eliminate all the speed bumps, time traps and system busters. However, with the eye of a Systems Thinker, you can cut a lot of wasted time from your operation.

Fix your faulty systema or processes before trying to fix people. The cause of inefficiency is usually because YOU didn't implement a good business system. Blaming people will often prevent you from uncovering the true source of the problem.

Take a look around your business today. Can you improve the layout, working conditions, or get more organized? Can you reduce rework, downtime, distractions, and complexity? Can you get those half-finished jobs completed? For increased profit, find ways now to reduce and simplify your business operations.

 

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Tags: Systems Thinker, Business Systems, Efficiency/Speed, Cost Cutting

Less is More with Good Business Systems!

Posted byRon Carroll

The ALDI food chain opened their first U.S. store in Southeastern Iowa in 1976 and has grown to over 1,400 stores from Kansas to the East Coast. There are also more than 9000 stores internationally. They've continued to expand rapidly even during difficult economic times. So, how do they do it?

ALDI Store

ALDI has refined their business systems and processes over many years. Their philosophy—"to offer incredible value every day"—is rooted in the idea that less is more.

Lean Business Systems Cut Costs

ALDI only carries about 1400 frequently purchased grocery and household items. They build energy-saving stores, hire fewer employees, make better use of space, sell in case lots, and rely on customer self-service. Their vendors provide self-displaying cases, with pre-priced merchandise delivered on labor-saving pallets. Customers bring shopping bags, pack their own groceries, and pay with cash or debit cards only.

ALDI streamlines operations so that shoppers only pay for food—not frills. The systems and processes of their business are designed to remove unnecessary cost and pass the savings along to customers. This savvy retailer promotes everyday prices that are lower than supermarket "sale" prices, and their customers love them for it.

Good Business Systems Strengthen Your Brand

ALDI is especially well-known for its shopping cart system. Let me explain.

I am a part owner of a home décor retail outlet. Years ago, I wanted to learn more about the business operation, so I decided to work in the 100,000 square-foot store during the busy Christmas season. Like other employees, I did anything I was asked by the store manager (except, I wasn't paid). One of my duties was to move abandoned shopping carts from the parking lot into the store.

I've seen store personnel gathering shopping carts many times, but I didn't realize what a miserable and never-ending task it was. I began thinking how this chore might be made easier and shared several ideas with the store manager. It seemed like the least of his concerns.

Sometime later, I was impressed to learn how ALDI created a system to solve this headache. Their shopping carts are hooked together right outside the store. As customers approach, they insert a quarter to release a cart. When they finish shopping, they reconnect the chain to the cart and get their quarter back. With this system, ALDI doesn't have to assign an employee to round up carts in the parking lot. They don't lose expensive carts, and they don't worry about runaway carts dinging up their customer's cars. This expense-saving system has become a legendary part of the ALDI culture.

ALDI Shopping Carts

ALDI has many other impressive business systems, but you get the idea. Systems Thinking has enabled them to become very prosperous, even during difficult times. Their systems are customer focused, take waste out of the operation, and provide a very pleasurable and unique buying experience. The ALDI folks really get it!

What are Your Remarkable Business Systems?

You can do the same thing with your company by first becoming clear about who your customers are and precisely what they want. Then create effective business systems and processes that deliver your products and services in such a remarkable way they would be a fool to buy from anyone else!

 

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Tags: Systems Thinker, Business Systems, Culture, Cost Cutting, System Example

How does 3% Business Waste Equal 40% Lost Profit?

Posted byRon Carroll

Most business owners do not face the brutal reality about waste and inefficiency in their business operations. However, experts estimate that the average small business has at least 3% waste; some have much more! (Jay Arthur, “Lean Six Sigma Simplified”). This percentage may seem reasonable at first, but upon further examination, you will see what a profit killer it is.

As a customer, I’m sure you’ve experienced the frustration of things gone wrong. Products have defects. Deliveries arrive late. Parts to assemble are missing. Merchandise is labeled or priced improperly. Counts are inaccurate. Stores and restrooms are unclean. Sales people lack knowledge. You get the idea. These typical problems occur often and cost business owners dearly in lost profit and lost customers. They are likely happening to YOU!

