Here are seven tips to eliminate waste in your company.
Achieving positive financial results is what every company seeks, even more so during times of crisis; the equation "profit = revenue - expenses" needs to be positive, and the most common way to achieve this is to ensure that revenue exceeds company expenses; a tip to avoid waste is to eliminate defects in production; defective products, services, and information generate higher costs for the company due to rework; another recommendation is to produce only what is necessary, when necessary, without exaggeration; overproduction can be the worst form of waste, as it directly contributes to other forms of waste occurring.
Sebrae Agency - Achieving positive financial results is what every company seeks, even more so during times of crisis. The equation "profit = revenue - expenses" needs to be positive, and the most common way to achieve this is to ensure that revenue exceeds company expenses. However, many business owners are unaware that it's possible to work with a third element of the equation: expenses, that is, costs and outlays (raw materials, supplies, electricity, salaries and benefits, and office supplies, for example).
If expenses decrease, even if revenue remains the same, profit will increase. However, this needs to be done with great care and strategy. Random decisions, such as staff cuts and reduced product quality, may reduce costs, as can pressuring suppliers on payment terms and margins, but they will likely also negatively impact the delivery of value to the customer, resulting in a drop in revenue.
With this in mind, Sebrae has prepared a guide to support micro and small businesses in identifying and eliminating unnecessary expenses, reducing costs, making the company more "lean," efficient, and competitive, and delivering more value to the customer. "Waste generates costs and takes time, in addition to not adding value to what is being produced, from the customer's point of view. Therefore, it must be eliminated," says the president of Sebrae, Guilherme Afif Domingos. "For waste to be effectively eliminated or reduced, it is necessary to identify it, measure it, determine Action Plans for its reduction or elimination, and designate someone responsible for implementing the plan. Reducing expenses seems complicated, but there are ways to facilitate this process," he adds.
The publication, based on the lean business management philosophy that originated from the Toyota Production System, identifies seven wastes in production and offers tips for entrepreneurs to eliminate each one. Although these wastes were identified in automobile production, they are valid for other types of businesses in all sectors of the economy: commerce, services, industry, and agribusiness. The same publication is available with case studies focused on the healthcare, foodservice, and automotive services sectors.
Check out these seven tips from Sebrae:
1. Eliminate defects in production.
Defective products, services, and information generate higher costs for the company due to rework. After all, it will require more time from professionals, more equipment and production scheduling time, more materials and supplies, in addition to the need to manage discarded products. In a hospital, for example, this involves faulty or incomplete test results or the administration of medications incorrectly or outside of prescribed periods. In a mechanic's workshop, it is the case of cars delivered to customers with faulty or incomplete services. This can be caused by deficient processes, low quality of ingredients and materials, or low qualification of professionals. Therefore, define procedures for the operation of each piece of equipment, standardize some activities, and always seek continuous improvement of processes.
2. Produce only what is necessary, when it is necessary, without exaggeration.
Overproduction can be the worst form of waste, as it directly contributes to other forms of waste. A company producing more than it can sell is considered waste because time and resources (materials, supplies, equipment, and personnel) are being allocated far in advance of what is needed, generating excessive inventory and requiring asset mobilization. The problem can be caused by excessive equipment or personnel capacity, lack of product standardization, and even company policies that incentivize production targets. Therefore, plan production according to actual demand, not for inventory.
3. Keep inventory as low as possible.
When you buy too much (beyond production or sales capacity) or produce too much (beyond sales capacity), products accumulate and form excessive inventory, which can eventually be lost due to expiration, inadequate storage, or any other reason. Besides increasing costs, excessive inventory requires more storage space and management effort. Excessive inventory means idle money! Therefore, carefully plan your purchases and production so that they occur efficiently and according to demand, and have reliable sales statistics and inventory control to adjust accordingly.
4. Avoid unnecessary waiting.
The time that people or equipment spend unnecessarily idle or are forced to wait for the next action is considered waste. This unproductivity negatively impacts company costs and should be avoided. Continuous flow in a process considerably minimizes waiting time. This includes, for example, professionals waiting for tools or equipment to be able to work, or a restaurant kitchen staff waiting for an order to arrive, which is delayed by interruptions along the waiter's route. Plan processes to occur in a continuous flow.
5. Ensure proper transportation of supplies.
If equipment, supplies, materials, or any other resource is moved from one location to another unnecessarily or inefficiently, transportation waste is created. The situation can be worsened by the possibility of losses and damages during transport. None of this adds value to the service being provided to the customer. For example, supplies, materials, or information might be sent to the wrong location or at the wrong time. This can be caused by, among other reasons, distant suppliers or inefficient routes or processes.
6. Organize your workspace.
Wasteful movement delays work and disrupts workflow. Besides often resulting in higher costs, it also leads to low efficiency and weakened employee performance. These are unnecessary body movements, such as bending, lifting, or bending to reach supplies or tools, often caused by disorganization in the work environment. In a restaurant, for example, excessive movement by kitchen staff during food preparation can occur when ingredients, equipment, and utensils are scattered. Keep the work environment clean and organized, with only the materials and equipment necessary for the process.
7. Eliminate processing waste.
Additional procedures should add value to what will be delivered to the customer; otherwise, they should be dispensed with. Deliver more value to the customer, but without waste in processing, that is, waste resulting from processes that do not add value. This includes services provided beyond what was requested and approved by the customer, generating costs. It is necessary to identify activities that negatively affect productivity and production costs and eliminate the impact of these activities.