Improve the way things are done, and the savings rack up

OED Certifed Advisor Dana Komar shares insight into some of the most effective cost containment measures a small busines can take.
Improve constantly and forever every process for planning, production and service. Improve quality and productivity, and thus constantly decrease costs. ~William Edwards Deming


In a contracting economy, good business owners realize the need to quickly get costs in line with declining revenues in order to preserve their operating margins. Typically, their first reaction is to eliminate obvious unnecessary spending on supplies and ancillary items and to reduce payroll. However, after these steps have been taken, many realize that they just are not enough. But, how can they pull more cost out of their operation without destroying the quality of their product? The answer is to focus on improving processes and increasing efficiency which will ultimately result in increased margins, production capacity, and product quality. This approach will also help owners surgically reduce resources spent in certain areas rather than blindly eliminating spending without truly understanding the impact it will have on the operation.

So, how do you do this?

By using a systematic approach to analyzing current processes, you will find opportunities to reduce the amount of time and money that goes in to producing your product.

First, assemble a team to perform this exercise. It’s important to have outside perspectives as well as insight from those directly involved in the processes. Therefore, including people from different functions and levels in the organization is beneficial.

Next, have the team map out the individual processes employees go through to produce the product, step-by-step. Are there steps that are taking longer than they should? Are they wasting time waiting, searching, or walking? Are supplies being wasted? Are they performing steps that really don’t need to be done at all? Are steps being repeated?

Now, list out the reasons why time and efforts are being wasted or why things are taking longer than they should. What is really causing these things to occur? Don’t assume that the most obvious explanation is the answer – keep asking why to uncover the true root cause of the issue.

Next, determine how to fix the root cause of the issues so that they don’t happen again in the future. Don’t just come up with a way to band-aid the problem “for now” – that’s not good enough.

Then, prioritize all of your fixes, starting with the ones that will give you the biggest bang for the time and effort it will take to make the changes.

Finally, get to work! Develop and execute action plans to implement the changes that are needed. Make sure each plan has an owner and a deadline to ensure accountability and completion.

After the initial exercise is over, encourage all employees to adopt this type of thinking and process analysis into their daily work. That way you will continuously build on previous improvements, thus continuously enhancing your operation and reducing costs.

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