Good Efficiency Always Means Higher Profit!
Max
Williams, Principal Consultant
The latest news on the state of the
economy here and around the world is getting better by the minute. Good.
It still continues to be confusing! Not so good.
For instance, retail sales appear to be strongly increasing, but
falling at the same time.
Translation? Sales for the June
quarter have increased year on year, but for the month of June they are
down year on year. So, is that good? Or bad?
As business
managers, our task is to anticipate the best moves for our business,
and plan and implement accordingly. In the face of today's uncertainty
- even if the bias seems to be on positive improvement - what should we
be doing right now?
One thing we can do is get on with
building our business - making the best of what we do know. And what we
know is that every saving we can make without hurting our planned
business outcomes, is a step forward. No matter what happens in the
broader economy, increasing efficiency yields permanent savings that go
straight to the bottom line.
Another way of putting this
is that some things we can do will always be the right thing to do - no
matter what the external circumstances. What is worth remembering on
this context, is the very human tendency to take two common points of
view.
The first of these two very human points of view,
is to think we have already exhausted all the possibilities for
improvement - that we have done all we can. The experience of most
consultants is that different players in the same industry will have
very different performances in very similar circumstances. Clearly, not
all of them are performing at the best industry standard - but it is
very hard to have lower performers accept the possibility of
improvement! Instead of finding out how to improve, just about every
body seems to find a rationalisation for being less than the best.
If ever there was a time not to succumb to this temptation - if
ever there were time to turn the whole world upside down to get even
small improvements - this time must surely be it!
The
second of these two human attitudes is to settle into a comfortable rut
- and think of that as 'world's best practice'. Even when it's clear
that others are doing better! Certainly it is not easy to blast
yourself from your comfort zone and challenge every part of what you
do. Easy doesn't come into it! Constantly improving profits don't come
easily, so if it costs us a bit of discomfort, isn't it worth it?
In the end, we get the profit we can make by our skill and hard
work. So, increasing efficiency is the kind of hard work that really
pays off - over and over again. Right now is when we most need those
efficiency gains.
I ncreasing productivity often means new
factory plant and equipment, new technologies, and less human
inputs. Specifically, it usually means more technology and less staff.
Now, everyone has to increase productivity, regardless of
technology. Increasing productivity in offices, shops, and
warehouses is the only way to be sure of new growth.
What are your chances
of increasing productivity? That's a question we often ask.
Increasing productivity in offices, shops, and warehouses is the only
way to be sure of new growth.
There is one problem
though. Just about everyone believes they are doing the best they can.
That might be expected, of course, because if there is a better way,
most people would be expected to be taking it already. Wouldn't
they?
On the other hand, it is a feature of our human
frame that we get locked into the existing 'status quo'. Usually, we
need a short, sharp shock to break us out of our comfort zone. Once we
break free from that blinkered view of the present, all kinds of new
opportunities open up! That kind of 'new view' keeps setting people
free time and time again!
This is the time to take a new
view of the productivity in all operating areas of your business - and
make improvements. Right now!
What
are you doing - that you don't need to do?
What does this
mean? Here is an example. A company was using the older style thermal
paper in their fax machine. This paper 'goes off' with time, so it
became a practice to photocopy every incoming fax and file the copies.
That way, there was always a permanent copy.
Problem is
that the process requires double handling. Easily overcome, by using a
plain paper photocopier. But then there is a problem - plain paper
printing is much more expensive because the ink cartridges for the fax
machine are so costly - however, while there is no photocopying labour
- there is still the work of filing.
All that work was
still time consuming, so there was still another step to take:
Receive all faxes on a computer. Then you can print any that need to be
printed. No more filing - the computer files provide historical copies
if needed. Use the existing fax machine as a back-up, in case there is
computer failure. Everything is done as required, and there is a
dramatic reduction in operating expenses and a significant labour
saving.
This example has all the elements. A business
need (record of all incoming faxes) that was being met but with
something close to over servicing (photocopying all faxes), and a new
process (computer faxing) that meets the need - and still
provides significant expense reductions in consumables, along with
massive labour savings.
What can you do to reduce the cost of doing
what does have to be done?
Whenever you try to reduce
expenses, you find how terribly hard it is to achieve. For example, the
use of so-called 'compatible' printer cartridges may save expense in
some degree, but the extent of that savings is questionable, and
sometimes the quality is suspect as well. You need much more
substantial - and demonstrable - cost reductions if there is to be any
real and lasting improvement in productivity.
Perhaps
it's possible to do away with the printer altogether - or at least make
electronic means the standard way of doing things - leaving the printer
only for relatiuvely few specific items. Once such a step is suggested,
you'll find a thousand reasons why that can't work, won't work, or
won't make any difference. The trick for all good managers is to see
the one reason it will work - and will make a difference.
You will almost certainly need new skills to make your new, cost
saving, process work. If you have a policy and program for continuous
improvement, these new skills will keep you moving ahead in a changing
world.
Continuous
Improvement? What's that?
'Continuous Improvement' - (CI)
- if you are looking for a definition, is: 'a process in which delivery
(customer valued) processes are constantly evaluated and improved in
the light of their efficiency, effectiveness and flexibility.'
The purpose of 'CI' is the identification, reduction, and elimination
of sub-optimal processes. In other words, the elimination of waste and
the increasing of efficiency. Its emphasis is on making improvements in
incremental, continuous steps, so avoiding quantum leaps.
This has been summed up much more succinctly by the simple expression -
'It's easier to improve a thousand things by 1%, than it is to improve
one thing by a thousand percent'.
You can put it yet
another way. Here is an emphasis on evolution, so that your business is
always moving forward in small ways. What this requires, however, is
that every staff member, every process, and every function is
constantly refining what it does.
After all is said and done, it is
helpful to remember that for many operators:
a 5% reduction in
expenses yields an increase in profit of 50% to 100%.
Isn't
it time you looked at your productivity? In all areas of your operation!
If you'd like to find out more about increasing your
productivity, talk
to us, or ask us a question here! Remember, there's no charge or
obligation.
This same offer applies in New Zealand. Click
Here!
McNicol
Williams Management & Marketing Services is a Small Business
Advisor listed with the Small Business Victoria, and has presented The
Red Zebra program under its auspices. This listing requires
that the first hour's consultation is always free. So when we say
"No charge or obligation", we mean it!
