If it is about finding an effective and efficient way to reduce costs, the best way to achieve it is by implementing the kaizen continuous improvement system. For kaizen, it's not about cutting costs, it's about managing them.
Cost management involves monitoring the processes of development, production and sale of good quality products or services, while trying to reduce costs or keep them at target levels.
The cost reduction in the company is the product of various activities carried out by the management. Unfortunately many companies try to reduce costs only by cutting expenses; among the typical actions the dismissal of personnel, restructuring and reduction of suppliers.
This type of attitudes causes the interruption of the quality process and results in its deterioration.
But in today's markets, customers and consumers demand better quality at a lower price and punctual delivery, which can also be formulated as a higher satisfaction (quality + service) / price ratio.
When management only concentrates its activities on the search for lower prices, it simply proceeds to reduce costs, discovering that both quality and punctual delivery are seriously affected by this attitude.
Managing costs in the company implies:
- Cost planning aimed at maximizing the margin between revenue and costs Systematic cost reduction Investment planning by senior management
The possibilities of reducing costs can and should be expressed in terms of waste and waste, which are called dumb in Japanese.
The best way to reduce costs in the company is through the systematic detection, prevention and elimination of excessive use of resources.
To reduce costs, seven activities must be executed simultaneously, of which quality improvement occupies the most important place, and the other six activities must be considered as part of the quality of the process.
The activities we mention are:
1. Quality improvement.
2. Improved productivity.
3. Inventory reduction.
4. Shortening of production lines.
5. Reduction of idle time of machines and equipment.
6. Reduction of used space.
7. Reduction of total cycle time.
Quality improvement
Quality improvement is essential to kickstart cost reduction. Improving the quality of work processes results in fewer errors, defective products and repetition of work, thereby shortening the total cycle time and reducing the consumption of resources, thereby reducing the costs of the operations.
A company that aims to be internationally competitive must set itself the goal of achieving a quality level corresponding to six sigma, which implies reducing failures and errors to a level of 3.4 DPMO (defects per million opportunities).
The point is not only to reach the end customer with products free from defects, but also to generate those products "the first time", which implies production processes with the ability to produce high quality goods and services without the need for reprocessing and inspection work.
Higher levels of quality generate greater satisfaction in customers and consumers, and consequently decrease their levels of rotation accompanied by an increase in sales to the same customers and to new products of better advertising among them.
It should always be borne in mind that it is much more expensive to get new customers than to keep them, and secondly, that consumer satisfaction is usually spread by this among three people, while a bad product or service will lead them to spread it among ten.
Higher quality contributes to increasing the brand value of products and consequently the ability to generate future income, with which employees, managers, owners and suppliers can be rewarded to a greater extent.
Improving productivity
Improving productivity indices implies generating a greater volume of product with the same amount of inputs, or the same volume with a smaller amount of inputs.
By inputs we understand in this case both human resources, such as equipment and machinery, facilities, raw materials and components, energy and other public services.
Setting productivity objectives, determining strategies and concrete actions for their achievement, and measuring the achievements obtained are the three fundamental steps in the search for higher levels of productivity.
Levels that must be continuously exceeded within the trend of continuous improvement.
Improving productivity implies the best and fullest use of each of the resources, be it materials, machinery, facilities, labor, and monetary resources.
Inventory reduction
Inventory takes up space, prolongs production lead times, generates transportation and storage needs, and absorbs financial assets.
Materials, work in process and finished products that take up space in the factory or warehouses do not generate any added value, but on the contrary they deteriorate and can even quickly become obsolete.
Shortening of production lines
In factories, a long production line implies the need for a greater number of people, more work in process, and a longer total cycle time.
The greater number of people on the line also implies a greater number of errors, which generates lower levels of quality, the latter being a primary issue when it comes to reducing costs and fully satisfying the consumer.
Reduction of idle time of machines and equipment
Machinery and equipment with breakdowns give rise to idle times, inability to meet the expected delivery deadlines, generation of defects in products, and high expenses in repair concepts, with all that this implies both in terms of customer satisfaction, as in financial results.
Another critical factor in reducing machine idle times is the systematic reduction of setup times.
The idle time of the machines leads to batch production, and consequently to higher levels of inventories, with all that this implies in terms of handling, security, insurance, financial costs and the cost of physical space, among others.
In addition, the lack of reliability and durability of the machines leads to the generation of safety stock in order to use them in case of anomalies, such as the interruption or malfunction of certain equipment.
Reduction of used space
Traditional businesses typically use four times the space they really need.
Eliminating conveyor belts, shortening production lines, incorporating separate workstations within the main production line, reduces inventory and decreases transportation needs. All this consequently generates the least need for space, being able to use the excess spaces in the implementation of new lines, renting their use to third parties if feasible, or eliminating the need to rent said premises.
Reduction of total cycle time or waiting time
Total cycle time begins when a company pays for raw materials and various supplies and ends only when the company receives payment from its customers for products sold.
Thus the waiting time represents the turnover of money. A shorter lead time means better use and rotation of resources, greater flexibility in meeting customer needs, and lower cost of operations.
Conclusions
The first and fundamental thing to take into consideration is that achieving higher levels of quality does not imply higher costs, but quite the opposite, with higher levels of quality more productivity is achieved and consequently lower costs accompanied by greater satisfaction for customers and consumers.
The implementation of the kaizen system for the prevention, detection and elimination of waste is essential for a company that intends to achieve higher levels of added value for its customers, high profitability rates, higher added value per employee, higher levels of satisfaction, and greater market share.
Reducing costs is essential, but not just any methodology is consistent in the medium and long term with the desired returns, even more so they end up generating higher costs than they were intended to reduce.
That is why the implementation of the kaizen philosophy of continuous improvement is the ideal, since it starts from the permanent improvement of the most valuable elements that a company has, which is its staff.
The lower price (costs), quality and customer service today do not constitute competitive advantages, but are essential conditions to compete.
Reducing the change cycle time to carry out what the market requires is what currently determines competitive advantage.
This implies the imperative need to reduce costs no longer to be competitive, but to aspire at least to participate in the market game.
The implementation of said system of continuous improvement must have the leadership and commitment of senior management, and the strong support and awareness, management and staff levels.
Bibliography
Kaizen. Waste detection, prevention and elimination - Mauricio Lefcovich - www.gestiopolis.com - 2004
The Lean Company - Mauricio Lefcovich - www.winred.com - 2004
How to Implement Kaizen in the Workplace - Masaaki Imai - McGraw Hill - 1998
Management E-fectivity - Juan Carlos Fresco - Prentice Hall - 2000
Kaizen Strategy - Mauricio Lefcovich - www.monografias.com - 2003
