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Cost Control in this Economy

Written by: Jack Greene

Article Overview: Cost control is not just a checklist, but a way of thinking that cost effectiveness is the primary objective. Focus on results, not the process. And please, don’t just look at direct hourly people for improvement. That is probably not where your big costs are. Show me the money.

Cost Control in this Economy


So what is it with this economy, and how does it affect what your business should do, can do?
Cost control is not just a checklist, but a way of thinking that cost effectiveness is the primary objective. Focus on results, not the process. And please, don’t just look at direct hourly people for improvement. That is probably not where your big costs are. Show me the money.

Cost effectiveness is just as effective in the front office, the lab, the maintenance shop, the field, the customer service unit, and the warehouse as on a production floor. For a deeper analysis, my book called Cost Reduction; Survive, Recover, Thrive
offers actions for any phase of the economy, for all levels of the
organization chart. It is listed on Amazon, search by the title please.
It is available in a Kindle edition as well as paperback.

A. First, the way of thinking

1. Cut waste.
That is the centerpiece of every successful management style. Results count, not the process. Add value in each action or question harshly why you take that action. Be sure to apply this concept not only to the product but also to administration and strategy and written procedures and paperwork and electronic systems.

Good articfles appear often in the Superfactory web site.

2. Prioritize
Management must set priorities and communicate them; focus on those few items that influence the largest productivity result. The person with the wrench or the mouse in their hand will do a task, and if management does not set the priority then the worker will.

3. Expectations
You, and I, and the people in your company want to know what is expected of them (and their work group and the company) and how well they do against expectations. Measure productivity, and the results. In this economy, people are more apprehensive than usual, so expectations and measurement and communication are even more important.

4. Encourage innovation, but don’t ad lib.
And require accountability for actions. As you define how to meet these all these platitudes in your organization, start with number one, cut waste. Use your management structure to build a list, prioritize, assign actions and report results.

5. Motivate
Maybe survival is the key motivator in your situation, in this economy. Consider both the organization and individuals, in the short term and longer range. Talk frankly about the challenges and rewards, encourage joint efforts toward common goals, communicate, and act in a perfectly straightforward manner.



B. Next, the checklist
Act to raise profits or output, to ease bottlenecks, to refine operations that have lost their sharp focus over time or start effective new ones. Remember that you can improve productivity by cutting cost or by adding output, or both.

1. Capacity and constraints are linked; as constraints are reduced then capacity will rise. Identify the constraints and manage them to reduce wasted time and add output. Minimize the number of changes. Keep equipment up through rapid changeover.

2. Work measurement
Measure work to define objectively the time a job should take, for costing but also to set expectations, Identify constraints, quantify crew sizes and balance workloads, define capacity, schedule lines, justify equipment, analyze variances, point out where lost time can be avoided. Objective measurement can also resolve a contested situation fairly.

Measure direct and indirect labor, processes and equipment; not only on a production floor but also in the office, the lab, the maintenance shop, the field, customer service, and the warehouse. Just about anywhere your organization has a presence.

3. Product quality
Keep product quality up. Let me rephrase that; keep necessary quality up. Just because extremely high standards are necessary in pharmaceuticals and space ships doesn’t mean they are necessary for sunglasses and kitchen cabinets. And remember the old adage that quality is built in, not inspected in. The capability of your process drives the quality level, not the other way around.

4. Plant and workplace layout
Layout, or the physical organization of people, materials and machines within a workspace, is at the very heart of productivity. For an existing business, a revised layout can often cut operating costs and add capacity. For a new facility, design and layout are critical to optimize construction cost yet provide for long term operating efficiency and room for growth.

5. Merge or consolidate business, operation, plant or facility
If your organization is faced with a consolidation or merger of facilities, through choice or because it has been imposed by market forces, a successful facility project can concentrate the resources necessary for effective operation and use economies of scale to minimize cost.

6. Relocate for cost reasons, or to access qualified employees or support.
It is certainly possible for a business to cost justify another facility, instead of or in addition to, because of access to qualified employees or specialized vendors and support; location-sensitive operating costs, community incentives and tax combination, regulatory climate.

7. Just in time or just in case materials control?
Whichever system you are using, consider how it fits today’s situation for your organization.

Choose the ideas that apply to your business; you will find that most can be put into effect pretty quickly, with a benefit likely to be much higher than the cost. Read my other articles for some strategy and a lot of particular guidance, then call Jackson Productivity Research Inc. for help to plan or implement.

Good luck.

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