Waste is Preventable!

Most waste in your business is hard to spot—a little here and a little there, scattered throughout your office and operations. For example, I am always amazed by the number of undetected errors made on customer invoices. Mistakes, rework, delay, and lost time happen every day to everyone in every business. The average organization is like a steak, riddled with fatty waste.

Fatty Business Waste

For a company with a million dollars in sales, 3% waste amounts to $30,000 in cost. This expense, however, is not paid out of revenue dollars, but is paid out of profit dollars! If the company's net profit before taxes is expected to be 8%, or $80,000 dollars, waste would reduce the profit to $50,000.

Do you realize what I just said? All waste in time and material comes directly off the bottom line. In this example, waste of 3% of sales translates to nearly 40% in lost profit. Yikes!

Stated another way, the company has to sell nearly $400,000 more to replace this $30,000 loss (sales equivalency) in order to achieve the desired profit level. (I don't want to depress you, but it actually gets worse because there are additional costs in rework and handling of the waste.)

Reduce Your Business Waste to 1%

The closer you get to achieving perfect processes—and a perfect business—the more difficult and expensive it becomes. However, you can bring that 3% waste down to 1% fairly easily. It is not only doable, but essential to compete and succeed in today's business environment.

To error is human, but holy cow, we can all do better at cutting costs. It requires a little knowledge and the right tools. The Box Theory™ Way is designed to squeeze the waste out of your business systems and processes. There is no better way!

Your challenge for today (and you can't go home until you do it) is to spot one area of waste or inefficiency in your business—an ounce of fat—that you can get rid of tomorrow. Then get after it first thing in the morning!

Related Articles:
Three Kinds of Business Waste Robbing Your Profit
Sales Equivalency—The Surprising Power of Cutting Costs


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Tags: Business Systems, Laws/Principles, Cost Cutting

10 Ways Business Systems "Indirectly" Increase Profit!

Posted byRon Carroll

Last week, we discussed ten ways effective business systems can directly increase profit. That would be enough to convince any rational business owner to get started. However, there are even more ways well-designed business systems can boost your bottom line.

Good Business Systems can Increase Your Profit

Systems Provide Hidden Financial Benefits

Below are ten indirect financial benefits you will get from building better business systems and processes.

  1. Effective business systems enable a company to run without constant hands-on involvement of owners (owners can spend more time growing and improving their business).

  2. Consistent and reliable systems delight customers and turn them into loyal fans (customers who have a great buying experience keep coming back, and they tell their friends).

  3. Efficient systems and processes increase sales throughput and the velocity of cash flow (good cash flow helps every company operate better and more profitability).

  4. Smooth-running business systems create a positive and productive work environment where employees are happier and stay longer (less employee-turnover decreases cost and increases customer satisfaction).

  5. Measured systems naturally produce a results-driven workforce, which lowers operating cost and boosts performance (high productivity maximizes profit).

  6. A systematic work environment is an organized work environment—cleaner, safer, more efficient—and one that raises employee morale and attracts quality people (a great place to work is essential to having a culture of excellence).

  7. Effective business systems and processes give your organization a competitive edge (your product or service is better (fewer mistakes/defects/disappointments), faster (shorter response/delivery time), and cheaper (quality plus speed equals low cost)). You become the "best deal!"

  8. Exceptional business systems enable you to differentiate yourself in the marketplace (you attract more customers by standing out like a "purple cow in a field of brown cows" - Seth Godin).

  9. Well-designed systems that achieve intended results are significant business assets and add long-term value to your company (a completely systemized business sells for top-dollar).

  10. An organization built with effective systems and processes becomes a prototype for replicating or franchising your business in other locations (exponential sales growth is possible).

Good Systems Pay for Themselves

While some system improvements generate large financial returns, most innovations add incrementally to your profit margin. The accumulation of small improvements can have a dramatic effect on overall business results—enough to rescue an ailing company or help a good company become great!

I'll say it again. Effective business systems pay for themselves many times over. The question is not whether you develop systems, but what new system or process improvement will have the most immediate financial impact on your company.

