What if an additional 20% or more of your current gross revenues dropped to your bottom line?
Studies show that waste in most American companies totals 20%+ of gross revenues, yet waste in companies using the Deming quality management method average 3%—or less. How? Answer: There is a better, more profitable way of operating a business: The Deming Quality Method.
Major Sources of Waste,* Lost Revenue & Lost Opportunity include the following. What is the state of these key waste factors in your organization today?
• Poor communication.
• Insufficient/incorrect planning.
• Insufficient/incorrect training.
• Low morale/high stress/high employee turnover.
• Time: Lost, poorly managed, etc.
• Under-utilization of people’s skills & abilities.
• High customer turnover/dissatisfaction.
• Inventory: Excess, slow-moving, over production.
• Product, service, solution defects.
• Production, processing, transportation waste.
• Waste of motion/effort; rework.
• Superficial quick fixes vs. removing root causes.
• Lost opportunities (sales, growth, etc.)
• Lack of clear company values.
• Unclear/misaligned priorities.
• Working on the urgent/fire-drills vs. the important.
• Low teamwork, poor synergy.
• Lack of bright, compelling company vision.
The Bottom Line: The waste in most companies is HUGE, yet the obvious waste is invariably just the tip of the iceberg. Unless intelligent systems are in place to both identify and eliminate the waste, it will continue to be an invisible yet growing, major source of loss. Businesses utilizing the proven Deming quality management/waste reduction method (e.g. Toyota, Proctor & Gamble) inevitably outperform their competition, dominate their markets and enjoy healthy, growing profits.
Leadership Alliance provides targeted solutions to identify the waste and remove its root causes. Results: Major, increasing and sustainable improvements in productivity and profitability. In fact, removing waste can add proportionally far more to actual bottom-line profitability than increasing sales—a surprise to many, in our “sell-sell-sell” world (see concise study, next page).
The Alliance offers comprehensive waste analysis and reduction expertise, which pinpoints the greatest opportunities for waste reduction/profit enhancement in your organization. We design customized, win-win approaches that remove the waste and lead to the achievement of your organization’s top objectives. Greater quality, market share, profitability, loyalty and success results.
*Key Waste Definitions
The difference between the way things are today, and the way they could be if every action added value to the customer, and these Added-Value Actions worked perfectly:
No errors, no mistakes, no failures, no problems, no rework of any kind. Leadership Alliance
Anything other than the minimum amount of equipment, materials, parts, space and worker’s time which are absolutely essential to add value to the product and/or service. Toyota Motor Co.
Study: Reducing Waste vs. Increasing Sales
If your company sells a product or service with a 20% net before-tax profit margin (after product/services cost, salaries, commissions, overhead, etc.), then $1,000 in sales produces $200 in profit. A 10% increase in sales increases profit by $20, while a 10% reduction in costs/waste saves $80 (total costs: $800 x 10% = $80)… This is FOUR TIMES as much.
Thus, at a 20% net profit margin, a reduction in waste/cost of only 2.5% will produce as much profit as a 10% increase in sales. The smaller your net profit margin, the more dramatic the impact a reduction in costs/removal of waste has on your bottom line (vs. increasing sales). For example:
• At a 10% net profit margin, a 10% reduction in waste adds nine times as much to your bottom line as a 10% increase in sales:
A company operating at a 10% net creates $100 in profit from every $1,000 in sales; a 10% increase in sales adds $10 to the bottom line; a 10% decrease in waste [.10 x $900] adds $90 to the bottom line: NINE times as much.
• At a 5% net profit margin, a 10% reduction in waste adds nineteen times as much to your bottom line as a 10% increase in sales:
A company operating at a 5% net creates $50 in profit for every $1,000 in sales; a 10% increase in sales adds $5 to the bottom line; a 10% decrease in waste [.10 x $950] adds $95 to the bottom line: NINETEEN times as much.
KEY POINT: Removing waste, increasing quality and innovation, raising loyalty, improving efficiency and reducing costs are among the most powerful investments you can make to sustain and grow your bottom line. Greater sales and market leadership inevitably results.
The basic method to remove waste in any business system is to work cooperatively on: (1) How to correctly measure and optimize each process in your total end-to-end system, and: (2) How to reduce variation and/or cycle time (e.g., simplify, combine, or eliminate steps).
This applies to both operating and management systems; e.g., in one year Toyota’s employee suggestion program generated over 1.5 million suggestions on how to remove waste; over 94% of these suggestions were adopted.
• The Waste in most organizations is surprisingly vast, yet largely invisible
• WASTE ALWAYS EQUALS LOST REVENUE.
• There are proven methods for reducing Waste in all organizations and industries.
• Organizations practicing enlightened management, quality enhancement/waste reduction grounded in a robust Continuous Improvement Process (CIP) are invariably more productive, profitable and successful. Leadership Alliance can show you how to leverage this vast potential present in your organization today.