Identifying Cost Reductions

Identifying cost reductions, having efficient operations and improving cash flow seem simple and obvious. However, with all of the training, technology and information at our fingertips we continue to have companies that underperform and businesses fail.

When we peel back the layers of the onion, I have learned there are several reasons that affect our decision-making process. I going to spend some time explaining the main elements that impact our decisions and add unnecessary costs and processes to our business.  

Reasons of Unnecessary Costs

Lack of Time: It seems as though time is always short and today’s competitive market exacerbates the challenge of time. Sometimes we make decisions without the proper planning or analysis because we cannot get the information fast enough.

Limits on Creative Thinking: It is human nature to rely on the old “tried and true” or jump at the first workable idea that presents itself. For many of us, the natural creativity enjoyed in our childhood has been pushed away due to formalized training and maturity. Creativity is a skill becomes a learned behavior and takes practice. I will discuss creativity in my next post.

Lack of Information: We have unnecessary costs in our products and processes when we do not have all or the correct information. Are you effectively using today’s technology?

Honest Wrong Beliefs: Well-intentioned as we believe ourselves to be, we often kill or self-veto good ideas just because we do not know any better. Will Rogers said, “It’s not ignorance that’s so bad, but all the things we know that ain’t so”. In 1903, Simon Newcomb said “Man shall never fly”.

Temporary or Changing Circumstances: How often do we set up 100% inspection on process until we fix the problem and we are still doing it months later.

Habits and Attitudes: Those behavioral patterns that become completely involuntary and the habitual though patterns called attitudes. Sometimes they create “opioneering” which adds unnecessary costs.

Continuous Process Improvement methods are focused on helping us address reasons of unnecessary costs with a process. There are many tools that include value stream mapping, Kaizen workshops and value engineering/ value analysis.

Is your business struggling financially, do you need more efficient processes, or do you want to have a culture of continuous process improvement? If so, I recommend you understand these methods and try the process in one area the business that needs to improve. I know you will like the results.