If you had the opportunity to make $1,000,000 with 100 hours of work or 10,000 hours of work, which would you choose? It sounds like a no-brainer; however, if that’s true, why do so many supply chain businesses ignore the vast power of leverage?
Utilizing leverage can achieve substantial results. Leverage is the advantage or power gained by using a lever. A classic example is the story of David and Goliath, where David was able to defeat Goliath because David used the power of leverage (by using a slingshot to defeat a giant). In my experience consulting with clients across multiple industries, geographies and company sizes, I’ve found that those companies that valued leverage achieved greater business results than those who didn’t. A few keys to using leverage for success include: 1) Think leverage options, 2) People leverage, 3) Automation.
- Think leverage options: There are many forms of leverage – money, resources (people), machines/equipment, systems, etc. The key is to take a step back from your situation or issue and think about leverage options. Although it will take additional time vs. beginning the task, it could save significant cost and/or produce significantly quicker, more sustainable and significant results. I’ve found this to be the critical step that is often overlooked. It is a common problem to have many more tasks requiring completion than is possible to achieve within the specified timeframe, and so employees are often overwhelmed and don’t have time to “put their feet up and think.” One of the most powerful forms of leverage is the power of your mind. Sounds too simple to be true? Be radical and experiment with this concept on one project….the results will likely be staggering.
- People leverage: People leverage is powerful. In one example in working with a company to improve profitability, the finance leaders suggested labor cost reduction as the key to success – a common “helpful suggestion” regardless of industry. However, in this case, labor costs were miniscule in comparison with other cost elements such as materials and freight. Of course, it was possible to reduce labor costs and improve profitability; however, the effort spent on this significant effort would achieve only minor benefits. On the other hand, if we increased labor cost in strategic areas (such as investing in people who could impact material costs), we would achieve vast benefit with minimal effort.
- Automation: One of the key purposes of equipment and systems is to automate processes (hand packing boxes vs. utilizing an automatic packing machine). Therefore, utilizing equipment typically speeds up the process, reduces the likelihood of human errors, and reduces the cost of production (increases your return). In this case, you’ve used leverage (equipment) to automate and achieve significant benefits. There are countless types and uses for automation. Think about what will work for your business. Do not automate for automation’s sake; however, strategic automation can be pivotal.
Leverage doesn’t have to require significant capital investment or complexity. Will you take a fresh look at your organization for leverage opportunities?