CI 101

How can you create changes in your business?

Often business owners see something that tells them that something different needs to be done. Perhaps it is a recurring problem or realizes that the business is not reaching financial goals. What is the solution? You need to identify what areas need change and prioritize. How can you create changes? There are two major ways to create change: innovation and continuous improvement.

More often than not, innovation is a high-cost solution. While it is necessary to keep yourself ahead of the game, I like to start somewhere else. My first stop in creating improvements is to use common sense, low-cost solutions.

What are common-sense solutions? It is to approach a problem using good judgment. For example, let’s use one of my favorite low-cost tools: housekeeping and organization. Will you agree that keeping a clean and organized workplace is common-sense? Why do you think it is? Perhaps because you know some of the following facts:

  • Clutter and disorganization are against productivity, reduces the ability to concentrate.
  • A messy workplace causes anxiety, stress, and has the potential to foster a negative state of mind, like feeling overwhelmed.

Your good judgment tells you that an efficient workplace is cleaned and organized. A lack of cleaning and organization is a visual indicator of inefficiency. You know that this condition has to change.

To improve housekeeping, you can buy a fancy computerized program or use a simple low-cost solution. Your new high-cost application will help you to create checklists, assign responsibilities and follow up on the cleaning activities. But it will not help you to ensure the workplace is clean and organized.

An alternative is to use 5S, a housekeeping and organization program. This program along with waste elimination and standardization are the basics of practicing continuous improvement. CI is about creating small changes using common-sense solutions that are easy to implement and follow. When you add up all those changes you will see a huge improvement in the overall performance of your business.

Waste

Are your customers paying for the inefficiencies of your business?

As a customer, I am not willing to pay more than necessary. When I needed to paint the house, I compared service costs and customer reviews between service providers. Around 61% of internet users research a product online before making a purchase. These days is easier than ever to compare prices, which is why price strategy is so important. Most business owners use cost-plus pricing. This strategy sets the service price, adding a mark-up to the cost. 

This formula implies that higher costs translate into higher prices. If your service price is higher than your competitors and the service is not much better, you are at risk of losing customers. There is a simple and effective solution to reduce operating expenses. What you need to do is to find waste and eliminate it.

Waste is any activity that does not add value from the customer’s perspective. For example, Company A paints with brushes and rollers while Company B paints with paint sprayers. To finish the job on-time, Company A needs more painters because their process is slower. Are you willing to pay more because their process time is longer?

There are eight types of waste: transportation, inventory, motion, waiting, over-production, over-processing, defects, and underutilization of people. Our friends from Company A have quite some waste in their business. The following are examples of each type.

  • Transportation: moving paint cans in and out storage
  • Inventory: keep enough brushes and rollers for 6-month service
  • Motion: walking back and forth to the truck looking for the right size brush.
  • Waiting: Waiting for the materials truck or instructions
  • Over-production: Painting the fence when it wasn’t part of the request
  • Over-processing: Paint the same wall five times
  • Defects: Use the wrong color paint
  • Underutilization of people: the new guy is wasting paint because he does not have training

One way to identify what areas of your business need change is by identifying waste. You can use a process map to highlight the waste on the process and use the information to design a new process.

Do not make your customers pay for your inefficiencies. If you want to improve profits by controlling costs, it is important to learn how to identify waste.

This article was originally posted by Jina Rivera in Organization and Efficiency Solutions.