Managers and business owners often ask me, ‘how can I improve my bottom-line?’ More often than not, they choose to focus on increasing sales and winning new business.
My instinct is to encourage them to focus on analysing the performance and efficiency of their existing systems and processes before turning attention to increasing sales. Why?
The metaphor that I use to explain my justification is simple. Imagine you are trying to fill a bucket with water, but the bucket has a large hole in it. No matter how much water you pour into the bucket, you will need to keep topping it up as the water flows out of the hole. How much easier would it be if you just took the time to seal the hole? Obvious, of course, but you will be amazed at how many times people missed the obvious.
Just winning more business and increasing sales is a little like topping up a bucket that is leaking water – much of the time, effort and resources devoted to increasing sales is literally going down the drain. Therefore, before you consider how you can fill your bucket with more water, I would challenge you to identify and plug the holes. What is the point of letting more water drain away or should I say wasting more time, money and resources?
The inspiration for what I am about to share with you is drawn from the work of Taiichi Ohno in his book called Toyota Production System. Ohno devised the ‘7-Wastes Model’ which provides the foundations of what we now refer to as ‘lean manufacturing’.With a little adaptation, Ohno’s ideas can be applied to non-manufacturing scenarios as well.
Ohno defined waste (or ‘muda’) as the use of resources over and above what is actually required to produce the product (or service) as defined by the customer. If the customer does not need it or will not pay for it, then it is waste, this includes material, machines and manpower.
The ‘7 Wastes’ are:
Defects in quality that prevent customers from accepting the final manufactured product or delivered service. The time, resources and energy to create ‘defective’ products or services is wasted.
Overproduction is the production or acquisition of raw materials, stock and services before they are actually required. It is a particularly expensive form of waste as it can often hide other production or service related problems. Overproduction has to be stored, managed and looked after so that it remains fit for sale.
Each time a product is moved, it runs the risk of being damage, lost and can add time into the production and service delivery timeline. In addition to unnecessary transportation costs, time delays add to waste and detract from value. .
Waiting refers to the time spent by managers and employees waiting for resources to arrive, the queue for their products to be processed. It is also about tying up the capital invested in the goods and services that have not yet been delivered to the customer.
Whether this is in the form of raw materials, work in progress or finished goods, excess inventory represents a capital outlay that has not yet produced an income nor any added value for either for the customer, or the organisation. Excess inventory is waste.
Motion refers to managers and employees or equipment that have to move from place-to-place. Unnecessary movement consumes time, which does not add value and is therefore waste.
Using a more expensive or higher specification resource than is required for a task or adding in features into a product or service for which the customer has not paid is waste. This is particularly relevant to the performance by people of tasks for which they are overqualified – the training that they have received and their underutilised skills is waste.
While the ‘7-Waste Model’ is not a tool in its self, it is a valuble framework for routing out waste. When used with other tools and techniques such as Pareto Analysis, Flowcharting or Failure Modes Effects Critical Analysis (FMECA), the use of the ‘7-Waste Model’ can lead to an amazing improvement of the bottom-line without generating a single new sale.
The elimination of waste is a vital component of increasing competitiveness, performance and productivity. My challenge to you is to invite you to identify all of the non-value added activities that are performed within your organisation, or at least within your area of responsibility – you might discover that you have dozens if not hundreds of opportunities to eliminate waste.