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Cost-Reduction Practices

Cost-reduction, while vital, is not always easy. This page offers specific ideas on the what, where, and how of cost-reduction practices in Southern California for manufacturing, warehousing, and industry.
Cost reduction, cost improvement, cost control, profitability, productivity improvement, or just good management? All of the above. The name is not as important as the actions.
First, consider your entire organization, not just direct labor, to optimize results. Where to look? Start with the Pareto Principle applied to business that predicts that a few line items will contribute the majority of costs and, therefore, the majority of cost reduction potential. Get the best bang for the buck.
Line Graph
Second, platitudes and buzzwords alone won't do the job. Successful cost reduction requires a hands-on approach to select and prioritize targets, find and effect solutions (literally a line-by-line analysis), consider options, define and implement solutions, and measure and brag about results. Your business is unique, but these insights are often useful:

Specific High-Value Cost, Plus Reduction Opportunity

  • Find the highest value opportunities in your unique circumstances. "Opportunity" combines both the overall cost and the potential to create an improvement.
  • Cut waste. Just what is waste? A March 2009 Business Week article presents this test:
  • Will a customer pay for this activity?
  • Will my service fail without this activity?
  • Will I go to jail if I eliminate this activity?
  • Answer "no" to all three, and the activity can essentially be defined as waste.
  • Sounds good to us.
  • Find and manage constraints, bottlenecks, and delays that extend the cycle time of any activity.
  • Quantify expectations, measure performance, and ask for accountability.
  • Cherry pick on the floor; look for delay, workload imbalance, and high scrap. Target issues that are relatively easy to find and correct.
  • Cherry pick at the management level, non-value-added activity, or inventory policy that causes changeover or out-of-stock. Match throughput to customer demand and match facilities and workforce to customer demand. Do your internal operating practices or paperwork interfere? Is the quality expectation appropriate? Some of these opportunities are not difficult to implement once they get the attention they deserve.
The immediate needs of your organization will depend on the general economy, the particular sector of the economy in which you participate, and the unique characteristics of the organization. You may need to survive, recover, or thrive at different times of your existence. Ideas for cost reduction and for good management are mixed interchangeably, just as in real life.

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Contact us today with any questions or concerns about our cost-reduction solutions. You may also schedule an appointment with us for an in-person consultation.