Spotlight: Cutting costs doesn't have to mean cutting corners. What if you could reduce expenses and boost performance—at the same time?
In today's uncertain economy, cost-cutting is a survival strategy. But strategic cost reduction is a growth strategy. However, cost-cutting doesn’t have to be reactive or painful. With the Kaizen approach to continuous improvement, you can strategically reduce costs, eliminate waste and tap into hidden efficiency across your organization.
This blogpost shows how businesses are using Kaizen to improve profitability sustainably—with real-world insights you can act on. It explains how Kaizen—a proven continuous improvement methodology—can help organizations slash waste, improve processes, and elevate profitability without sacrificing quality.
From practical tips to real-world examples, this is a must-read for leaders aiming to do more with less--sustainably.
Is your organization struggling with rising costs? Would you like to cut expenses and boost performance—without layoffs or compromising quality? Then read the full blogpost below to learn how Kaizen can transform your cost-cutting strategy into a competitive advantage...
In today's uncertain economy, cost-cutting is a survival strategy. But strategic cost reduction is a growth strategy. However, cost-cutting doesn’t have to be reactive or painful. With the Kaizen approach to continuous improvement, you can strategically reduce costs, eliminate waste and tap into hidden efficiency across your organization.
This blogpost shows how businesses are using Kaizen to improve profitability sustainably—with real-world insights you can act on. It explains how Kaizen—a proven continuous improvement methodology—can help organizations slash waste, improve processes, and elevate profitability without sacrificing quality.
From practical tips to real-world examples, this is a must-read for leaders aiming to do more with less--sustainably.
Is your organization struggling with rising costs? Would you like to cut expenses and boost performance—without layoffs or compromising quality? Then read the full blogpost below to learn how Kaizen can transform your cost-cutting strategy into a competitive advantage...
Costs do not exist to be calculated. Cost exist to be reduced. |
In this battered economy (as a result of Covid-19 pandemic) when every penny counts even the smallest increase in revenue or reduction in expenses can have an impact on cost and ultimately on your company’s profitability.
The good news is that, a large-scale company overhaul is not necessary. By and large, in most cases, it has been observed that it is short, often done, and simple improvement steps improve the bottom-line.
However, to calculate, manage or reduce cost, a critical understanding of all the tasks or activities that generate such costs is essential.
Cost, in accounting language are of various types- fixed cost, variable cost, controllable cost, uncontrollable cost etc. But in Kaizen parlance, costs are basically of 2 types-
The good news is that, a large-scale company overhaul is not necessary. By and large, in most cases, it has been observed that it is short, often done, and simple improvement steps improve the bottom-line.
However, to calculate, manage or reduce cost, a critical understanding of all the tasks or activities that generate such costs is essential.
Cost, in accounting language are of various types- fixed cost, variable cost, controllable cost, uncontrollable cost etc. But in Kaizen parlance, costs are basically of 2 types-
- Obvious cost.
- Hidden cost.
The good thing is that, both ‘obvious’ cost and ‘hidden’ cost provide us with areas of opportunities for doing cost reduction. |
Obvious cost as the name suggests are ‘obvious’ and cannot be eliminated, as they are incurred to run the business. For example- wages, rent, purchasing raw materials, payment made to others in the course of running the business, etc. Although ‘obvious’ cost cannot be eliminated, it can be controlled to a significantly large extent.
Hidden cost on the other hand are like a leaking faucet that drains out water from a storage tank. I would say that a ‘hidden’ cost situation is grave and should be a huge area of concern in any company- be it big or small.
‘Hidden’ costs if not eliminated can actually toss out a company’s balance sheet out of the window. ‘Hidden’ cost therefore must be completely eliminated- just fix it!
Hidden cost on the other hand are like a leaking faucet that drains out water from a storage tank. I would say that a ‘hidden’ cost situation is grave and should be a huge area of concern in any company- be it big or small.
‘Hidden’ costs if not eliminated can actually toss out a company’s balance sheet out of the window. ‘Hidden’ cost therefore must be completely eliminated- just fix it!
A point to note is that Kaizen can be applied to achieve cost reduction initiatives that control ‘obvious’ cost and fix ‘hidden’ cost. |
There are three primary categories of ‘hidden’ cost-
Addressing these three categories will open-up numerous areas of opportunities for cost reduction.