Learning the Master Skill of system development will take you farther and faster than any other method of building and growing a successful enterprise. There really is no other way!

Rekated Article:
10 Ways Business Systems "Directly" Increase Profit

 

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Tags: Business Systems, Culture, Customer Retention, Quality, Efficiency/Speed, Cost Cutting

10 Ways Business Systems "Directly" Increase Profit!

Posted byRon Carroll

Many small businesses have "C-grade" systems and processes—rudimentary, seat-of-the-pants, and constantly changing as people come and go. However, some owners and managers catch the vision and create "A-grade" business systems that bring about a results-driven culture, delighted customers, and a prosperous enterprise. What grade would you give your business systems and processes?

Now, I wouldn't be so obsessed about developing effective business systems if there wasn't such an enormous payoff—a real take-it-to-the-bank benefit. Make no mistake; good business systems and processes will increase profit, stakeholder dividends, and your personal take-home pay!

Make money with good business systems

Good Systems Increase Sales and Lower Costs

Below is a list of ten ways that business systems provide a direct and measurable return on the investment of your time, effort, and financial resources.

  1. Effective marketing and sales systems generate more leads and a higher percentage of conversions (higher sales reduce the number of days to reach the monthly break-even point, and thereby increase profit).

  2. Smooth-running business systems elevate customer satisfaction and loyalty (happy customers return to buy more products).

  3. Good operational systems reduce employee mistakes, defects, wasted time, and rework (high quality lowers cost of materials and labor).

  4. Well-designed business systems increase efficiency, productivity, and throughput of goods and services to customers (speedy processes lower cost).

  5. High-quality systems minimize customer returns (less shipping, accounting, and recycling costs).

  6. Fast systems and processes shorten delivery/lead time (customers choose you over the competition).

  7. Effective business systems accelerate the turnover of inventory and accounts receivable (lower stock-levels, faster collections, and accelerated cash flow decrease cost).

  8. Efficient business systems and processes reduce the number of employees required to get the work done (fewer employees reduce labor cost).

  9. Good systems enable people to perform above their skill level (less-expensive people can perform higher-level tasks, also lowering labor cost).

  10. Well-designed systems and processes require less supervision and management oversight (fewer managers mean lower administrative cost).

Don't Be a Skeptic!

It makes financial sense to learn the Master Skill for developing effective business systems and processes—the only way to build a lasting organization. The alternative—low-grade systems—will limit your potential and could land you on a scrap heap with the other 85% of small businesses that failed to perform.

So don't wait another day! Pick the business system giving you the most frustration and turn it into one that shines—a system that pleases customers and earns you more money!

Related Article:
10 Ways Business Systems "Indirectly" Increase Profit.

 

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Tags: Business Systems, Customer Retention, Quality, Efficiency/Speed, Cost Cutting

Three Kinds of Business Waste Robbing Your Profit!

Posted byRon Carroll

A Systems Thinker can't help it; he or she sees waste everywherea scrap heap at a construction site, uneaten food piled on plates at a buffet restaurant, waiting time in a hospital emergency room, out of control government bureaucracy. Waste is part of life. However, excess waste can drive you out of business.

Like a bad steak, most small businesses are riddled with fatty waste!

The most important thing you can do to improve your business operationto please customers and increase profitis to reduce the waste buried in your business processes. This includes the office, the store, the workshop and the factory.

So, let's identify the different types of waste and keep your hard-earned money from going down the drain.

Don't let your hard-earned money go down the drain

What is Waste?

There are three improvement strategies incorporated into the Box Theory™ methodology and Box Theory™ Software. Each looks at your operation in a little different way. However, they all provide valuable insight for identifying the waste within your business systems and processes—production, customer service, hiring, marketing, and so forth.

Below is a brief description of each type of waste you should be trying to eliminate:

  • From Six Sigma - Waste is the variation from acceptable standards or customer expectations—the defects and delay in your business processes. How often do people make a mistake, causing loss of time and materials? Do you keep the mistakes and rework in your operation under one percent?

