We’re passionate about helping our clients achieve their goals and a common goal we’re often faced with is helping clients to increase profitability in their businesses. There are many factors that can serve to increase profitability and one of the most effective is to eliminate inefficiencies.
Below are the seven most prominent inefficiencies within businesses, and what you can do to reduce or eliminate them within yours.
This is a result of producing more than is required to meet the customer’s needs. Producing something before it’s required is an excellent example of overproduction.
For a manufacturer, overproduction is easy to identify, and it will often be visible as excess stock on hand.
For service businesses, overproduction may be more difficult to identify and can be the result of overservicing your clients or even booking ‘Work in Progress’ by commencing work before it’s required.
TIP – Look for opportunities within your business to identify and reduce duplication that may be inadvertently occurring and try to not create something until it’s been sold.
This is the result of time not being used efficiently. Consider a single product or service; it’s often the case that much of particularly a service’s lead time, will be in waiting for the next action to occur.
Examples of waiting can include waiting for information, waiting for customers, waiting to get paid etc.
TIP – Think about where in your business – from the initial preparation of your product or service to when it’s delivered, and when the cash has cleared in your bank – does waiting often occurs. Work to reduce or eliminate the waiting periods but be sure to consider any flow-on effects of your actions and the resulting impacts both inside and outside of your business.
Your clients may value your finished product or service being delivered to their preferred location, but transportation of a product between processes adds no value to your client and is a clear source of waste that should be minimised.
Minimising transport can result in multiple efficiencies including reducing ‘waiting’ and minimising the risk of damage occurring during transit.
TIP – Consider stock layouts and material handling within your business, as well as sales travel versus online catalogues or service delivery.
This is about ensuring you’re using the right person or tools for the right job. This may seem like common sense, but too often we see business owners who are highly qualified in their field, spending time on low-value tasks within their business. In all cases, there is a solution available to allow that person to return to the higher value work on which their time and energies are better spent.
In relation to tools or machines, it’s the same as using an expensive, high precision instrument when a simpler tool may be just as efficient at achieving the same outcomes.
TIP – Always consider whether the most appropriately qualified person is assigned to a task and try to keep the most qualified persons available for the higher-value tasks.
Or more appropriately: unnecessary inventory increases ‘waiting’ and results from overproduction.
Work in Progress (WIP) is often a result of unnecessary inventory and overproduction but be warned that it can also be responsible for hiding other challenges which may arise if WIP is reduced. Regardless, unnecessary inventory and WIP are often areas where waste can be reduced.
TIP – An easy win for unnecessary inventory in a products business is to identify old and obsolete stock lines or product ranges and consider the benefits of removing them.
This is about ergonomics and functional design. Waste occurs during unnecessary motions such as moving, adjusting, or reaching and often a minor adjustment to the functional design of a process can result in large gains over time.
TIP – Consider reviewing your work floor layout, location of tools required and frequency of use etc.
Defects include warranty claims and can have devastating effects on a business.
If internal defects are identified prior to sale, the result is scrap, re-work (sometimes re-design) and increased ‘waiting’. Internal defects are still preferred when compared to external defects such as warranty claims which can result in not only the above but also the potential loss of reputation and customers.
TIP – Identify reasons for re-work, production faults or errors occurring in your business and consider what can be done to reduce or eliminate these altogether.
To reiterate my earlier comment, processes either add value or create inefficiencies to the production of an item or service, and reducing wastage is a key driver to increasing profitability in any businesses. If you would like to discuss inefficiencies or methods to increase profitability within your business, please contact us today.