In today’s economy, there is no doubt a large focus on reducing operational costs (whether they are the traditional operational costs of a business or the day-to-day personal operational costs). Reducing operational costs reduces your breakeven point – definitely a key to success in today’s economy:
- Reduce waste – sounds obvious but often requires significant focus, which requires clear priority. Reducing waste reduces raw material cost – if raw materials are a significant portion of your business cost, consider prioritizing.
- Improve operational efficiency – find a way to resolve roadblocks, analyze root causes and improve your throughput. Improving operational efficiency frees up crews – then, focus those crews on other, value-added activities that will reduce operational cost or reduce temps/ labor costs.
- Minimize machine breakdowns – it is obvious that minimizing machine breakdowns will improve operational efficiency. In addition, it typically also reduces waste because lining out the machine when starting back up uses extra materials. A healthy focus on preventative maintenance combined with operator training programs typically does the trick.
- Reduce inventory levels – although the main benefit of lower inventory levels is increased cash flow, it also can reduce operational cost. For example, if there is less inventory on hand, it is typically quicker / requires less people to cycle count, pull inventory, etc. It also can reduce costs significantly if your company is at the breakeven point in terms of warehouse space.
- Continuous improvement – don’t forget to ask your employees! In my experience, employees are able to generate significant ideas to save operational cost when asked. Be genuinely interested and you’ll be amazed with the results.