  • From Lean Thinking - Waste is any step in a process flow that does not add value and ultimately benefit customers. Can you spot idle time, rework, unnecessary movement or handling, build-up of inventory, and so forth? Stop doing the things customers don't want to pay for (if they knew)—and things you shouldn't spend money on either!

  • From Theory of Constraints - Waste is the constraint—a weak link or bottleneckthat limits product going out the door. What person, piece of equipment, or step in a process is bogging things down and preventing maximum throughput of sales and service? Focus on the weakest step in the process and elevate its performance. Hint: It's usually a system problem, not a people problem.

Waste creates frustration, drives up costs, and can even threaten the very existence of your company. I see waste everywhere. Most of it is subtle and goes undetected by business owners. Most of it is also preventable. A water faucet releasing one drop per second wastes over 2000 gallons in a year. What can you do to plug the leaks in your organization?

Get More Green and More Greenbacks!

The "green movement" is all about eliminating waste. Every businessyour organization includedshould become green. If you don't need to do it for the environment, do it to create happy customers, higher profits, and an efficient, smooth-running business operation.

Walk around and observe your business through the eyes of a Systems Thinker. Look for defects and delays, over-flowing in-baskets, unnecessary effort, bottlenecks, and other system busters. Consider customer complaints you have received. Then go make the necessary improvements and reap the abundant rewards!

 

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Tags: Systems Thinker, Quality, Efficiency/Speed, Cost Cutting

The Dollars are in the Details!

Posted byRon Carroll

We are all familiar with the expression, "the devil is in the details." However, in business, it is also true that "the dollars are in the details." Your profit at the end of the year is highly dependent on how well you manage the important details within your company.

The Dollars are in the Details

A recent Toyota commercial said, "We care about the details behind the details." They mean it! For example, a Toyota project manager drove a Sienna Minivan through every state in the USA to learn about the American driver. Among other things, he realized that America is a large place, and families drive long distances. He saw a need to add many more drink holders to the Sienna's interior. With this kind of attention to detail, the Sienna "transportation system" is now a little better at serving its American customers (from Jeffrey Liker, The Toyota Way).

Every business owner must understand this important principle: Daily attention to small details can make a big difference over time.

Details Determine Destiny

We live in an age when the best companies grow and prosper because they do the little things well, all the time. Owners and managers realize that the success of their company depends upon the effectiveness of their internal systems and processes. And the success of their business processesmarketing, accounting, customer care, hiring, production, inventory management, order fulfillment, and so forth—depends upon the careful management of the seemingly trivial and boring details.

Remember, each customer contact is a moment of truth, a time when a relationship is either made or broken. Customers do business with companies that consistently meet their expectations—that deliver explicitly on their promise. Nothing can be left to chance. Most customers keep a subconscious scorecard on how well YOU handle the details! If frustrated, they shop elsewhere.

Keep in mind that daily improvements to business processes add incrementally to your profit margin. However, the accumulation of these often-subtle innovations can have a dramatic effect on earnings over the course of a year. The financial gains can be enough to rescue an ailing company, or help a good company flourish!

One of our retail customers put planted "mystery shoppers" through their ten checkout registers and was shocked to discover a 1.5% error-rate at checkout—a yearly cost of $150,000. They made a few minor adjustments to the checkout process, and the problems were largely resolved.

Another business owner modified workflow details in her order-fulfillment process and trimmed 10% from labor costs—a $75,000 a year improvement. You can get the same kind of results!

Details Make or Break Business Systems

Opportunities abound to refine the details of your organization, and depending on its size, there can be a lot of money at stake. In addition, the marketplace will not usually tolerate disorganized, seat-of-the-pants operations that are careless with details. If you are not a "detail person," find one who can help you out!

I know the world is filled with different personality types. And we love people of all kinds. However, when I have surgery, I want a detail person. When I build a new house, I want a detail person. When I get my car repaired. . . . Well, you get the idea. When it's important, we all want a detail person. And so do YOUR customers!

J. Willard Marriott said, "It's the little things that make the big things possible. Only close attention to the fine details of any operation makes the operation first class."

One last detail—you are losing money every day you wait, so START TODAY!

 

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Tags: Improvement, Innovation, Laws/Principles, Cost Cutting