08/ 18/ 2008
by Charles R. McConnell
Most managers have too much on their minds to devote attention to controlling the cost of their products. After all, managers have to worry about meeting schedules and deadlines, getting the work out, keeping customers happy, and dealing with problem employees and employee problems. Virtually every move a manager makes has a resulting effect on the cost of operations. Cost implications may not be obvious at all times, but they're always there. Therefore, it's in the realm of cost control that the individual manager can make some of the most valuable and recognizable contributions to the success of the business.
The manager's task will always remain getting the work done, but this doesn't mean getting it done by any means possible or at any cost. The manager who finds ways to improve the operation with more effective methods is making as important a contribution to success as he or she can make by achieving quotas and meeting schedules.
There are a number of steps a manager can take to eliminate waste and inefficiency. These include identifying lost time, coordinating tasks and resources, improving workflow, improving scheduling and eliminating inefficiencies in the use of employees.
Wasted time is one of the costliest elements in any operation. Time is an essential element, and any factor that holds up the job can increase costs. It pays to learn how long each operation takes, how many people are needed, how the work flows, and the capacity of each person or workstation. If time is passing but the work isn't advancing, costs are accruing to no benefit. Time is money, and both are lost when some person, task or activity has to wait for input from others, making coordination of tasks and resources critical to cost-effective operations.
Workflow is often a productive place to seek cost savings. In too many instances poor work flow develops over time from a lack of specific planning. There is often a tendency to regard the "way we've always done it" as the proper method when there's almost always room for improvement. Improper work flow results in uneven workloads and unproductive waiting time.
Note that everything discussed up to this point concerns the use of time, especially the elimination of idle time of people and equipment. Beyond minimizing idle time it's necessary to look at the relative efficiency with which employees are utilized. Efficient use of labor requires knowledge of the common ways in which help is wasted, such as:
- using more people than a job actually requires
- using too few people, resulting in delays and unnecessary overtime
- hiring hastily and frequently while proceeding in ignorance of the true cost of rapid employee turnover
- using higher paid workers for tasks that lower paid people can do
- failing to provide adequate orientation and on-the-job-training
- failing to control overtime and limit it to the barest of essential uses
Depending on the nature of the business, material waste can run a close second to--and sometimes surpass--inefficient use of employees as a cost-booster and profit-stealer. In some manufacturing operations, careless and indifferent workers can push scrap production and reject rates to appalling levels. Neither the best of tools nor the fanciest of quality control programs will keep output under control if the workers don't care what they turn out. As one company had posted in its main production area: Quality must be built into the product--it can't be inspected into it.
Workers who are kept in the dark concerning how their individual roles fit into the whole generate much greater scrap or rework rates than those who know exactly how they fit in, what they're doing and why they're doing it. Also, scrap and rework rates should be posted or otherwise published so everyone knows exactly how the department stands overall.
A conscientious manager always cares what something costs. The manager can better control costs by remembering the following means of controlling waste and inefficiency:
- Analyze every operation and activity, and eliminate idle time and non-productive steps
- Hire with care; proper recruiting can help hold costly turnover to a minimum
- Use available employee capacity to the fullest extent
- Reduce scrap, rework and customer service problems by personally working to improve the performance of marginal or troublesome employees
- Curb abuses of tools, equipment and materials, and especially abuses of time.
- Keep employees constantly aware of issues of cost and quality, reminding them periodically that conscientious cost control can help ensure the continued success of the business
