Saving the Business with Assorted Cost Improvement Methods
Saving the Business with Assorted Cost Improvement Methods
Reducing Process Costs with Lean, Six Sigma, and Value Engineering Techniques
There are boom times and there are times when the business world is less secure and profit margins erode. We see some company responses to economic downturn are to eliminate staff as if that were the only way to become a viable company once again. We wonder if these companies have some cost improvement methodology behind them that would give their management other options than summarily removal of personnel. A company that has effective cost improvement activities ongoing will be better suited to adapt to the changing economic climate. More like the little creatures that survived the meteor impact that caused the extinction of the dinosaurs – adaptive.
Saving Money Includes Innovation
There is value in an organizations ability to innovate. New product or service generation is important for business growth to be sure. However we want to maximize our return on this investment in development of a product or a new service. To do that we must frequently critique how we are meeting our customer’s needs. What is our value proposition? How can we improve upon the existing proposition?
Example of a few of Methods
Certainly it is not necessary to wait until we have delivered our product or service to start thinking about cost. It is sound business practice to understand the market and whether a particular course of action has economic upside for the undertaking organization. Value Analysis and Value Engineering techniques improve our organizations profit margins by reducing costs. An abundance of techniques of varying degrees of sophistication are available that will drive out costs, improve efficiency and provide the organization with a competitive advantage. In our work experience we have saved companies hundreds so thousands and millions of dollars and we can show you how to do this as well.
- Brainstorm and Mind mapping
- Teardowns
- Process improvements
- Cost recovery
- Optimization
- Lean and Six Sigma
Any of these techniques can improve the bottom line of your organization. It is also certain that cost improvement activities go only so far. An organization cannot rely solely upon cost as a competitive feature as a long term strategy for success. However it is also certain that demand and competition influence the asking price for the product or service and that influences potential profit margins. A company that does not actively seek cost improvements leaves much on the table and is not necessarily a good steward of the organizations resources.
Cost Improvement was and still is Important
Cost and value improvement activities for business is as old as business itself. In the days of selling pots, our ancestors crafted the best pot they could with the materials available –which were no doubt limited. Farmers have met their needs through creative means (a butter churn). My father in law regales my family of a story of the farm upon which he was raised. To make butter, they had to manually churn the milk. One day, they elevated the drive axel of the car, placed a belt on the tire and a belt on the churn handle in such a way that the car idle and subsequent tire rotation would churn butter. It could be argued that the value of the car was greater than that of the purchase price for the vehicle solely for its intended operation. It is difficult to say from the story whether or not there was a suitable substitute. This was in the 1930’s and there may not have been an automatic butter churn available. However, this demonstrates the principle of creative thinking to meet a need.
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