September 1997 • Volume 7 • Number 9
Establishing An Effective Cost
Control Climate
By Charles R. Harte
Global competition and the increasing pace of
change make effective cost control critical to a company's
profitability. While comprehensive total organization
programs and sophisticated analyses may be helpful, a much
simpler approach in production operations may yield
surprisingly good results. Further, the approach discussed
below has been successful in promoting aggressive
improvement by everyone in the organization as a part of
their daily job.
Productivity improvement means increasing the output per
unit of input or reducing the inputs per unit of output. A
systematic examination of how workers, materials, and
machinery interact often presents opportunity to engage in
positively perceived cost improvement activities. There are
ways to improve productivity and reduce costs by reducing
stress and making the work easier to perform. Indeed, with
some presentation forethought, managers may find
enthusiastic acceptance of such cost control activities.
Examine interaction between labor and equipment
In production operations, the desired output occurs after a
series of events has taken place. In many cases labor is
employed in a monitoring role, with the speed of the
equipment overseen generally determining gross output. An
examination of a few aspects of the interaction to labor and
equipment can often provide a fertile field for improving
productivity at little, if any, cost. Some of these aspects
are:
First, if equipment speed is the primary determinant of output, what is happening when the equipment is not running at peak speed? If some sort of changeover is involved, what would reduce the frequency of changeovers? Are required tools or materials handy, and are they made available on time? If many items are needed, how are these arranged and obtained? Are the heaviest/bulkiest items easy to handle? Is it possible to rearrange supplies or storage to make it easier and faster to employ at the proper time?
Second, are the operator's activities reasonably uniform in intensity? Or, is the work characterized by periods of inactivity and periods of frenzy? Why is there frenzy? Can some of the frenzy be done during the inactivity? Perhaps it is possible to rearrange workers' schedules so that more people are usefully deployed during someone's busiest time.
Third, examine the flow of materials from the beginning of the process until the end of the process. As change occurs over time, the flow of materials and their access points are good places to look for cost improvements. For example, are material movements characterized by back and forth flows or is the flow reasonably straight-line? Just how do people get things from place to place? What is the likelihood that the wrong items are selected? What are the consequences of improper item selection?
Fourth, examine the flow of people during operations. Are
there many crossed paths or long trips? In considering the
overall operation, are these trips desirable (would the
person involved prefer the trip or prefer not to make the
trip)? For both people and materials it is often helpful to
use a plan of the operating area and chart these flows. If
the flow lines create a jumbled pattern, that is clear
indication of a cost reduction opportunity.
Improvements at no significant cost
Observing these aspects of the operation should identify
stressful and inefficient points. Most employees are
interested in maximizing results and welcome opportunities
to help the success of the business. Improvements via these
questions may not only increase output, but may also make
the work easier, faster and more productive. Note these call
for nothing more than organized observation of how people
interact with the production operations. Over time, using
these kinds of questions to examine the work being performed
is bound to find some cost element to reduce or even
eliminate. Most such improvements come at no significant
cost and are easily implemented. If such programs are wisely
managed, the result will be the creation of a climate of
continuous improvement questioning by all personnel, and the
increased likelihood of more profitable and productive
operations.
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Contributors note: |
Charles R. Harte is the president and owner of BioSpecialities Inc. Previously, he spent 15 years in industrial engineering with Proctor & Gamble. He has an economics degree from Yale.
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