ARE YOU “LEAN” ENOUGH as we enter into the Summer of 2009? Are you in good shape; ready to rock and roll?

No, no. I don’t mean you personally; physically beach or pool ready. (Although you – and I – should probably be thinking about that aspect of “leanness” as well, Eric’s got the expertise there. I leave it to him to spell out the What To Do and How To Do It.)

I’m talking about cutting costs. Of course it’s really a season-less topic. But heading into the traditionally slower summer period, especially this year, gives us a good opportunity/excuse to scrutinize the way every harder-to-come-by dollar is spent.

The focus here will be “business.” The Five Questions I’ll share are useful, first and foremost, for spotlighting where and how you can cut costs on a variety of functions in a business operation. But you can probably apply them to personal finances as well.

So, in the spirit of the “leanness,” let’s trim this introduction now and get right to our –

TGIM ACTION IDEA: Increase the value of every dollar that passes through your hands. Put everything your organization produces … every process and element that produces sales and hopefully profits … under close scrutiny.

TGIM IDEA IN ACTION: Conduct a value analysis. If you have employees or coworkers, have them do the same. Everyone who creates a “cost” can contribute to cost cutting.

Start by posing these Five Questions:

QUESTION #1: What is it costing us now? Highlight profit-draining procedures and processes by breaking down the costs of each individual element of the process — from “raw materials” to the billing and collection process.

QUESTION #2: What elements factor into the problem? Costs are created as well as incurred. So delve into the many factors that contribute to the problem, not just the bills and invoices you can gather up. Examples: Inexperienced help, substandard raw materials, poor communication, bottlenecks in production, problematic procedures, equipment downtime, manufacturing defects, and so on.

QUESTION #3: What’s the problem behind the problem? Don’t simply point out costly problem areas. Also spell out what needs to be done. Don’t say, for example, that “the problem is an inordinately high reject rate; we need to cut costs by eliminating rejects and second runs.” Say instead, “We need to get X, Y and Z jobs through production within a certain allowable cost range.” Be specific.

QUESTION #4: How else could the job be handled? The cost-reducing alternative to the broken down delivery van that causes late-arriving shipments and antagonizes customers may not be a replacement van. Maybe it’s a delivery service without all the cash and maintenance commitments of owning (or leasing) capital equipment. Look for more efficient means of accomplishing the goal.

QUESTION #5: What would the new cost be? If a change is in order (we must deal with that clunker of a van), be certain that the proposed changes (get a new van) truly costs less. Look for savings at each step in the process and their overall effect on the whole in terms of quality and cost.

Putting it all together: To ensure full support for any dollar-saving changes the Five Questions initiate, be sure you share the benefits you intend to gain with all involved.

Belt tightening pinches less when you’re a lean team. Get everyone in on the act. Don’t just talk about “waste” or “high costs.” Make it clear in dollars and cents. Think about, and help every individual understand, “What’s in it for me?” Share the personal payoff and you’ll gain cooperation as well as speed improvement.

In these dollar-conscious times, make sure everyone involved with the cost-cutting process understands “we’re all in the same boat.”

Let’s all pull together.

Geoff Steck
Chief Catalyst
Alexander Publishing & Marketing
8 Depot Square
Englewood, NJ 07631
201-569-5373
tgimguy@gmail.com

P.S. “Cooperation, like other difficult things, can be learned only by practice; and to be capable of it in great things, a people must be gradually trained to it in small. Now, the whole course of advancing civilization is a series of such training.” John Stuart Mill (1806-1873) said that.

Popularity: 2% [?]