And Kaizen methodology can be used to identify areas of opportunity for cost reduction that would ‘control’ the obvious cost and ‘fix’ hidden cost, find favorable solutions to sort out the cost-problems and sustain results.
But most businesses do cost-reduction ad-hoc. What do I mean by that? Let me narrate you an incident-
Imagine Quarter 1 results have come-in and you notice that profit figures are not as targeted, they have dipped. The reasons for this could be many, for example- the new product scheduled launch didn’t happen on time or a critical raw material’s procurement cost had suddenly risen due to a shortage or the manufacturing over heads became higher than what was budgeted, or sales didn’t happen as planned …
The cause factor(s) may be one or many, but the first or most-likely comment by decision-makers is- "We must contain costs” and then there's a hiring freeze!
In my view this is an ad-hoc cost-reduction decision.
- Cost due to ‘Variability’
- Cost due to ‘Waste’ and
- Cost due to ‘Inflexibility’
Addressing these three categories will open-up numerous areas of opportunities for cost reduction.
And Kaizen methodology can be used to identify areas of opportunity for cost reduction that would ‘control’ the obvious cost and ‘fix’ hidden cost, find favorable solutions to sort out the cost-problems and sustain results.
But most businesses do cost-reduction ad-hoc. What do I mean by that? Let me narrate you an incident-
Imagine Quarter 1 results have come-in and you notice that profit figures are not as targeted, they have dipped. The reasons for this could be many, for example- the new product scheduled launch didn’t happen on time or a critical raw material’s procurement cost had suddenly risen due to a shortage or the manufacturing over heads became higher than what was budgeted, or sales didn’t happen as planned …
The cause factor(s) may be one or many, but the first or most-likely comment by decision-makers is- "We must contain costs” and then there's a hiring freeze!
In my view this is an ad-hoc cost-reduction decision.
Best and effective cost-reduction happens when it is done using a strategic and structured approach. |
In Lean Kaizen, Lean defines various types of wastes which create costs, while Kaizen provides the mechanism to address those wastes. By Kaizen-ing, one can reduce the ‘obvious’ costs and eliminate the ‘hidden’ cost.
However, to apply Lean Kaizen methodology accurately, it is vital to understand its underlying principles, advantages and implementation challenges. You may read more on Lean Kaizen here.
Is your organization cutting costs correctly? To know more on how you can strategically cut costs at your workplace contact us for a free preliminary online consultation.
Ready to move from cost-cutting chaos to strategic savings? Book a consulting session or corporate training with us and start your Kaizen journey today.
However, to apply Lean Kaizen methodology accurately, it is vital to understand its underlying principles, advantages and implementation challenges. You may read more on Lean Kaizen here.
Is your organization cutting costs correctly? To know more on how you can strategically cut costs at your workplace contact us for a free preliminary online consultation.
Ready to move from cost-cutting chaos to strategic savings? Book a consulting session or corporate training with us and start your Kaizen journey today.
Checkout Operational Excellence Case Studies at: https://www.drshrutibhat.com/blog/category/case-studies
Keywords and Tags:
#Kaizen #CostReduction #ContinuousImprovement #LeanThinking #BusinessStrategy #OperationalExcellence #ProcessImprovement #AgileTransformation #LeanConsulting #ProcessExcellence #BusinessTransformation #LeadershipDevelopment #CorporateTraining #StrategyExecution #DrShrutiBhat #KaizenForCostReduction #LeanKaizen #BusinessImprovement #StrategicCostReduction
Categories: Operational Excellence | Strategy | Kaizen
Follow Shruti on Twitter, YouTube, LinkedIn
Keywords and Tags:
#Kaizen #CostReduction #ContinuousImprovement #LeanThinking #BusinessStrategy #OperationalExcellence #ProcessImprovement #AgileTransformation #LeanConsulting #ProcessExcellence #BusinessTransformation #LeadershipDevelopment #CorporateTraining #StrategyExecution #DrShrutiBhat #KaizenForCostReduction #LeanKaizen #BusinessImprovement #StrategicCostReduction
Categories: Operational Excellence | Strategy | Kaizen
Follow Shruti on Twitter, YouTube, LinkedIn
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