How Do We Reduce Costs?

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Organizations are in a constant juxtaposition between the desire to reduce costs and grow at the same time. While there are many ways to reduce costs, senior leaders want to be sure they’re choosing the best methods for the organization. Studies have proven that 85–90% of an organization’s challenges are found buried in their core business processes. Therefore, implementing process excellence within your organization can effectively reduce cost while improving efficiency. So in essence, you reduce costs while growing your organization.

Process excellence is an organizational philosophy. It must be strategically centered, leadership driven, customer focused, and contributor supported. So, where do you start? Start by looking at your core business processes. If you can reduce the amount of time it takes to accomplish your core business processes, remove non-value added steps, and improve productivity, it will have a tremendous impact to your organization’s bottom line, quickly.

One of the tools utilized in process excellence allows you to build upon your current processes but adds the element of speed. This customized facilitation allows you to eliminate waste and non-value added steps. All additional steps generate costs, and usually there aren’t allotted revenues to cover the expense of the additional costs. Here are some examples of what clients experienced.

One organization that implemented this tool actually reduced one of its core business processes by 50%. With the savings generated, the organization purchased a new inventory tracking system, which helped the client reduce its annual complaint rate to only 2%. A new inventory tracking system was created which increased efficiency by 518%. The hours necessary for inventory tracking were reduced from 3,626 hours to 700 hours. Another process, which contained 118 steps, was whittled down 57% to 68 steps. The improvements to the inventory control processes translated into a cost savings of $700,000.00. Now, that’s quite a reduction in costs!

Another proven tool utilized in process excellence allows you to reduce variation within a core business process. Variation is something that occurs within a process, which hasn’t been anticipated and ends up altering the expected outcome. Because it’s not something that happens all of the time, when it does occur the result is typically rework, replace, retype, redo, reprocess, etc., and all the re’s dig into the organization’s revenue. By reducing variation, the organization is able to prevent challenges from occurring by building in quality rather than inspecting out defects, saving the organization time and money.

One organization used this tool and achieved more than a 50% reduction in scrap. Another client reduced production times from the norm of 8 hours to 12 hours down to 4 hours to 6 hours on first production runs.

How can you strengthen your organization by reducing costs in the most effective and efficient ways?

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