Reducing Costs While Building a Better Future

The only constant is change. You’ve heard this saying countless times before, but that doesn’t make it any more comfortable when you’re going through it. In this market, many organizations will face increasing pressures to reduce costs and will wait for an event or trigger to initiate tactical cost-cutting measures in response. However, organizations that achieve cost cutting as part of continuous improvement initiatives can not only reduce costs but enhance capabilities. When you respond to the constant need for change in a way that aligns to your business strategy, you can address immediate tactical savings goals without sacrificing long-term success.

Aligning to your business strategy

When starting with a strategic analysis of where the best value opportunities can be gained, you are able to evaluate opportunities in terms of alignment to your business strategy. You can also then consider the cost-savings opportunity in the overall system, not just the immediate effect. This means determining the impact of the change not only one step away but two, three, or twelve steps down the line, to truly understand what impact this cost-saving change will cause. This will help you make choices about what cost-savings measures to implement based on that data. Six Sigma tools, such as a cause-and-effect matrix, can be used to determine key process inputs and outputs to help prioritize where adjustments are best made.

Leveraging Lean and Six Sigma tools

By leveraging Lean and Six Sigma tools to guide your cost cutting and continuous improvement initiatives, changes can be less focused on broad cost reductions. This can impact business capabilities and agilities, as efforts will be more strategically focused on better ways of doing things with immediate cost savings. Perhaps you find that travel doesn’t need to be suddenly stopped entirely but can be optimized by targeting just specific areas. Or, the R&D tests that were going to be stopped to minimize costs can actually be done in a way to produce a saleable product during the tests. Often, when we think an entire manufacturing line needs to be stopped due to cost constraints, we can find waste in the process that can be eliminated. This, in turn, keeps that line profitable and optimized, and perhaps most importantly, key employees working and producing value.

Using these Lean and Six Sigma efficiency tools, like in a short-term Kaizen event, can eliminate waste and produce exponential gains above a short-term cost elimination choice that didn’t assess downhill impacts. Kaizen literally means “better way,” and it is important to achieve your cost-savings targets through a truly better way of doing things. Sending a few of your employees to do an efficiency analysis may not cut costs on step one, but it will return even greater savings in just another step or two.

Staying competitive

These continuous improvement programs can be the backbone of business transformation to stay competitive in an ever-changing market while meeting the cost-saving needs of today.

Contact Sikich for help aligning your cost-savings measures to your business strategy or to guide your next Kaizen continuous improvement exercise.

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