By Victoria Moroney
Taking regular stock of key areas in your business can identify opportunities, cost savings, efficiencies, and hidden potential – just to name a few! There isn’t a magic bullet with profit improvement. Strategies can vary across pricing, supplier negotiation, reducing costs, product offerings – there are plenty of variables.
The lean approach, derived from Toyota’s operating model, is a methodology to identify and reduce waste focusing on seven key areas. While this approach was originally aimed at the manufacturing industry, we find that these areas can be applied to any business in any industry. It’s a great tool to help you think about every area of your business and where profit might be hiding.
The seven wastes
Defects don’t just affect physical products. Consider what errors are coming up in all areas of your business and any regular work arounds or fix it jobs you are finding yourself or your team doing. How can these be reduced or even better, eliminated? Ensure you have a system for monitoring these so that issues are identified and then addressed. Solutions could be found in things like more effective training or upgrading faulty/outdated equipment.
Dell’s ‘just-in-time’ approach to their inventory management has become a case study for reducing overproduction, famously reducing their inventory on hand days from 20-25 to a bare two hours. While Dell may have scale and supplier pull that many businesses do not, the approach to only produce what the customer wants and/or needs at the right time can be applied to any business.
Unbalanced processes can not only create idle time while employees wait on others and/or supplies but can also create delays in service delivery to your customers. Time delays can be hidden all throughout your business. Think software, repairs and maintenance, ineffective meetings, processes, supply lead times. How could you reduce these? What forward planning could be done to utilise time effectively?
This waste is all about how your product and/or service gets from A to B. Think about if you can cut out any middleman in your supply chain to reduce your transportation. Supporting local also goes a big way here if it can take less time and money for your product to arrive at your door. Consider taking advantage of fuel discounts and make sure your freight pricing is competitive.
Excessive stock on hand, raw materials and work in progress can all contribute to underutilised inventory. Consider marketing approaches that might be needed to move excess stock or what supplies you could order as you need them rather than holding stock that you may only sell once a year. If you’re in an office check whether you really need to hold a year’s supply of toilet paper or reams of paper or would less be sufficient?
If 2020 has sped anything up for businesses it is the need to adapt to remote working, with many businesses reaping the rewards of being able to offer services via a Zoom call rather than spend a day traveling for 2 hours of meetings. Face-to-face contact is still valuable for building relationships but having a mix of approaches can cut down on wasted time and money spent. And if you’re in an office or warehouse? Think about excessive movements to get the job done – there’s a reason Segway has had success marketing its scooters and hoverboards to the modern workplace!
- Over Processing
Are you giving more than the standard required by the customer? Spending too much time gathering information that isn’t actually necessary? This is a big one to look at your internal processes, not just your customers. Are there instances of double-entry? Forms that need to be filled out then entered into a system by someone else?
And the unofficial 8th waste, which we would argue is one of the most powerful:
- Non-utilised people
People are an organisation’s biggest asset. So often though skills are underutilised, ideas are unheard and critical input is never taken on board. Create feedback channels for your team - ask the right questions, provide a safe place for input and you might just find the next great idea for your business.
Making sure you’ve also got the right people in the right roles plays a big part in productivity and profitability. Stop trying to force those square pegs into round holes!
Where is profit hiding in your business? If you’d like help to identify where you could be saving money and increasing your profit, we can help you look at it from every angle. Contact our team to find out more – we’d love to help.